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Feel free to expand on why that is. I'm genuinely asking - this is the first time I've heard that portmanteau.

nprz 5y ago
It's a collection of protocols use to loan and trade cryptocurrencies. The goal of DeFi is to replicate all the services a bank could offer, but through decentralized apps running on the blockchain.
newacc9 5y ago
Generally, its loans that are over-collateralized with crypto-assets. Use case being: I need cash now but I think ETH will go up and I don't want to sell mine, instead I borrow stablecoin against my ETH using a DeFi app (probably on ethereum).
- the_optimist 5y ago
  Do you have an example of collateral management in this context?
  - newacc9 5y ago
    Its all automated, so it depends on the contract, I assume if the USD value of ETH drops too much, the borrower gets margin called.
    - the_optimist 5y ago
      Can you reference a specific margin call mechanism?
      - newacc9 5y ago
        I found this for Compound. The liquidation mechanism is in section 11. https://zengo.com/understanding-compounds-liquidation/ https://zengo.com/understanding-compounds-liquidation/
hammock 5y ago
https://en.wikipedia.org/wiki/Decentralized_finance https://en.wikipedia.org/wiki/Decentralized_finance As cryptocurrency replaces government-issued money, defi replaces traditional financial institutions/services.
- bonzini 5y ago
  Then they also need to comply with the KYC and reporting requirements placed on traditional financial institutions/services, which exist for a reason.
  - deleted 5y ago
    [deleted]
  - int_19h 5y ago
    One could argue that at least some of those requirements in effect (if not by design) protect the established position of traditional centralized finance, and prevent decentralization, allowing the existing blend of concentrated political and economic power to maintain its stronghold on society at large. So, for those who believe in decentralization, the reason may not be a valid justification. Of course, at that point, one also shouldn't be surprised that pushing back against centralization is criminalized by those who benefit from it. But even so, they don't need to comply - they can accept that what they're doing is illegal, but continue doing it because it's morally right.

nprz 5y ago

It's a collection of protocols use to loan and trade cryptocurrencies. The goal of DeFi is to replicate all the services a bank could offer, but through decentralized apps running on the blockchain.

newacc9 5y ago

Generally, its loans that are over-collateralized with crypto-assets. Use case being: I need cash now but I think ETH will go up and I don't want to sell mine, instead I borrow stablecoin against my ETH using a DeFi app (probably on ethereum).

the_optimist 5y ago
Do you have an example of collateral management in this context?
- newacc9 5y ago
  Its all automated, so it depends on the contract, I assume if the USD value of ETH drops too much, the borrower gets margin called.
  - the_optimist 5y ago
    Can you reference a specific margin call mechanism?
    - newacc9 5y ago
      I found this for Compound. The liquidation mechanism is in section 11. https://zengo.com/understanding-compounds-liquidation/ https://zengo.com/understanding-compounds-liquidation/

hammock 5y ago

https://en.wikipedia.org/wiki/Decentralized_finance https://en.wikipedia.org/wiki/Decentralized_finance As cryptocurrency replaces government-issued money, defi replaces traditional financial institutions/services.

bonzini 5y ago
Then they also need to comply with the KYC and reporting requirements placed on traditional financial institutions/services, which exist for a reason.
- deleted 5y ago
  [deleted]
- int_19h 5y ago
  One could argue that at least some of those requirements in effect (if not by design) protect the established position of traditional centralized finance, and prevent decentralization, allowing the existing blend of concentrated political and economic power to maintain its stronghold on society at large. So, for those who believe in decentralization, the reason may not be a valid justification. Of course, at that point, one also shouldn't be surprised that pushing back against centralization is criminalized by those who benefit from it. But even so, they don't need to comply - they can accept that what they're doing is illegal, but continue doing it because it's morally right.