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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 au

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 5y 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 5y 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 5y 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 5y 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 5y 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 5y ago
        It sounds like someone at a horse track who has brought along his loan shark.
    - milkshakes 5y ago
      this is a margin loan it’s not a new concept
      - RustyConsul 5y ago
        Four risks with margin loans. The first two also apply with crypto: 1.) Amplified losses if the securities in your account decline in value 2.) Margin calls or liquidation of securities 3.) Losses greater than the original investment are possible - Not possible due to constant access via oracles to the underlying asset. The Protocol may experience more loss in very rare instances, but as an individual i never will. 4.) Interest rates may rise, increasing the cost of your loan. And due to 3.) is why you have an 'interest rate'. I have no rate of interest on my margin loan. The protocol generates money from trade fees, more liquidity is and leverage increases TVL.
      - ineedasername 5y ago
        It's a fascinating throwback to the dotcom boom where everything was "It's $X, but on the internet!" Now it's "$X but with crypto!". Only with crypto there's a constantly evolving set of jargon that obfuscates the fact that yeah, traditional finance does it already To be fair, the dotcom era had it's fair share of obfuscating jargon too. Maybe crypto just seems worse because the dotcom boom was so far back in my memory. I think there might be some actual valuable use cases for crypto. I just wish all the people reinventing the wheel and thinking it's new would get out of the way. Then at least we can find out if crypto actually has something interesting it can do.
- danans 5y 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 5y 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 5y 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 5y 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 5y ago
        Having multiple oracles doesn't really change the problem, then you're implicitly trusting a group of oracles instead of just one.
- anyfoo 5y 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 5y ago
    Why don't you respond to the insurance part of my argument? Like I said, I think that's more immediately useful.
    - yunohn 5y ago
      Maybe if you supported your claim instead of vague hand waving, it would be easier to respond?
- ineedasername 5y 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.

thebean11 5y 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 5y 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 5y 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 5y 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 5y 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 5y ago
      It sounds like someone at a horse track who has brought along his loan shark.
  - milkshakes 5y ago
    this is a margin loan it’s not a new concept
    - RustyConsul 5y ago
      Four risks with margin loans. The first two also apply with crypto: 1.) Amplified losses if the securities in your account decline in value 2.) Margin calls or liquidation of securities 3.) Losses greater than the original investment are possible - Not possible due to constant access via oracles to the underlying asset. The Protocol may experience more loss in very rare instances, but as an individual i never will. 4.) Interest rates may rise, increasing the cost of your loan. And due to 3.) is why you have an 'interest rate'. I have no rate of interest on my margin loan. The protocol generates money from trade fees, more liquidity is and leverage increases TVL.
    - ineedasername 5y ago
      It's a fascinating throwback to the dotcom boom where everything was "It's $X, but on the internet!" Now it's "$X but with crypto!". Only with crypto there's a constantly evolving set of jargon that obfuscates the fact that yeah, traditional finance does it already To be fair, the dotcom era had it's fair share of obfuscating jargon too. Maybe crypto just seems worse because the dotcom boom was so far back in my memory. I think there might be some actual valuable use cases for crypto. I just wish all the people reinventing the wheel and thinking it's new would get out of the way. Then at least we can find out if crypto actually has something interesting it can do.
danans 5y 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 5y 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 5y 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 5y 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 5y ago
        Having multiple oracles doesn't really change the problem, then you're implicitly trusting a group of oracles instead of just one.
anyfoo 5y 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 5y ago
  Why don't you respond to the insurance part of my argument? Like I said, I think that's more immediately useful.
  - yunohn 5y ago
    Maybe if you supported your claim instead of vague hand waving, it would be easier to respond?
ineedasername 5y 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.