There’s a new player in the “crypto cashback” scene: Eco, a startup offering a type of interest-bearing bank account with crypto rewards and loyalty points.
You might not have heard of it. But the project is sound enough for a group of under 100 prestigious investors, led by Andreessen Horowitz's a16z crypto and followed by Coinbase and Pantera, to plump it full of $26 million, bringing the company’s total funding to $35 million.
According to Eco Co-Founder Andy Bromberg (who also co-founded ICO platform CoinList), Eco is meant to be a “single wallet for everyday saving and spending that rewards you anytime you do anything.” It offers 5% APY a year if you convince your pals to join, plus cashbacks at certain stores, plus loyalty points—ostensibly in the form of ECO crypto tokens. It has a waitlist of 140,000.
That 5% return is better than the real-world bank accounts to which the San Francisco company compares itself. Goldman Sachs’s Marcus interest account, which used to offer about 3% interest, now offers a paltry 0.25% as the pandemic slashed interest rates.
But Eco’s 5% is nothing compared to BlockFi’s ~10% interest on stablecoin deposits or the 100%+ annual yields touted by riskier decentralized finance protocols.
And like BlockFi, deposits aren’t insured. Eco says that doesn’t matter. Bromberg told Fortune that a financial crash could cause the dollar to crash, meaning the $250,000 insurance on all bank accounts does little to protect savings.
Whereas banks make money from lending out your deposits to other banks, Eco makes money by lending out your deposits in the form of US dollar-pegged stablecoins to crypto lending companies such as BlockFi.
So why has the project received so much backing from reputable investors?
Katie Haun, the federal prosecutor turned crypto VC and Coinbase board member, said in a blog post that Eco is “without the burden of legacy, misaligned business models,” which allows it to “offer rewards that sound almost too good to be true, but aren’t.”
It could also be the caliber of the project’s leaders. Among its co-founders are Bromberg and Ryan Breslow, co-founder of e-commerce platform Bolt. And on its advisory board is Garrett Camp, co-founder and board member of Uber cofounder.
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