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You did not cite 3 examples of "financial engineering," you cited examples of "financial services." If crypto made it meaningfully easier to borrow capital to

by RC_ITR 4y ago

You did not cite 3 examples of "financial engineering," you cited examples of "financial services." If crypto made it meaningfully easier to borrow capital to invest in utility assets, then I'd :heart: it too. (Mortgages) If crypto made it meaningfully easier to own equity capital in assets priced by utility, then I'd :heart: it too. (ETFS) If crypto made it meaningfully easier to transact for utility goods/services with my capital, then I'd :heart: it too (ATMS) Crypto dos none of these things. What it does do, is it allows me to arb trade against misinformed retail liquidity providers who foolishly put their capital into DEX's.

fddhjjj 4y ago
Can you provide a decision rule that distinguishes financial services from financial engineering? I do not feel as confident as you seem that the group of things called “crypto” will not be useful for financial services.
- RC_ITR 4y ago
  My definition: Financial engineering is the quantitative isolation and amplification of financial risk/reward, usually through leveraged/synthetic derivative products. There's no perfect source, but you can see similar definitions here [0] [1] [2] To give you a crypto example of this, Aave is financial engineering, because it allows users to make a bet that they can execute high-volume short-duration trades that yield more than Aave lending fees. In terms of what is financial services, my definition is: Any action taken that allows capital holders to better deploy their capital into the real (read: goods and services) economy. Again, no prefect source, but [3] [4] [5] Again the key nuance here is financial services primarily focus on supporting the real economy, while financial engineering is primarily focused on risk/reward And to be frank, I would absolutely love it if cryptocurrencies supported the real economy in literally any way shape or form. I would get "BTC4Life" tattooed on my forehead, I would dedicate my life to working for the innovators in the space, but unless you've got some secret, I don't think you can give me an example of literally anything cryptocurrency does to support the real economy that a centralized solution couldn't also do. [0] https://en.wikipedia.org/wiki/Financial_engineering https://en.wikipedia.org/wiki/Financial_engineering [1] https://www.investopedia.com/terms/f/financialengineering.asp#:~:text=Financial%20engineering%20is%20the%20use,new%20and%20innovative%20financial%20products https://www.investopedia.com/terms/f/financialengineering.as.... [2] https://www.iaqf.org/what-is-financial-engineering https://www.iaqf.org/what-is-financial-engineering [3] https://www.imf.org/external/pubs/ft/fandd/2011/03/basics.htm https://www.imf.org/external/pubs/ft/fandd/2011/03/basics.ht... [4] https://www.cisa.gov/financial-services-sector https://www.cisa.gov/financial-services-sector [5] https://www.law.cornell.edu/definitions/uscode.php?width=840&height=800&iframe=true&def_id=12-USC-2042094144-351334289&term_occur=999&term_src=title:12:chapter:53:subchapter:V:part:C:section:5536 https://www.law.cornell.edu/definitions/uscode.php?width=840...
  - fddhjjj 4y ago
    Strong parallels between your definition with “isolation” and that offered by freemint in terms of decomposition into elements. The nuance makes sense on its face. Although I don’t trust my own judgement of what impacts the real economy and what is just shuffling of decomposed elements of risk and reward.

by RC_ITR 4y ago

fddhjjj 4y ago

Can you provide a decision rule that distinguishes financial services from financial engineering? I do not feel as confident as you seem that the group of things called “crypto” will not be useful for financial services.

RC_ITR 4y ago
My definition: Financial engineering is the quantitative isolation and amplification of financial risk/reward, usually through leveraged/synthetic derivative products. There's no perfect source, but you can see similar definitions here [0] [1] [2] To give you a crypto example of this, Aave is financial engineering, because it allows users to make a bet that they can execute high-volume short-duration trades that yield more than Aave lending fees. In terms of what is financial services, my definition is: Any action taken that allows capital holders to better deploy their capital into the real (read: goods and services) economy. Again, no prefect source, but [3] [4] [5] Again the key nuance here is financial services primarily focus on supporting the real economy, while financial engineering is primarily focused on risk/reward And to be frank, I would absolutely love it if cryptocurrencies supported the real economy in literally any way shape or form. I would get "BTC4Life" tattooed on my forehead, I would dedicate my life to working for the innovators in the space, but unless you've got some secret, I don't think you can give me an example of literally anything cryptocurrency does to support the real economy that a centralized solution couldn't also do. [0] https://en.wikipedia.org/wiki/Financial_engineering https://en.wikipedia.org/wiki/Financial_engineering [1] https://www.investopedia.com/terms/f/financialengineering.asp#:~:text=Financial%20engineering%20is%20the%20use,new%20and%20innovative%20financial%20products https://www.investopedia.com/terms/f/financialengineering.as.... [2] https://www.iaqf.org/what-is-financial-engineering https://www.iaqf.org/what-is-financial-engineering [3] https://www.imf.org/external/pubs/ft/fandd/2011/03/basics.htm https://www.imf.org/external/pubs/ft/fandd/2011/03/basics.ht... [4] https://www.cisa.gov/financial-services-sector https://www.cisa.gov/financial-services-sector [5] https://www.law.cornell.edu/definitions/uscode.php?width=840&height=800&iframe=true&def_id=12-USC-2042094144-351334289&term_occur=999&term_src=title:12:chapter:53:subchapter:V:part:C:section:5536 https://www.law.cornell.edu/definitions/uscode.php?width=840...
- fddhjjj 4y ago
  Strong parallels between your definition with “isolation” and that offered by freemint in terms of decomposition into elements. The nuance makes sense on its face. Although I don’t trust my own judgement of what impacts the real economy and what is just shuffling of decomposed elements of risk and reward.