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> You can also take out insurance for the biggest protocols for additional protection. Then what's the point? I can already take out insurance in the "traditio

> You can also take out insurance for the biggest protocols for additional protection. Then what's the point? I can already take out insurance in the "traditional" banking system (e.g. every checking account has FDIC).

yourabstraction 5y ago
One thing that I think is really big in DeFi is the idea of permissionless composability. Let me give you an example. Say you want to start a traditional fintech company that aggregates many existing banks to provide the best interest rate to the user. So it would basically move your money around between banks depending on where the best rate is the current day. This is basically impossible to build, there is very little ability to integrate into various banks, and even if you can, you need permission to do so. However, you can build this on DeFi today quite easily (see yearn for an example), and you don't need to ask anyone for permission, you just hook things together. The smart contracts can move money around within DeFi based on algorithms that will find the best rate of return on various collateral coins. This is why people are calling it money legos. It allows rapid innovation from the edges, instead of the center, which is insanely powerful. I hope this inspires you to do more research.
chrisco255 5y ago
A number of points: 1) Decentralized finance is extensible, pluggable, open, auditable, and non-custodial. This means, when you want to integrate, say a popular crypto money market like Aave into your application, you don't need Aave's permission. You can just have your application interact with Aave's smart contract. (https://aave.com/ https://aave.com/) 2) When a smart contract is properly engineered, you retain full 24/7 access to your funds with 100% uptime guaranteed by the base chain that it sits on (Ethereum in most cases). You do not get Robinhood-like situations where all of a sudden they turn the buy button off on some stock like what happened two months ago. 3) Everyone has access to the same information. It's all on the public blockchain. There are no backroom deals, it's all in open-source code on the chain. It's all auditable. 4) The yields on so-called stablecoins (cryptos that are pegged to some traditional currency, like USD) are higher on DeFi. You can earn 7 or 8% or more on DeFi, because you are effectively acting as your own peer-to-peer bank and lending out your funds directly to a collateralized third party.(https://compound.finance/ https://compound.finance/) 5) Decentralized finance has already introduced things like decentralized exchanges, which allow people to crowdsource liquidity. You can earn a yield for participating in a liquidity pool on Uniswap, for example (https://uniswap.org/ https://uniswap.org/) 6) There are additional exciting applications in this space, it's currently undergoing a Cambrian explosion of activity similar to the early internet. I cannot explain all of this in a short-form HN response, but there's real value there. Real innovation that will change finance forever. If you want to learn more, please check out: 1) https://newsletter.thedefiant.io/ https://newsletter.thedefiant.io/ 2) https://newsletter.banklesshq.com/ https://newsletter.banklesshq.com/

yourabstraction 5y ago

One thing that I think is really big in DeFi is the idea of permissionless composability. Let me give you an example. Say you want to start a traditional fintech company that aggregates many existing banks to provide the best interest rate to the user. So it would basically move your money around between banks depending on where the best rate is the current day. This is basically impossible to build, there is very little ability to integrate into various banks, and even if you can, you need permission to do so. However, you can build this on DeFi today quite easily (see yearn for an example), and you don't need to ask anyone for permission, you just hook things together. The smart contracts can move money around within DeFi based on algorithms that will find the best rate of return on various collateral coins. This is why people are calling it money legos. It allows rapid innovation from the edges, instead of the center, which is insanely powerful. I hope this inspires you to do more research.

chrisco255 5y ago

A number of points: 1) Decentralized finance is extensible, pluggable, open, auditable, and non-custodial. This means, when you want to integrate, say a popular crypto money market like Aave into your application, you don't need Aave's permission. You can just have your application interact with Aave's smart contract. (https://aave.com/ https://aave.com/) 2) When a smart contract is properly engineered, you retain full 24/7 access to your funds with 100% uptime guaranteed by the base chain that it sits on (Ethereum in most cases). You do not get Robinhood-like situations where all of a sudden they turn the buy button off on some stock like what happened two months ago. 3) Everyone has access to the same information. It's all on the public blockchain. There are no backroom deals, it's all in open-source code on the chain. It's all auditable. 4) The yields on so-called stablecoins (cryptos that are pegged to some traditional currency, like USD) are higher on DeFi. You can earn 7 or 8% or more on DeFi, because you are effectively acting as your own peer-to-peer bank and lending out your funds directly to a collateralized third party.(https://compound.finance/ https://compound.finance/) 5) Decentralized finance has already introduced things like decentralized exchanges, which allow people to crowdsource liquidity. You can earn a yield for participating in a liquidity pool on Uniswap, for example (https://uniswap.org/ https://uniswap.org/) 6) There are additional exciting applications in this space, it's currently undergoing a Cambrian explosion of activity similar to the early internet. I cannot explain all of this in a short-form HN response, but there's real value there. Real innovation that will change finance forever. If you want to learn more, please check out: 1) https://newsletter.thedefiant.io/ https://newsletter.thedefiant.io/ 2) https://newsletter.banklesshq.com/ https://newsletter.banklesshq.com/