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When you are involved long enough with crypto, you'll see a lot of stupid ideas. DAI is one of them. For those who don't have time to get into the weeds, DAI i

When you are involved long enough with crypto, you'll see a lot of stupid ideas. DAI is one of them. For those who don't have time to get into the weeds, DAI is a "digital native" stable coin. It wants to create a 1-1 peg to USD using an underlying volatile asset, Ethereum. If you want to use USD, it's probably most efficient to go get USD. :) But for some ideological reasons (decentralization), DAI wants to be USD but also digital native. So they "lock" the underlying asset, Ethereum, and issue DAI coins. The premise is with intelligent computer algorithms, we can maintain 1-1 peg between a digital asset (Ethereum) and a real-world asset (USD). Digital assets are digital. Humans are the arbitrageurs. Humans are emotional. DAI is trying to create stability on top of Ethereum volatility. It's kinda like building a stable house on a shaky foundation. Your building will either collapse or you spend so much money patching the flaws of your shaky foundation. This is a laughable idea for those who live in reality. But I guess some computer programmers/investors live in alternative realities too long. They forget about reality. Whatever your algorithms are, you need to arbitrage risks. So you will always need to lock up more USD-ETH to account for risks. To be safe, maybe, you need 1.5 USD-ETH for a DAI USD. However, with digital scarce and volatile assets like Ethereum, there's a chance that 1.5 USD-ETH will drop to 0.9 USD-ETH. At that point, you will be underwater. Yesterday, it did. If you need to lock up 1.5 USD for 1 USD, you may as well go get 1 USD. It's a dumb idea to use 1.5 USD to get 1 USD. DAI has a lot of jargon and technology (more layers on top of the shaky foundation). These things make it look sophisticated and fool people. The basic problem is very simple. You only need elementary school arithmetic and logic to know its flaws and inefficiency.

lalaland1125 7y ago
> If you need to lock up 1.5 USD for 1 USD, you may as well go get 1 USD. It's a dumb idea to use 1.5 USD to get 1 USD. DAI locks up 1.5 USD of ETH, not 1.5 USD. There is an important difference. The main benefit/use of DAI is that it effectively lets you increase your leverage when you are betting long on ETH. The trick is that when you lock ETH in the contract you can then use the resulting DAI to purchase more ETH, lock up that ETH/etc. The end result is about 3X leverage for relatively minimal fees.
- rhlsthrm 7y ago
  The real idea here is even beyond going long on ETH. It's multi collateral DAI. The idea that you can (eventually) lock up any collateralized asset and mint DAI. Need to take out a mortgage on a property you own? You can do it automatically and atomically through smart contracts without any middlemen. Eventually people could tokenize things like their future earnings and take out a loan against that now. As dystopian as that last point sounds, it illustrates the point.
  - arcticbull 7y ago
    > mortgage... Where on earth are you going to get accurate price data for a house when you allow this? What if the foundation is crumbling and there are termites? The process of getting a mortgage involves a ton of inspections, background checks and paperwork. No amount of magic blockchain dust will change that. > Eventually people could tokenize things like their future earnings and take out a loan against that now. As dystopian as that last point sounds, it illustrates the point. Yeah that’s just called an unsecured loan, you can get one online now in minutes.
    - rhlsthrm 7y ago
      Why can't all the background checks and inspections be part of the process towards tokenizing the house? If everything is verifiable and transparent on the blockchain it can surely be used for this process. The key with this is it's not unsecured. It's secured by something.
      - arcticbull 7y ago
        Secured by what? Magic beans that live in your computer? That's strictly less powerful than the contract law an unsecured loan is based on today. It's also totally verifiable: the person lending you the money has every interest in retaining an audit trail for themselves. They're the only ones that need to verify this. Who on earth else needs to know you have a loan?
  - ficklepickle 7y ago
Acrobatic_Road 7y ago
>Digital assets are digital. Humans are the arbitrageurs. Humans are emotional. DAI is trying to create stability on top of Ethereum volatility. It's kinda like building a stable house on a shaky foundation. And yet it works. Dai has practical results; it has weathered massive volatility in the price of Ether over the past 2 years. >If you need to lock up 1.5 USD for 1 USD, you may as well go get 1 USD. It's a dumb idea to use 1.5 USD to get 1 USD. If it's such a stupid idea then nobody would do it. Yet, there is now 350 million dollars worth of collateral people have put up of their own volition just to generate some Dai for themselves in this fashion. stats: https://defipulse.com/maker https://defipulse.com/maker >DAI has a lot of jargon and technology. These things make it look sophisticated and fool people. Or you just don't understand how it works. Dai is a complicated solution to a complicated problem, but its not some trick.
- ac29 7y ago
  > Or you just don't understand how it works. Dai is a complicated solution to a complicated problem, but its not some trick. But the problem isn't complicated. If you need something worth 1USD, buy 1USD. It is by definition stable relative to 1USD. You don't need to understand complicated terminology or esoteric failure modes. DAI is effectively never worth exactly 1USD: https://coinmarketcap.com/currencies/multi-collateral-dai/ https://coinmarketcap.com/currencies/multi-collateral-dai/
  - Latty 7y ago
    People buy 1USD of Paypal account value for 1USD all the time, do you say the same thing to them? I'm not saying I definitely think Dai is a good idea, but fundamentally the value isn't the only thing that matters. The ability to transfer that value is important and Dai offers something different to USD there.
    - ForHackernews 7y ago
      Yes, Paypal is also terrible[0] and you'd have to be pretty dumb to deliberately keep a large fraction of your savings "invested" in a paypal balance. [0] http://paypalsucks.com/ http://paypalsucks.com/
perl4ever 7y ago
"It's kinda like building a stable house on a shaky foundation" Maybe it's kind of like building your house on sand and believing that with powerful enough hydraulic actuators controlled by fast computers and sensors, you can keep it stable. Dynamic instability is proven to work on fighter jets, right?

lalaland1125 7y ago

> If you need to lock up 1.5 USD for 1 USD, you may as well go get 1 USD. It's a dumb idea to use 1.5 USD to get 1 USD. DAI locks up 1.5 USD of ETH, not 1.5 USD. There is an important difference. The main benefit/use of DAI is that it effectively lets you increase your leverage when you are betting long on ETH. The trick is that when you lock ETH in the contract you can then use the resulting DAI to purchase more ETH, lock up that ETH/etc. The end result is about 3X leverage for relatively minimal fees.

rhlsthrm 7y ago
The real idea here is even beyond going long on ETH. It's multi collateral DAI. The idea that you can (eventually) lock up any collateralized asset and mint DAI. Need to take out a mortgage on a property you own? You can do it automatically and atomically through smart contracts without any middlemen. Eventually people could tokenize things like their future earnings and take out a loan against that now. As dystopian as that last point sounds, it illustrates the point.
- arcticbull 7y ago
  > mortgage... Where on earth are you going to get accurate price data for a house when you allow this? What if the foundation is crumbling and there are termites? The process of getting a mortgage involves a ton of inspections, background checks and paperwork. No amount of magic blockchain dust will change that. > Eventually people could tokenize things like their future earnings and take out a loan against that now. As dystopian as that last point sounds, it illustrates the point. Yeah that’s just called an unsecured loan, you can get one online now in minutes.
  - rhlsthrm 7y ago
    Why can't all the background checks and inspections be part of the process towards tokenizing the house? If everything is verifiable and transparent on the blockchain it can surely be used for this process. The key with this is it's not unsecured. It's secured by something.
    - arcticbull 7y ago
      Secured by what? Magic beans that live in your computer? That's strictly less powerful than the contract law an unsecured loan is based on today. It's also totally verifiable: the person lending you the money has every interest in retaining an audit trail for themselves. They're the only ones that need to verify this. Who on earth else needs to know you have a loan?
- ficklepickle 7y ago

Acrobatic_Road 7y ago

>Digital assets are digital. Humans are the arbitrageurs. Humans are emotional. DAI is trying to create stability on top of Ethereum volatility. It's kinda like building a stable house on a shaky foundation. And yet it works. Dai has practical results; it has weathered massive volatility in the price of Ether over the past 2 years. >If you need to lock up 1.5 USD for 1 USD, you may as well go get 1 USD. It's a dumb idea to use 1.5 USD to get 1 USD. If it's such a stupid idea then nobody would do it. Yet, there is now 350 million dollars worth of collateral people have put up of their own volition just to generate some Dai for themselves in this fashion. stats: https://defipulse.com/maker https://defipulse.com/maker >DAI has a lot of jargon and technology. These things make it look sophisticated and fool people. Or you just don't understand how it works. Dai is a complicated solution to a complicated problem, but its not some trick.

ac29 7y ago
> Or you just don't understand how it works. Dai is a complicated solution to a complicated problem, but its not some trick. But the problem isn't complicated. If you need something worth 1USD, buy 1USD. It is by definition stable relative to 1USD. You don't need to understand complicated terminology or esoteric failure modes. DAI is effectively never worth exactly 1USD: https://coinmarketcap.com/currencies/multi-collateral-dai/ https://coinmarketcap.com/currencies/multi-collateral-dai/
- Latty 7y ago
  People buy 1USD of Paypal account value for 1USD all the time, do you say the same thing to them? I'm not saying I definitely think Dai is a good idea, but fundamentally the value isn't the only thing that matters. The ability to transfer that value is important and Dai offers something different to USD there.
  - ForHackernews 7y ago
    Yes, Paypal is also terrible[0] and you'd have to be pretty dumb to deliberately keep a large fraction of your savings "invested" in a paypal balance. [0] http://paypalsucks.com/ http://paypalsucks.com/

perl4ever 7y ago

"It's kinda like building a stable house on a shaky foundation" Maybe it's kind of like building your house on sand and believing that with powerful enough hydraulic actuators controlled by fast computers and sensors, you can keep it stable. Dynamic instability is proven to work on fighter jets, right?