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Crypto was great at feeling superior than the financial world when BTC was simple and pure. Now we have earning interest, rehypothetication, DeFi and a whole lo

by u678u 6y ago

Crypto was great at feeling superior than the financial world when BTC was simple and pure. Now we have earning interest, rehypothetication, DeFi and a whole lot of weird stuff that no one understands. Plus its still useless for actually buying things.

vmception 6y ago
Most of the issues with complex financial products leading to the 2008 Global Financial Crisis was the lack of pricing and provenance. People did not know who owns what, what the underlying assets were, and what the prices were. In a system where all states are visible and the prior states unchangeable, these cease to be issues, allowing for many of those complex products to exist very easily, which is exactly what is happening and has happened. If you don't trust that, there is also smart contract insurance you can buy for when smart contracts and oracles create results outside the bounds of the community understanding. This doesn't mean there won't be problems, an insurance smart contract recently got hacked, it is prudent to recognize that the solutions are presented and the market is choosing those solutions. You should be in the place to laugh about it and know what specific issue occurred and know how you can improve that, as opposed to simply waiting for me to finish so you can play devil's advocate on a mere concept of "crypto" because you might be stuck in the wrong decade since we're way past that. I'm okay with the rapid iteration towards stronger more robust systems. The permissionless nature is driving that rapid iteration. Unlike the outsiders in "The Big Short", you don't even need an ISDA Master Agreement to trade these esoteric products. And the flash loan market is very similar to the Federal Reserve's overnight repo market, you don't have to be a big bank. In the repo market, the Fed creates and destroys hundreds of billions of dollars for minute long trades on request, allowing banks to complete deals without needing the cash themselves. This is very onbrand to what "crypto" aspired to do, lower barriers of entry. The permissionless nature is specifically that it doesn't require your opinion or any gatekeeper in order to offer something to the market.
- exo762 6y ago
  There is also an issue of complexity hiding the risk. I'm not convinced that DiFi solves this problem.
  - vmception 6y ago
    It doesn't solve the problem, most of the issues are related to current prices with oracles instead of not knowing any price. Services in the DeFi space introduce solutions to prior iterations of complex products hiding the risk. They aren’t trying to show how its better than traditional wall street, there is no one person or organization saying “eureka now we can offer the biggest CDOs since Lehman”, its new people picking up new tools building what the community wants, or else they dont have a community.
oleganza 6y ago
Maybe BTC succeeded at providing people with free (as in freedom) money, so some of it is inevitably going to all sorts of unregulated uncensorable trading games.
agumonkey 6y ago
And I have a feeling it's only getting started. I envision the 2020s as the crypto dot com bubble. That said I still thing it's gonna be a chunk of the future of human civilization somehow.
smabie 6y ago
I feel the opposite: defi has been shaping up to be seriously useful. There's still a lot of kinks to work out and while I don't see it replacing tradfin systems, the next 5-10 years look very bright! We will have some crypto winters in the meantime, but the trajectory is undoubtedly going upwards.
sgpl 6y ago
I first became aware of BTC around 2011, bought some around 2013. I didn't really use it for buying anything at all tbh, but it still felt fun - there was a playful, toy like element to it (for me). Since then, the institutionalization + litany of new crypto to generate wealth for their originators has really soured that feeling for me.
pixel_tracing 6y ago
Yep basically trying to solve the problem most banks and financial system were already trying to solve for hundreds of years.

by u678u 6y ago

vmception 6y ago

Most of the issues with complex financial products leading to the 2008 Global Financial Crisis was the lack of pricing and provenance. People did not know who owns what, what the underlying assets were, and what the prices were. In a system where all states are visible and the prior states unchangeable, these cease to be issues, allowing for many of those complex products to exist very easily, which is exactly what is happening and has happened. If you don't trust that, there is also smart contract insurance you can buy for when smart contracts and oracles create results outside the bounds of the community understanding. This doesn't mean there won't be problems, an insurance smart contract recently got hacked, it is prudent to recognize that the solutions are presented and the market is choosing those solutions. You should be in the place to laugh about it and know what specific issue occurred and know how you can improve that, as opposed to simply waiting for me to finish so you can play devil's advocate on a mere concept of "crypto" because you might be stuck in the wrong decade since we're way past that. I'm okay with the rapid iteration towards stronger more robust systems. The permissionless nature is driving that rapid iteration. Unlike the outsiders in "The Big Short", you don't even need an ISDA Master Agreement to trade these esoteric products. And the flash loan market is very similar to the Federal Reserve's overnight repo market, you don't have to be a big bank. In the repo market, the Fed creates and destroys hundreds of billions of dollars for minute long trades on request, allowing banks to complete deals without needing the cash themselves. This is very onbrand to what "crypto" aspired to do, lower barriers of entry. The permissionless nature is specifically that it doesn't require your opinion or any gatekeeper in order to offer something to the market.

exo762 6y ago
There is also an issue of complexity hiding the risk. I'm not convinced that DiFi solves this problem.
- vmception 6y ago
  It doesn't solve the problem, most of the issues are related to current prices with oracles instead of not knowing any price. Services in the DeFi space introduce solutions to prior iterations of complex products hiding the risk. They aren’t trying to show how its better than traditional wall street, there is no one person or organization saying “eureka now we can offer the biggest CDOs since Lehman”, its new people picking up new tools building what the community wants, or else they dont have a community.

oleganza 6y ago

Maybe BTC succeeded at providing people with free (as in freedom) money, so some of it is inevitably going to all sorts of unregulated uncensorable trading games.

agumonkey 6y ago

And I have a feeling it's only getting started. I envision the 2020s as the crypto dot com bubble. That said I still thing it's gonna be a chunk of the future of human civilization somehow.

smabie 6y ago

I feel the opposite: defi has been shaping up to be seriously useful. There's still a lot of kinks to work out and while I don't see it replacing tradfin systems, the next 5-10 years look very bright! We will have some crypto winters in the meantime, but the trajectory is undoubtedly going upwards.

sgpl 6y ago

I first became aware of BTC around 2011, bought some around 2013. I didn't really use it for buying anything at all tbh, but it still felt fun - there was a playful, toy like element to it (for me). Since then, the institutionalization + litany of new crypto to generate wealth for their originators has really soured that feeling for me.

pixel_tracing 6y ago

Yep basically trying to solve the problem most banks and financial system were already trying to solve for hundreds of years.