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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 thin

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.

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.