24 ms·

I think there's at least some value that can potentially be created. The fact that you can take out a loan or buy insurance and your counterparty is a smart con

I think there's at least some value that can potentially be created. The fact that you can take out a loan or buy insurance and your counterparty is a smart contract is pretty interesting. It could seriously bring down insurance margins if you no longer have drones of people administering policies. Obviously remains to be seen how practical it is.

ngc248 4y ago
>>> The fact that you can take out a loan or buy insurance and your counterparty is a smart contract is pretty interesting. it would be like if google is your insurance provider. If something goes wrong (it eventually will) there would be no recourse, no one to talk to ... all hail our algorithmic overlords.
cuteboy19 4y ago
In DeFi to take out a loan of $100 you need to have collateral worth $200 or more. If the value of the collateral ever goes below $200 then it is immediately autosold. Moreover the collateral has to be on the blockchain as well, so concrete assets like houses cannot be used for this purpose. The main issue with insurance is actually assessment. All smart contracts do is replace execution, which was never a hassle to begin with.
- thebean11 4y ago
  For sure, DeFi loans aren't practical at the moment (for anything but speculation), and may never be practical for something like a mortgage or even a credit card. I still find it pretty mind blowing that an algorithm can loan me money. For insurance I don't agree. Something basic like weather insurance (widely used in agriculture) is already possible. The hardest part is getting the weather information onchain in a way that's trusted by the buyers and sellers of the insurance. Weather oracles do exist though.
  - WJW 4y ago
    > I still find it pretty mind blowing that an algorithm can loan me money. Algorithmic lending has been a thing for decades though. What do you think a credit score is for if not a tool to let computers decide whether to give you credit or not?
    - thebean11 4y ago
      An algorithm might help decide who to lend to, but the algorithm isn't actually lending the money. You aren't paying the algorithm back. Pretty big difference there.
    - RustyConsul 4y ago
      Credit is loaning you money and providing an interest rate. Usually something insane like 15%. DeFi is unlocking the value of an asset, making it liquid and allowing me to participate in other investment opportunities without an APR. One example is on Kaurura. I have KSM, Stake that KSM for a 19% APR Rate. Throw that LKSM into a vault and mint AUSD as long as i have 160% collatoral ratio. I can then use that aUSD i printed, buy other assets and participate in liquidity pools, which are giving anywhere from 50% to 300% APR. It's a new era of finance. Play around in the space before you say it's worthless.
      - dabeeeenster 4y ago
        "One example is on Kaurura. I have KSM, Stake that KSM for a 19% APR Rate. Throw that LKSM into a vault and mint AUSD as long as i have 160% collatoral ratio. I can then use that aUSD i printed, buy other assets and participate in liquidity pools, which are giving anywhere from 50% to 300% APR." I'm sorry, but this sounds ridiculous.
        quickthrower2 4y ago
        It sounds like someone at a horse track who has brought along his loan shark.
      - milkshakes 4y ago
        this is a margin loan it’s not a new concept
  - danans 4y ago
    > The hardest part is getting the weather information onchain in a way that's trusted by the buyers and sellers of the insurance. So the hardest part is trust, the very thing that blockchains supposedly make unnecessary?
    - thebean11 4y ago
      People get touchy about the word "trust" in blockchain threads. Would it help if I said that the hardest part is creating a way to get the weather data on chain that the buyer and seller can agree on ahead of time? Anyway, I'm obviously not claiming this can work without input from humans off chain. My point is that the infrastructure needed to get clean and honest weather data on to the chain (which requires human inputs) is much smaller than the entire infrastructure needed to administer weather insurance (which other than the previous part, can be done autonomously).
      - throwaway82652 4y ago
        >Would it help if I said that the hardest part is creating a way to get the weather data on chain that the buyer and seller can agree on ahead of time? No, because it's still impossible to do that at scale without solving the oracle problem. Putting some arbitrary data on a chain doesn't mean the data is reliable.
        Karrot_Kream 4y ago
        I don't know if there's any way out of the oracle problem honestly. There's nothing wrong with shopping around between different human-administered oracles though, or having some code which polls multiple oracles and takes action based on some statistic applied to the oracles (mean, etc.) But yeah I'm not convinced the oracle problem can be solved.
        throwaway82652 4y ago
        Having multiple oracles doesn't really change the problem, then you're implicitly trusting a group of oracles instead of just one.
  - anyfoo 4y ago
    > I still find it pretty mind blowing that an algorithm can loan me money. I still find it pretty mind blowing that you can make a Turing complete language with nothing but S and K combinators. Good luck finding a real world application for that, though. Sometimes the crypto space (the part that isn't just FOMO coin buyers at least) strikes me as folks who have been looking at something technically interesting for the first time in their lives, under the initial lure of money, and haven't figured out yet that "technically interesting" does not necessarily translate into real world applicability.
    - thebean11 4y ago
      Why don't you respond to the insurance part of my argument? Like I said, I think that's more immediately useful.
      - yunohn 4y ago
        Maybe if you supported your claim instead of vague hand waving, it would be easier to respond?
  - ineedasername 4y ago
    I still find it pretty mind blowing that an algorithm can loan me money. Go to Amazon, put some items in your cart, and click the (almost always present) banner about opening an Amazon credit card. Enter your relevant information, wait about 3 seconds, and BOOM! An algorithm just loaned you money.
1penny42cents 4y ago
The problem is that the loudest backers overshoot and oversell the true potential. The truly innovative people are those who add the proper constraints and work within them to solve the problems where blockchains actually fit best.
itsoktocry 4y ago
>It could seriously bring down insurance margins if you no longer have drones of people administering policies. Instead you might a bunch of people with zero actuarial experience gambling on policies. I agree, the concept is interesting, no regulation makes everything a crapshoot.
- thebean11 4y ago
  Maybe. Or you enable people who need these services but have no access currently to get them. Most likely both.
- WJW 4y ago
  That seems like an insanely good opportunity for people with actual actuarial expertise to profit off any retail investors/gamblers in the market btw. That seems like a market that would professionalize extremely fast.
  - attilaperez 4y ago
    >That seems like an insanely good opportunity for people with actual ~actuarial~ expertise to profit off any retail investors/gamblers in the market btw. https://protos.com/tether-papers-crypto-stablecoin-usdt-investigation-analysis/ https://protos.com/tether-papers-crypto-stablecoin-usdt-inve... If only you knew...
  - quickthrower2 4y ago
    I wonder if anyone talking here has every made any kind of insurance claim? Doing it with a smart contract is as feasible as dating a smart contract. You can only really “insure” against globally agreed on data, for example the price of wheat. That is an options/futures market not insurance though.
    - xur17 4y ago
      Nexus Mutual offers insurance against smart contract hacks, coin depegs, custodial provider withdrawal issues, etc, and they've been operating fine for several years. The one advantage I really appreciate is the transparency it enables over the decision making process. There's no reason this couldn't be expanded for other use cases, including home, car, etc. It really isn't limited to just smart contract data as you suggested.
throwaway82652 4y ago
>The fact that you can take out a loan or buy insurance and your counterparty is a smart contract is pretty interesting. No it isn't. I've been hearing this for years and I still haven't seen any reason anyone would actually want this, beyond the novelty factor. It's strictly worse than any other equivalent insurance or loan for a number of reasons, the worst one being that there's no human you can talk to when something goes wrong. If you think it's bad enough now when your bank has terrible customer service or your insurance company is fighting your claims, blockchains are like taking that a step further by making it technically impossible to provide any kind of customer service. >It could seriously bring down insurance margins if you no longer have drones of people administering policies. This sentence also makes zero sense. You don't need blockchains to replace insurance actuaries with an algorithm, insurance companies could already do that. Over the long-term they can't rely on this because the whole point of insurance is you constantly readjust your models based on risk which cannot be predicted. Once again I'm reading a cryptocurrency thread where everything is wrong and nothing makes any sense.
- pattrn 4y ago
  [deleted]
  - throwaway82652 4y ago
    >One could make the same argument for a dictatorship being superior to the rule of law. After all, you can always talk to a human to resolve your problem. I'm sorry I don't understand what you're talking about, this makes no sense. The judicial system also requires humans who are tasked with resolving the problems who you can talk to, that's literally the whole point of it. >Removing human decision making from a process makes it a game where everyone plays by the same rules. First of all, no it doesn't because that presumes the machine is always going to be working correctly. Computers don't do this. Second of all, somebody always has to build and maintain the computers, so there is no situation where you can remove all human decision making from the process. I hear executives making these kind of comments all the time as an excuse for cost cutting but that's all it is. You can't make a tech company that isn't paying IT staff in some way. >You ignored his point No, you're wrong. His point was also wrong. I actually agree you can indeed reduce administrative expenses by using computer modeling, and most insurance companies already do that. My point is this has nothing to do with blockchains. You don't need blockchains to do that, and attempting to do that on blockchains only increases cost. We're getting into an area where everything is wrong again, please stop with this because I would rather not. >If you keep making up your own bad arguments Except this is not my argument. The parent comment just made it and I've heard it probably hundreds of other times. It's the same kind of comment as "maybe we can put the deed to my house on the blockchain" which is equally nonsensical and I've probably heard that hundreds of times too.
jmyeet 4y ago
There are a lot of these theoretical cases but none seem likely to come to fruition anytime soon and pretty much all of them ignore this basic problem: the transactional nature of blockchains falls apart as soon as you interact with the real world. Let me explain: you can have a smart contract where you get 5-20% of the value whenevder it's sold and that'll work and be guaranteed (assuming the network isn't compromised eg 51% attack). That is wholly continaed with the blockchain. But what if someone wants to sell that for cash? Now you've introduced the exact same trust issues that exist in every transaction in the traditional finance system: trust in the institutions involved and the potential needs for courts to enforce contracts. So what exactly have you gained? Nothing. Literally nothing.
- thebean11 4y ago
  Why can't you sell it for some crypto asset and exchange that for cash (obviously this second exchange requires a trusted third party)? Maybe I don't understand your example. That seems like an issue with cash (no way to enforce you giving me the thing I paid for, and no way for you to enforce me giving you the cash for the item you gave me). Yes using cash gets rid of the guarantee that the transfer of goods is fully atomic that crypto generally offers. Buying tomatoes at the store has the exact same problem.
- FabHK 4y ago
  AKA the oracle problem.
spookthesunset 4y ago
> The fact that you can take out a loan Why would any rational actor provide a loan denominated upon an insanely volatile "currency" like bitcoin or ethereum? The lender could loan 100 ethereum bux only to lose big time because the price of ethereum went up 10x in a week making the amount repaid worthless. Or it could go down, in which case the borrower would wind up defaulting because who would want to pay back 10x more than they were lent? Lending requires a pretty stable currency...
- lowdest 4y ago
  Have you looked into any of the lending platforms? These are pretty well controlled for. Crypto loans are typically collateralized, so that below a certain loan-to-value ratio, the collateral belongs to the loan provider and the borrower can keep what was borrowed. The exact rules vary place to place. It's a calculated risk that is competitive with other investments. People borrow to avoid triggering capital gains, or to gain leverage or to short.
thrwy_ywrht 4y ago
>The fact that you can take out a loan You can take out a loan in crypto that's fully secured against some other crypto. It's turtles all the way down, and has zero relevance to what most people think about when they talk about taking out a loan.
- tylersmith 4y ago
  How so? I just recently borrowed USD to buy a car at a lower rate than I could find elsewhere.
  - lottin 4y ago
    How does that work? If you take a loan from a "decentralised lender" you can essentially walk away with the money and never pay the loan back. So, "decentralised lending" can't work, as far as I can tell.
    - ricochet11 4y ago
      Nearly all defi loans are overcollateralized. I deposit $100 of eth, borrow $50 of eth, convert to usdc and send to my bank. Six months later if the price of eth has gone up i need to buy more the $50 worth to repay my debt, if the price of eth goes down i can pay back less than $50 of eth. If it goes up by a lot then i can borrow more against my initial deposit, if it goes down by a lot and i dont close my position then the deposit is liquidated to pay off the debt and i have a smaller position. It actually works pretty well, add on to this things like Alchemix which builds loans via yearn vaults and you can borrow money against future interest and have self-repaying loans. If you have initial assets its an easy way to borrow against those assets. e.g. My bank wouldn't give me a loan against my eth as they don\t value the asset, instead I just open a maker vault and borrow against it in dai ($ stablecoin), and then sell that for € and deposit to my bank. problem solved.
      - lottin 4y ago
        > I deposit $100 of eth, borrow $50 of eth I could be missing something, but it seems you're lending $50 worth of eth, rather than borrowing. Your net debt position is <0.
FabHK 4y ago
How do you solve the oracle problem? How do you enforce that a loan be paid back? How do you check that an insurance case has actually occurred? You need institutions to determine and oversee this, and institutions you can trust. If you need to trust them anyway, you can dispense with the hugely inefficient "Proof of Waste" blockchain stuff, and have any required computations run on a few old PCs.
yellowapple 4y ago
Not only that, but it also removes a lot of opportunity for prejudicial discrimination that exists in the traditional loan application process. It ain't perfect (algorithmic bias/discrimination ain't exactly a rare thing), but it's at least more predictable and transparent.
lottin 4y ago
An insurance requires an independent assessment that a certain event has taken place (e.g. a car accident) and of the circumstances surrounding the event. A loan requires the ability from the lender to initiate legal action against the borrower in the event of default. Smart contract can't help with that or make any of that more efficient.
- solatic 4y ago
  To play the Devil's advocate, if the independent assessment can be provided by a neutral third-party API, then you could have a smart contract pay out depending on the response from the API. Realistically, this requires more Data-as-a-Service startups, so there's a bit of chicken-or-the-egg difficulty here.

ngc248 4y ago

>>> The fact that you can take out a loan or buy insurance and your counterparty is a smart contract is pretty interesting. it would be like if google is your insurance provider. If something goes wrong (it eventually will) there would be no recourse, no one to talk to ... all hail our algorithmic overlords.

cuteboy19 4y ago

In DeFi to take out a loan of $100 you need to have collateral worth $200 or more. If the value of the collateral ever goes below $200 then it is immediately autosold. Moreover the collateral has to be on the blockchain as well, so concrete assets like houses cannot be used for this purpose. The main issue with insurance is actually assessment. All smart contracts do is replace execution, which was never a hassle to begin with.

thebean11 4y ago
For sure, DeFi loans aren't practical at the moment (for anything but speculation), and may never be practical for something like a mortgage or even a credit card. I still find it pretty mind blowing that an algorithm can loan me money. For insurance I don't agree. Something basic like weather insurance (widely used in agriculture) is already possible. The hardest part is getting the weather information onchain in a way that's trusted by the buyers and sellers of the insurance. Weather oracles do exist though.
- WJW 4y ago
  > I still find it pretty mind blowing that an algorithm can loan me money. Algorithmic lending has been a thing for decades though. What do you think a credit score is for if not a tool to let computers decide whether to give you credit or not?
  - thebean11 4y ago
    An algorithm might help decide who to lend to, but the algorithm isn't actually lending the money. You aren't paying the algorithm back. Pretty big difference there.
  - RustyConsul 4y ago
    Credit is loaning you money and providing an interest rate. Usually something insane like 15%. DeFi is unlocking the value of an asset, making it liquid and allowing me to participate in other investment opportunities without an APR. One example is on Kaurura. I have KSM, Stake that KSM for a 19% APR Rate. Throw that LKSM into a vault and mint AUSD as long as i have 160% collatoral ratio. I can then use that aUSD i printed, buy other assets and participate in liquidity pools, which are giving anywhere from 50% to 300% APR. It's a new era of finance. Play around in the space before you say it's worthless.
    - dabeeeenster 4y ago
      "One example is on Kaurura. I have KSM, Stake that KSM for a 19% APR Rate. Throw that LKSM into a vault and mint AUSD as long as i have 160% collatoral ratio. I can then use that aUSD i printed, buy other assets and participate in liquidity pools, which are giving anywhere from 50% to 300% APR." I'm sorry, but this sounds ridiculous.
      - quickthrower2 4y ago
        It sounds like someone at a horse track who has brought along his loan shark.
    - milkshakes 4y ago
      this is a margin loan it’s not a new concept
- danans 4y ago
  > The hardest part is getting the weather information onchain in a way that's trusted by the buyers and sellers of the insurance. So the hardest part is trust, the very thing that blockchains supposedly make unnecessary?
  - thebean11 4y ago
    People get touchy about the word "trust" in blockchain threads. Would it help if I said that the hardest part is creating a way to get the weather data on chain that the buyer and seller can agree on ahead of time? Anyway, I'm obviously not claiming this can work without input from humans off chain. My point is that the infrastructure needed to get clean and honest weather data on to the chain (which requires human inputs) is much smaller than the entire infrastructure needed to administer weather insurance (which other than the previous part, can be done autonomously).
    - throwaway82652 4y ago
      >Would it help if I said that the hardest part is creating a way to get the weather data on chain that the buyer and seller can agree on ahead of time? No, because it's still impossible to do that at scale without solving the oracle problem. Putting some arbitrary data on a chain doesn't mean the data is reliable.
      - Karrot_Kream 4y ago
        I don't know if there's any way out of the oracle problem honestly. There's nothing wrong with shopping around between different human-administered oracles though, or having some code which polls multiple oracles and takes action based on some statistic applied to the oracles (mean, etc.) But yeah I'm not convinced the oracle problem can be solved.
        throwaway82652 4y ago
        Having multiple oracles doesn't really change the problem, then you're implicitly trusting a group of oracles instead of just one.
- anyfoo 4y ago
  > I still find it pretty mind blowing that an algorithm can loan me money. I still find it pretty mind blowing that you can make a Turing complete language with nothing but S and K combinators. Good luck finding a real world application for that, though. Sometimes the crypto space (the part that isn't just FOMO coin buyers at least) strikes me as folks who have been looking at something technically interesting for the first time in their lives, under the initial lure of money, and haven't figured out yet that "technically interesting" does not necessarily translate into real world applicability.
  - thebean11 4y ago
    Why don't you respond to the insurance part of my argument? Like I said, I think that's more immediately useful.
    - yunohn 4y ago
      Maybe if you supported your claim instead of vague hand waving, it would be easier to respond?
- ineedasername 4y ago
  I still find it pretty mind blowing that an algorithm can loan me money. Go to Amazon, put some items in your cart, and click the (almost always present) banner about opening an Amazon credit card. Enter your relevant information, wait about 3 seconds, and BOOM! An algorithm just loaned you money.

1penny42cents 4y ago

The problem is that the loudest backers overshoot and oversell the true potential. The truly innovative people are those who add the proper constraints and work within them to solve the problems where blockchains actually fit best.

itsoktocry 4y ago

>It could seriously bring down insurance margins if you no longer have drones of people administering policies. Instead you might a bunch of people with zero actuarial experience gambling on policies. I agree, the concept is interesting, no regulation makes everything a crapshoot.

thebean11 4y ago
Maybe. Or you enable people who need these services but have no access currently to get them. Most likely both.
WJW 4y ago
That seems like an insanely good opportunity for people with actual actuarial expertise to profit off any retail investors/gamblers in the market btw. That seems like a market that would professionalize extremely fast.
- attilaperez 4y ago
  >That seems like an insanely good opportunity for people with actual ~actuarial~ expertise to profit off any retail investors/gamblers in the market btw. https://protos.com/tether-papers-crypto-stablecoin-usdt-investigation-analysis/ https://protos.com/tether-papers-crypto-stablecoin-usdt-inve... If only you knew...
- quickthrower2 4y ago
  I wonder if anyone talking here has every made any kind of insurance claim? Doing it with a smart contract is as feasible as dating a smart contract. You can only really “insure” against globally agreed on data, for example the price of wheat. That is an options/futures market not insurance though.
  - xur17 4y ago
    Nexus Mutual offers insurance against smart contract hacks, coin depegs, custodial provider withdrawal issues, etc, and they've been operating fine for several years. The one advantage I really appreciate is the transparency it enables over the decision making process. There's no reason this couldn't be expanded for other use cases, including home, car, etc. It really isn't limited to just smart contract data as you suggested.

throwaway82652 4y ago

>The fact that you can take out a loan or buy insurance and your counterparty is a smart contract is pretty interesting. No it isn't. I've been hearing this for years and I still haven't seen any reason anyone would actually want this, beyond the novelty factor. It's strictly worse than any other equivalent insurance or loan for a number of reasons, the worst one being that there's no human you can talk to when something goes wrong. If you think it's bad enough now when your bank has terrible customer service or your insurance company is fighting your claims, blockchains are like taking that a step further by making it technically impossible to provide any kind of customer service. >It could seriously bring down insurance margins if you no longer have drones of people administering policies. This sentence also makes zero sense. You don't need blockchains to replace insurance actuaries with an algorithm, insurance companies could already do that. Over the long-term they can't rely on this because the whole point of insurance is you constantly readjust your models based on risk which cannot be predicted. Once again I'm reading a cryptocurrency thread where everything is wrong and nothing makes any sense.

pattrn 4y ago
[deleted]
- throwaway82652 4y ago
  >One could make the same argument for a dictatorship being superior to the rule of law. After all, you can always talk to a human to resolve your problem. I'm sorry I don't understand what you're talking about, this makes no sense. The judicial system also requires humans who are tasked with resolving the problems who you can talk to, that's literally the whole point of it. >Removing human decision making from a process makes it a game where everyone plays by the same rules. First of all, no it doesn't because that presumes the machine is always going to be working correctly. Computers don't do this. Second of all, somebody always has to build and maintain the computers, so there is no situation where you can remove all human decision making from the process. I hear executives making these kind of comments all the time as an excuse for cost cutting but that's all it is. You can't make a tech company that isn't paying IT staff in some way. >You ignored his point No, you're wrong. His point was also wrong. I actually agree you can indeed reduce administrative expenses by using computer modeling, and most insurance companies already do that. My point is this has nothing to do with blockchains. You don't need blockchains to do that, and attempting to do that on blockchains only increases cost. We're getting into an area where everything is wrong again, please stop with this because I would rather not. >If you keep making up your own bad arguments Except this is not my argument. The parent comment just made it and I've heard it probably hundreds of other times. It's the same kind of comment as "maybe we can put the deed to my house on the blockchain" which is equally nonsensical and I've probably heard that hundreds of times too.

jmyeet 4y ago

There are a lot of these theoretical cases but none seem likely to come to fruition anytime soon and pretty much all of them ignore this basic problem: the transactional nature of blockchains falls apart as soon as you interact with the real world. Let me explain: you can have a smart contract where you get 5-20% of the value whenevder it's sold and that'll work and be guaranteed (assuming the network isn't compromised eg 51% attack). That is wholly continaed with the blockchain. But what if someone wants to sell that for cash? Now you've introduced the exact same trust issues that exist in every transaction in the traditional finance system: trust in the institutions involved and the potential needs for courts to enforce contracts. So what exactly have you gained? Nothing. Literally nothing.

thebean11 4y ago
Why can't you sell it for some crypto asset and exchange that for cash (obviously this second exchange requires a trusted third party)? Maybe I don't understand your example. That seems like an issue with cash (no way to enforce you giving me the thing I paid for, and no way for you to enforce me giving you the cash for the item you gave me). Yes using cash gets rid of the guarantee that the transfer of goods is fully atomic that crypto generally offers. Buying tomatoes at the store has the exact same problem.
FabHK 4y ago
AKA the oracle problem.

spookthesunset 4y ago

> The fact that you can take out a loan Why would any rational actor provide a loan denominated upon an insanely volatile "currency" like bitcoin or ethereum? The lender could loan 100 ethereum bux only to lose big time because the price of ethereum went up 10x in a week making the amount repaid worthless. Or it could go down, in which case the borrower would wind up defaulting because who would want to pay back 10x more than they were lent? Lending requires a pretty stable currency...

lowdest 4y ago
Have you looked into any of the lending platforms? These are pretty well controlled for. Crypto loans are typically collateralized, so that below a certain loan-to-value ratio, the collateral belongs to the loan provider and the borrower can keep what was borrowed. The exact rules vary place to place. It's a calculated risk that is competitive with other investments. People borrow to avoid triggering capital gains, or to gain leverage or to short.

thrwy_ywrht 4y ago

>The fact that you can take out a loan You can take out a loan in crypto that's fully secured against some other crypto. It's turtles all the way down, and has zero relevance to what most people think about when they talk about taking out a loan.

tylersmith 4y ago
How so? I just recently borrowed USD to buy a car at a lower rate than I could find elsewhere.
- lottin 4y ago
  How does that work? If you take a loan from a "decentralised lender" you can essentially walk away with the money and never pay the loan back. So, "decentralised lending" can't work, as far as I can tell.
  - ricochet11 4y ago
    Nearly all defi loans are overcollateralized. I deposit $100 of eth, borrow $50 of eth, convert to usdc and send to my bank. Six months later if the price of eth has gone up i need to buy more the $50 worth to repay my debt, if the price of eth goes down i can pay back less than $50 of eth. If it goes up by a lot then i can borrow more against my initial deposit, if it goes down by a lot and i dont close my position then the deposit is liquidated to pay off the debt and i have a smaller position. It actually works pretty well, add on to this things like Alchemix which builds loans via yearn vaults and you can borrow money against future interest and have self-repaying loans. If you have initial assets its an easy way to borrow against those assets. e.g. My bank wouldn't give me a loan against my eth as they don\t value the asset, instead I just open a maker vault and borrow against it in dai ($ stablecoin), and then sell that for € and deposit to my bank. problem solved.
    - lottin 4y ago
      > I deposit $100 of eth, borrow $50 of eth I could be missing something, but it seems you're lending $50 worth of eth, rather than borrowing. Your net debt position is <0.

FabHK 4y ago

How do you solve the oracle problem? How do you enforce that a loan be paid back? How do you check that an insurance case has actually occurred? You need institutions to determine and oversee this, and institutions you can trust. If you need to trust them anyway, you can dispense with the hugely inefficient "Proof of Waste" blockchain stuff, and have any required computations run on a few old PCs.

yellowapple 4y ago

Not only that, but it also removes a lot of opportunity for prejudicial discrimination that exists in the traditional loan application process. It ain't perfect (algorithmic bias/discrimination ain't exactly a rare thing), but it's at least more predictable and transparent.

lottin 4y ago

An insurance requires an independent assessment that a certain event has taken place (e.g. a car accident) and of the circumstances surrounding the event. A loan requires the ability from the lender to initiate legal action against the borrower in the event of default. Smart contract can't help with that or make any of that more efficient.

solatic 4y ago
To play the Devil's advocate, if the independent assessment can be provided by a neutral third-party API, then you could have a smart contract pay out depending on the response from the API. Realistically, this requires more Data-as-a-Service startups, so there's a bit of chicken-or-the-egg difficulty here.