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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 ca

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
    - RustyConsul 4y 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 4y 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.
  - iboisvert 4y ago
    > It's a new era of finance I have no experience with crypto, but this I don't understand. > DeFi is unlocking the value of an asset, making it liquid... Like a mortgage or a bond issuance (bonds are secured against assets of the corporation)? > Credit is loaning you money and providing an interest rate. Usually something insane like 15%. Average rate for a 30-year fixed mortgage in the US is about 4%[1]. Average Aaa corporate bond yield is 3.43%[2]. I guess that you are talking about interest rate on credit cards? I think that credit card debt is pretty small compared to the size of the mortgage or bond markets. > One example is on Kaurura... I'm not sure I follow you here, but it sounds like you get a loan at 19% APR against some collateral. Then you use the loan as capital for some other investment at a higher rate of return. My question: how is this any different, for example, from a company issuing bonds at 4% coupon rate and using the proceeds to fund operations when the company's profit margin is, say, 50%? Let's say it's a matter of scale; I, as a person, can't issue bonds to trade on a public market. But I can get a mortgage and invest in other stuff hopefully at a return higher than the rate on the loan. As I said, I don't understand how this is a "new era of finance". [1] https://www.valuepenguin.com/mortgages/average-mortgage-rates#:~:text=The%20average%20rate%20for%20a%2030-year%20fixed%20rate,structures%20tend%20to%20have%20lower%20average%20interest%20rates https://www.valuepenguin.com/mortgages/average-mortgage-rate.... [2] https://fred.stlouisfed.org/series/AAA https://fred.stlouisfed.org/series/AAA
    - RustyConsul 4y ago
      The KSM is staked to ensure concencus of the network. proof of stake is like proof of work, but instead you are betting that this node is behaving and the node themselves are running cryptographic hash schemes like bitcoin. So like bitcoin, you are paid for validating the concensus of the network so you are paid that APR. Taken another step further, if you create a smart contract and lock the KSM in it, and that smartcontract stakes the coin for you, it can mint LKSM that proves your ownership in the pool. Slowly but surely the price of LKSM and KSM will diverge in LKSM's favor since the KSM in the smart contract is generating returns for being staked. So you can always redeem it with a slowly appreciating exchange rate. So all that to have a liquid form of staked KSM. You can now use the LKSM to mint AUSD and you can trust you can pay that back because you have colateral lockeed in a vault. Now when i participate n pools, I earn fees for providing liquidity of two assets. Now when people are trading, they can dip into the pool, swap their assets and no one has to be on the 'Other-side' of the trade. They get minimal slippage, and i get paid a trade fee that's much lower than what you can get in traditional finance (Usually fractions of a penny). >how is this any different, for example, from a company issuing bonds at 4% coupon rate and using the proceeds to fund operations when the company's profit margin is, say, 50%? It's nothing like that. Because A.) It's not getting people to loan me money. Company issuing bonds at 4% has to pay that 4% to get access to their assets because it's 'Risky'. In the blockchain there is no risk because they have constant oracle access to the price of the underlying asset so i can do it for free, with no counter party. Simple a piece of code collectively floating on thousands of nodes running around the world.
  - thrwy_ywrht 4y ago
    This comment is indistinguishable from satire.
  - quickthrower2 4y ago
    I miss Ponzi, he really just took my money and dealt with the details for me. Now you say I have to do all this work?
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.

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
  - RustyConsul 4y 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 4y 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.
- iboisvert 4y ago
  > It's a new era of finance I have no experience with crypto, but this I don't understand. > DeFi is unlocking the value of an asset, making it liquid... Like a mortgage or a bond issuance (bonds are secured against assets of the corporation)? > Credit is loaning you money and providing an interest rate. Usually something insane like 15%. Average rate for a 30-year fixed mortgage in the US is about 4%[1]. Average Aaa corporate bond yield is 3.43%[2]. I guess that you are talking about interest rate on credit cards? I think that credit card debt is pretty small compared to the size of the mortgage or bond markets. > One example is on Kaurura... I'm not sure I follow you here, but it sounds like you get a loan at 19% APR against some collateral. Then you use the loan as capital for some other investment at a higher rate of return. My question: how is this any different, for example, from a company issuing bonds at 4% coupon rate and using the proceeds to fund operations when the company's profit margin is, say, 50%? Let's say it's a matter of scale; I, as a person, can't issue bonds to trade on a public market. But I can get a mortgage and invest in other stuff hopefully at a return higher than the rate on the loan. As I said, I don't understand how this is a "new era of finance". [1] https://www.valuepenguin.com/mortgages/average-mortgage-rates#:~:text=The%20average%20rate%20for%20a%2030-year%20fixed%20rate,structures%20tend%20to%20have%20lower%20average%20interest%20rates https://www.valuepenguin.com/mortgages/average-mortgage-rate.... [2] https://fred.stlouisfed.org/series/AAA https://fred.stlouisfed.org/series/AAA
  - RustyConsul 4y ago
    The KSM is staked to ensure concencus of the network. proof of stake is like proof of work, but instead you are betting that this node is behaving and the node themselves are running cryptographic hash schemes like bitcoin. So like bitcoin, you are paid for validating the concensus of the network so you are paid that APR. Taken another step further, if you create a smart contract and lock the KSM in it, and that smartcontract stakes the coin for you, it can mint LKSM that proves your ownership in the pool. Slowly but surely the price of LKSM and KSM will diverge in LKSM's favor since the KSM in the smart contract is generating returns for being staked. So you can always redeem it with a slowly appreciating exchange rate. So all that to have a liquid form of staked KSM. You can now use the LKSM to mint AUSD and you can trust you can pay that back because you have colateral lockeed in a vault. Now when i participate n pools, I earn fees for providing liquidity of two assets. Now when people are trading, they can dip into the pool, swap their assets and no one has to be on the 'Other-side' of the trade. They get minimal slippage, and i get paid a trade fee that's much lower than what you can get in traditional finance (Usually fractions of a penny). >how is this any different, for example, from a company issuing bonds at 4% coupon rate and using the proceeds to fund operations when the company's profit margin is, say, 50%? It's nothing like that. Because A.) It's not getting people to loan me money. Company issuing bonds at 4% has to pay that 4% to get access to their assets because it's 'Risky'. In the blockchain there is no risk because they have constant oracle access to the price of the underlying asset so i can do it for free, with no counter party. Simple a piece of code collectively floating on thousands of nodes running around the world.
- thrwy_ywrht 4y ago
  This comment is indistinguishable from satire.
- quickthrower2 4y ago
  I miss Ponzi, he really just took my money and dealt with the details for me. Now you say I have to do all this work?

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.