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> The most important takeaway is to avoid new tokens that haven’t undergone a code audit. Code audits are a process by which a third-party firm analyzes the cod

> The most important takeaway is to avoid new tokens that haven’t undergone a code audit. Code audits are a process by which a third-party firm analyzes the code of the smart contract behind a new token or other DeFi project, and publicly confirms that the contract’s governance rules are iron clad and contain no mechanisms that would allow for the developers to make off with investors’ funds. But how do you know which third party auditors to trust? What DeFi projects are laying bare is that it’s an absolute marvel that we have functional societies at the scale we do today (USA, EU). Most people can live their lives intuitively knowing which instructions to trust (financial, groceries, restaurants, medical, you name it). All of it is ultimately backed by laws, systems, real people who can be held accountable, and government monopoly of force. Furthermore we rarely have to see that stuff for the system to work and that monopoly on force is rarely abused. It could be a meaningful technological shift if a lot of the financial infrastructure goes decentralized, digitized/programmatic, and open source. But I’m dubious the mainstream person’s day to day experience will change much, the stability and peace of mind afforded by the structures of our current society are pretty amazing and I don’t see them being replicated in a purely digital and decentralized form.

lupire 5y ago
people say "oh Bitcoin is mature it's 10 years old". Meanwhile the world is amazed that the United States is so stable at only 200 years old. And these shitcoins are weeks old. and these aren't new products. Each one is, by design, a new governance structure. Would you take a vacation or move your life to a country that was invented last week.... by anonymous people?
wizzwizz4 5y ago
> It could be a meaningful technological shift if a lot of the financial infrastructure goes decentralized It's important to note that “DeFi” is more centralised than our existing financial infrastructure. (Also, our existing infrastructure mostly uses open, public, well-known standards with many implementations; most DeFi stuff… documents how it currently works, I guess? Though it's hard to find that documentation.)
- spinny 5y ago
  have you tried google?
  - NationalPark 5y ago
    Seems super unlikely that somebody with a HN account is unfamiliar with search engines, doesn't it?
    - spinny 5y ago
      Seems super unlikely that somebody with a HN account can't find docs for defi projects that in most cases have github accounts with available contracts and api docs, doesn't it? Maybe it's just deceptive
      - erulabs 5y ago
        And not to mention that by definition, those DeFi contracts are readable. The actual code, itself. Sure, there might be (and probably are) bugs, and we need auditing tools, the list goes on, but at least it's not a black box.
        wizzwizz4 5y ago
        The compiled binaries, sure. If you peer with the blockchain, collect a block containing the smart contract and extract the binary from it. At least smart contracts usually don't have that much code, so it's not too much effort to reverse-engineer. But that's not source code.
  - wizzwizz4 5y ago
    If you know where the documentation for the most popular DeFi system, Bitcoin, is, then by all means share it. • What does the peer-to-peer network protocol look like? • How do I make a transaction / mine a block? I know how to do this using end-user wallet applications, but the open protocols are so very well documented that I'm sure you can find this information easily. The pages that show up in search results[0][1] don't really have this information. It gives me a high-level overview, tells me that it uses TCP and which port it uses, and gives the structure of the TCP packets (with some examples), but there's a whole load of stuff that's just never defined. To actually understand what's going on, I then have to read the source code. And… making a transaction?[3] Mining a block?[2] No chance. I know it's “double SHA256” and that's about it. (I can look at the source code to find out, sure… but an open standard? Open secret, more like. The flaming whitepaper[4] is more useful than these docs.) This is Bitcoin, the best-known, most-popular, (presumably) best-documented DeFi system on the 'net. Ethereum has… a blog post, an onlinelibrary.wiley.com book and an academic article. I don't even want to know what other stuff has. Most DeFi garbage barely has a whitepaper. [0]: https://developer.bitcoin.org/devguide/p2p_network.html https://developer.bitcoin.org/devguide/p2p_network.html [1]: https://developer.bitcoin.org/reference/p2p_networking.html https://developer.bitcoin.org/reference/p2p_networking.html [2]: https://developer.bitcoin.org/reference/block_chain.html#serialized-blocks https://developer.bitcoin.org/reference/block_chain.html#ser... [3]: https://developer.bitcoin.org/reference/transactions.html https://developer.bitcoin.org/reference/transactions.html [4]: https://bitcoin.org/bitcoin.pdf https://bitcoin.org/bitcoin.pdf (which has apparently been taken down…?) https://web.archive.org/web/20140320135003if_/https://bitcoin.org/bitcoin.pdf https://web.archive.org/web/20140320135003if_/https://bitcoi...
tenebrisalietum 5y ago
In the US: financial -> 2008 subprime loan crisis, recent inflation groceries -> couldn't buy toilet paper at the start of the pandemic, still some lingering supply issues, prices going up restaurants -> many not open reliable hours anymore, many closing medical -> costs way too high and continue to rise, hospitals oversaturated with patients from time to time, nurses quitting All of it is ultimately backed by laws, systems, real people who can be held accountable -> maybe if you are rich I can't fault the average-income (or slightly higher/lower) person for having the point of view that these are starting to fall apart and aspects of DeFi becoming attractive, even though the practicalities have a long way to go before they would become anywhere near as foundational.
- rchaud 5y ago
  What aspects of DeFi look attractive exactly? Yield of some digital coin which only has value relative to a fiat currency? Your local bank at least complies with regulations that cap transaction fees for your chequing account. Meanwhile, ETH gas fees are completely unpredictable, and can easily be higher than the amount you're transferring.
- amitkgupta84 5y ago
  I mean more like, you can generally eat food from grocery stores and restaurants and trust it'll be pretty safe. You can get medical operations and pharmaceuticals, and generally trust them. There are actually extremely large problems here, e.g. Purdue and fentanyl, but even there Purdue has been fined to death by the government. Still, there are huge problems for sure. The problems need to be addressed, but I think if you look to narrowly at some of the problems, you think the whole system needs to be overthrown. Sure that sentiment is increasing, but more pushed by well-off elites than a genuine grassroots uprising. This is one of the biggest problems we face today IMO. I don't think DeFi helps with most of the problems you're talking about. Supply chain issues, COVID-related business restrictions, health care prices and the role of insurance providers, none of these are caused by centralized financial systems.
theogravity 5y ago
A lot of DeFi scams claim that an auditing company has audited their code. There's also scam auditing companies too that work with these DeFi scams to add to the false legitimacy.
- drsnow 5y ago
  Can you provide a source or two for these claims?
- iszomer 5y ago
  I've seen projects go as far to claim to have their code audited by simply hosting it on a public github repo.
- dcist 5y ago
  What are the scam auditing companies?
- contravert 5y ago
  Although smart contract audits are pretty much security theatre where the auditor charges $10k-$30k to run your code through a program, rug pulls are way more common just through simple methods. A few common ways: 1. Use your admin privilege to withdraw or upgrade the smart contract to drain the funds 2. Withdraw all liquidity for your token and disappear 3. Sell the entire token supply all at once, which is functionally equivalent to (2) 4. Pretend to get "hacked" and lose your private key 5. Program a backdoor into the smart contract (the least common way). Some of these are economic in nature (e.g. frontrunning), which can't necessarily be found in an audit

lupire 5y ago

people say "oh Bitcoin is mature it's 10 years old". Meanwhile the world is amazed that the United States is so stable at only 200 years old. And these shitcoins are weeks old. and these aren't new products. Each one is, by design, a new governance structure. Would you take a vacation or move your life to a country that was invented last week.... by anonymous people?

wizzwizz4 5y ago

> It could be a meaningful technological shift if a lot of the financial infrastructure goes decentralized It's important to note that “DeFi” is more centralised than our existing financial infrastructure. (Also, our existing infrastructure mostly uses open, public, well-known standards with many implementations; most DeFi stuff… documents how it currently works, I guess? Though it's hard to find that documentation.)

spinny 5y ago
have you tried google?
- NationalPark 5y ago
  Seems super unlikely that somebody with a HN account is unfamiliar with search engines, doesn't it?
  - spinny 5y ago
    Seems super unlikely that somebody with a HN account can't find docs for defi projects that in most cases have github accounts with available contracts and api docs, doesn't it? Maybe it's just deceptive
    - erulabs 5y ago
      And not to mention that by definition, those DeFi contracts are readable. The actual code, itself. Sure, there might be (and probably are) bugs, and we need auditing tools, the list goes on, but at least it's not a black box.
      - wizzwizz4 5y ago
        The compiled binaries, sure. If you peer with the blockchain, collect a block containing the smart contract and extract the binary from it. At least smart contracts usually don't have that much code, so it's not too much effort to reverse-engineer. But that's not source code.
- wizzwizz4 5y ago
  If you know where the documentation for the most popular DeFi system, Bitcoin, is, then by all means share it. • What does the peer-to-peer network protocol look like? • How do I make a transaction / mine a block? I know how to do this using end-user wallet applications, but the open protocols are so very well documented that I'm sure you can find this information easily. The pages that show up in search results[0][1] don't really have this information. It gives me a high-level overview, tells me that it uses TCP and which port it uses, and gives the structure of the TCP packets (with some examples), but there's a whole load of stuff that's just never defined. To actually understand what's going on, I then have to read the source code. And… making a transaction?[3] Mining a block?[2] No chance. I know it's “double SHA256” and that's about it. (I can look at the source code to find out, sure… but an open standard? Open secret, more like. The flaming whitepaper[4] is more useful than these docs.) This is Bitcoin, the best-known, most-popular, (presumably) best-documented DeFi system on the 'net. Ethereum has… a blog post, an onlinelibrary.wiley.com book and an academic article. I don't even want to know what other stuff has. Most DeFi garbage barely has a whitepaper. [0]: https://developer.bitcoin.org/devguide/p2p_network.html https://developer.bitcoin.org/devguide/p2p_network.html [1]: https://developer.bitcoin.org/reference/p2p_networking.html https://developer.bitcoin.org/reference/p2p_networking.html [2]: https://developer.bitcoin.org/reference/block_chain.html#serialized-blocks https://developer.bitcoin.org/reference/block_chain.html#ser... [3]: https://developer.bitcoin.org/reference/transactions.html https://developer.bitcoin.org/reference/transactions.html [4]: https://bitcoin.org/bitcoin.pdf https://bitcoin.org/bitcoin.pdf (which has apparently been taken down…?) https://web.archive.org/web/20140320135003if_/https://bitcoin.org/bitcoin.pdf https://web.archive.org/web/20140320135003if_/https://bitcoi...

tenebrisalietum 5y ago

In the US: financial -> 2008 subprime loan crisis, recent inflation groceries -> couldn't buy toilet paper at the start of the pandemic, still some lingering supply issues, prices going up restaurants -> many not open reliable hours anymore, many closing medical -> costs way too high and continue to rise, hospitals oversaturated with patients from time to time, nurses quitting All of it is ultimately backed by laws, systems, real people who can be held accountable -> maybe if you are rich I can't fault the average-income (or slightly higher/lower) person for having the point of view that these are starting to fall apart and aspects of DeFi becoming attractive, even though the practicalities have a long way to go before they would become anywhere near as foundational.

rchaud 5y ago
What aspects of DeFi look attractive exactly? Yield of some digital coin which only has value relative to a fiat currency? Your local bank at least complies with regulations that cap transaction fees for your chequing account. Meanwhile, ETH gas fees are completely unpredictable, and can easily be higher than the amount you're transferring.
amitkgupta84 5y ago
I mean more like, you can generally eat food from grocery stores and restaurants and trust it'll be pretty safe. You can get medical operations and pharmaceuticals, and generally trust them. There are actually extremely large problems here, e.g. Purdue and fentanyl, but even there Purdue has been fined to death by the government. Still, there are huge problems for sure. The problems need to be addressed, but I think if you look to narrowly at some of the problems, you think the whole system needs to be overthrown. Sure that sentiment is increasing, but more pushed by well-off elites than a genuine grassroots uprising. This is one of the biggest problems we face today IMO. I don't think DeFi helps with most of the problems you're talking about. Supply chain issues, COVID-related business restrictions, health care prices and the role of insurance providers, none of these are caused by centralized financial systems.

theogravity 5y ago

A lot of DeFi scams claim that an auditing company has audited their code. There's also scam auditing companies too that work with these DeFi scams to add to the false legitimacy.

drsnow 5y ago
Can you provide a source or two for these claims?
iszomer 5y ago
I've seen projects go as far to claim to have their code audited by simply hosting it on a public github repo.
dcist 5y ago
What are the scam auditing companies?
contravert 5y ago
Although smart contract audits are pretty much security theatre where the auditor charges $10k-$30k to run your code through a program, rug pulls are way more common just through simple methods. A few common ways: 1. Use your admin privilege to withdraw or upgrade the smart contract to drain the funds 2. Withdraw all liquidity for your token and disappear 3. Sell the entire token supply all at once, which is functionally equivalent to (2) 4. Pretend to get "hacked" and lose your private key 5. Program a backdoor into the smart contract (the least common way). Some of these are economic in nature (e.g. frontrunning), which can't necessarily be found in an audit