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Yes, if you're an enthusiast, it seems like good, technical fun. But I have no idea how an "investor" could read this and think they can price the risk correct

Yes, if you're an enthusiast, it seems like good, technical fun. But I have no idea how an "investor" could read this and think they can price the risk correctly. This isn't even the wild west of finance--this is intergalactic space.

jquery 6y ago
> But I have no idea how an "investor" could read this and think they can price the risk correctly. This isn't even the wild west of finance--this is intergalactic space. To be a successful investor, you don’t necessarily have the price the risk correctly, you just have to price it better than others. I imagine someone successfully investing in crypto can read stuff like this fluently.
- pfisch 6y ago
  Anyone "successfully" investing in crypto got in at least 4 years ago or when we the last big run up was and just held in a reputable exchange or in their own wallet that they secured well. They don't need to understand anything really except how to deposit 5000+ in a reputable exchange. I think this makes up most successful crypto investors.
  - bojo 6y ago
    I am not an advovate for crypto by any means, but this is false. There are some Wall Street level investors out there. https://www.forbes.com/sites/michaeldelcastillo/2020/08/06/valuable-sec-data-on-20-institutional-bitcoin-investors-could-soon-disappear/#4227304a1de2 https://www.forbes.com/sites/michaeldelcastillo/2020/08/06/v...
    - pfisch 6y ago
      I agree. I just don't think they are the majority. The majority is just dumb holders.
golergka 6y ago
Many "investors" are working very far outside the law, are used to very high levels of risk and desperately need different ways to keep their assets out of view from authorities.
nootropicat 6y ago
It's way safer and less complex than you would expect. Most staking contracts are a copy-paste of two basic staking contracts (from synthetix and sushiswap), so it's enough to do a text diff and see what was changed, which is trivial. For more complex contracts that do something more, funds at risk are the best bug bounty there is - in the current environment if something had >$10M for a month and wasn't hacked, it most likely can't be trivially hacked. Bzrx, the single most incompetent defi platform, was hacked just two weeks after a relaunch for $8M - most likely someone was waiting from the start for it to get enough funds to make the hack worthwhile. Almost no hacks happened during the entire yield farming craze. Key word trivially - some contracts are custodial, so if someone hacked the owners (or they turned out to be scammers) funds could be stolen, which arguably has a reverse Lindy effect in the beginning. Fortunately people are starting to demand at least timelocks and/or multisigs. Another risk is how well liquidations function during a price crash, for protocols that need them. The current risk premium was and still is absurdly overestimated, but that was a good thing (for me) as without it three or even four digit APYs wouldn't last a day, but thanks to the unwarranted risk premium they lasted about 2 months. During the short peak three weeks ago it was possible to make even ~8% per day (on millions of dollars - good liquidity), completely risk free (trivial staking contracts). The great crypto bullrun of 2020 already happened and few outside of ethereum even noticed. You will see billions flow into defi on ethereum as others realize the real level of risk too (which guarantees those astronomical returns are never going to return - but even 10% apy on dollars is good in the current environment).
- hitekker 6y ago
  As an investor who is not into crypto, I don't understand this comment, let alone use it to correctly price the risk of crypto.
  - escapecharacter 6y ago
    agreed; this reads like someone explaining their casino good luck charm strategy.
    - 6y ago

jquery 6y ago

> But I have no idea how an "investor" could read this and think they can price the risk correctly. This isn't even the wild west of finance--this is intergalactic space. To be a successful investor, you don’t necessarily have the price the risk correctly, you just have to price it better than others. I imagine someone successfully investing in crypto can read stuff like this fluently.

pfisch 6y ago
Anyone "successfully" investing in crypto got in at least 4 years ago or when we the last big run up was and just held in a reputable exchange or in their own wallet that they secured well. They don't need to understand anything really except how to deposit 5000+ in a reputable exchange. I think this makes up most successful crypto investors.
- bojo 6y ago
  I am not an advovate for crypto by any means, but this is false. There are some Wall Street level investors out there. https://www.forbes.com/sites/michaeldelcastillo/2020/08/06/valuable-sec-data-on-20-institutional-bitcoin-investors-could-soon-disappear/#4227304a1de2 https://www.forbes.com/sites/michaeldelcastillo/2020/08/06/v...
  - pfisch 6y ago
    I agree. I just don't think they are the majority. The majority is just dumb holders.

golergka 6y ago

Many "investors" are working very far outside the law, are used to very high levels of risk and desperately need different ways to keep their assets out of view from authorities.

nootropicat 6y ago

It's way safer and less complex than you would expect. Most staking contracts are a copy-paste of two basic staking contracts (from synthetix and sushiswap), so it's enough to do a text diff and see what was changed, which is trivial. For more complex contracts that do something more, funds at risk are the best bug bounty there is - in the current environment if something had >$10M for a month and wasn't hacked, it most likely can't be trivially hacked. Bzrx, the single most incompetent defi platform, was hacked just two weeks after a relaunch for $8M - most likely someone was waiting from the start for it to get enough funds to make the hack worthwhile. Almost no hacks happened during the entire yield farming craze. Key word trivially - some contracts are custodial, so if someone hacked the owners (or they turned out to be scammers) funds could be stolen, which arguably has a reverse Lindy effect in the beginning. Fortunately people are starting to demand at least timelocks and/or multisigs. Another risk is how well liquidations function during a price crash, for protocols that need them. The current risk premium was and still is absurdly overestimated, but that was a good thing (for me) as without it three or even four digit APYs wouldn't last a day, but thanks to the unwarranted risk premium they lasted about 2 months. During the short peak three weeks ago it was possible to make even ~8% per day (on millions of dollars - good liquidity), completely risk free (trivial staking contracts). The great crypto bullrun of 2020 already happened and few outside of ethereum even noticed. You will see billions flow into defi on ethereum as others realize the real level of risk too (which guarantees those astronomical returns are never going to return - but even 10% apy on dollars is good in the current environment).

hitekker 6y ago
As an investor who is not into crypto, I don't understand this comment, let alone use it to correctly price the risk of crypto.
- escapecharacter 6y ago
  agreed; this reads like someone explaining their casino good luck charm strategy.
  - 6y ago