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This article seems like it's reaching. I don't think "money" accurately describes what cryptocurrency is because most people who use USD don't trade on the FORE

This article seems like it's reaching. I don't think "money" accurately describes what cryptocurrency is because most people who use USD don't trade on the FOREX markets, but most cryptocurrency users are primarily focused on the exchange rate of BTC to USD, not it's functionality as a currency. It's better described as a security, and while it can be used as a medium of exchange its volatility can make that expensive or inconvenient. As for this: > Right now, you can take out a loan without involving a bank from one of the many crypto lending protocols. You put up some collateral and can take out a loan for extremely cheap, because there isn't a bank in the middle to take a cut. The reason loans on the blockchain are cheap is not because there's no middle-man but because they're over-collateralized so there's no risk. One of the reasons the bank charges you interest is that they're taking a risk that you will not pay back the loan. AFAIK this is not possible in DeFi.

latchkey 4y ago
> One of the reasons the bank charges you interest is that they're taking a risk that you will not pay back the loan. AFAIK this is not possible in DeFi. That's why there are options markets like, Nexus Mutual [1], that allow third parties to take on that risk. [1] https://nexusmutual.io/ https://nexusmutual.io/
- nappy 4y ago
  Unless I'm missing something here, this is insurance, not lending.
  - christopherwxyz 4y ago
    Both products are lotteries with premiums.
    - nappy 4y ago
      They are categorically different. The issuer of an insurance policy does not bear risk upfront. Insurance policies are not collateralized.
junofan 4y ago
> The reason loans on the blockchain are cheap is not because there's no middle-man but because they're over-collateralized so there's no risk. You’re talking apples and oranges. I think, given recent blowups, it could be related to limits on rehypothecation. But hard to know for sure.
a2800276 4y ago
The Defi loan argument also discredits the argument that "crypto" is money. Why would I swap it for stablecoin, which presumably I swap for dollars which presumably I use to buy things if I could just buy things with "crypto"? Either I can't actually buy things with "crypto" in the world where grown ups reside or I don't want to part with it because I see it as a speculative investment/gambling.
ogogmad 4y ago
> Right now, you can take out a loan without involving a bank from one of the many crypto lending protocols. You put up some collateral and can take out a loan for extremely cheap, because there isn't a bank in the middle to take a cut. "Loan" is a very misleading description of what this is. This is margin trading. A loan is when you post a non-liquid asset in the real world -- like a house -- as collateral. Margin trading is when you post a fairly liquid asset (like other cryptocurrencies) as collateral so that you can buy more cryptocurrencies. You can't use these "DeFi loans" to buy a house in the real world. One reason I think DeFi is bullshit is because its critics describe what it does better than its advocates, who spout incoherent word salad.
- throwawaymaths 4y ago
  Loans do not need collateral, for example educational loans.
- jpgvm 4y ago
  > who spout incoherent word salad I affectionally call it crypto-babble. > critics describe what it does better than its advocates Seems to be true of pretty much all crypto. Most of the advocates have a very poor understanding of how it works, what the benefits/tradeoffs are and worst of all a complete ignorance of the systems they are seeking to "replace". As a result we see all the crypto stuff simply repeat mistakes/failures/weaknesses that have been known in financial systems for around a century or more in most cases.
  - dubswithus 4y ago
    Most of the discussion about HN is not about technicalities of smart contracts or block times or ledgers. The skeptics are interested in repeating the same lines but have a very poor understanding of how it works.
    - jpgvm 4y ago
      That is much less of a problem than the reverse scenario. Being sceptical of something doesn't necessitate a strong understanding, being an advocate does, or at least should. Remember the existing systems work and thus far crypto isn't offering anything new, just alternatives with different trade-offs. That places an awfully high burden of proof on any crypto advocate and such a bar is far from being reached.

latchkey 4y ago

> One of the reasons the bank charges you interest is that they're taking a risk that you will not pay back the loan. AFAIK this is not possible in DeFi. That's why there are options markets like, Nexus Mutual [1], that allow third parties to take on that risk. [1] https://nexusmutual.io/ https://nexusmutual.io/

nappy 4y ago
Unless I'm missing something here, this is insurance, not lending.
- christopherwxyz 4y ago
  Both products are lotteries with premiums.
  - nappy 4y ago
    They are categorically different. The issuer of an insurance policy does not bear risk upfront. Insurance policies are not collateralized.

junofan 4y ago

> The reason loans on the blockchain are cheap is not because there's no middle-man but because they're over-collateralized so there's no risk. You’re talking apples and oranges. I think, given recent blowups, it could be related to limits on rehypothecation. But hard to know for sure.

a2800276 4y ago

The Defi loan argument also discredits the argument that "crypto" is money. Why would I swap it for stablecoin, which presumably I swap for dollars which presumably I use to buy things if I could just buy things with "crypto"? Either I can't actually buy things with "crypto" in the world where grown ups reside or I don't want to part with it because I see it as a speculative investment/gambling.

ogogmad 4y ago

> Right now, you can take out a loan without involving a bank from one of the many crypto lending protocols. You put up some collateral and can take out a loan for extremely cheap, because there isn't a bank in the middle to take a cut. "Loan" is a very misleading description of what this is. This is margin trading. A loan is when you post a non-liquid asset in the real world -- like a house -- as collateral. Margin trading is when you post a fairly liquid asset (like other cryptocurrencies) as collateral so that you can buy more cryptocurrencies. You can't use these "DeFi loans" to buy a house in the real world. One reason I think DeFi is bullshit is because its critics describe what it does better than its advocates, who spout incoherent word salad.

throwawaymaths 4y ago
Loans do not need collateral, for example educational loans.
jpgvm 4y ago
> who spout incoherent word salad I affectionally call it crypto-babble. > critics describe what it does better than its advocates Seems to be true of pretty much all crypto. Most of the advocates have a very poor understanding of how it works, what the benefits/tradeoffs are and worst of all a complete ignorance of the systems they are seeking to "replace". As a result we see all the crypto stuff simply repeat mistakes/failures/weaknesses that have been known in financial systems for around a century or more in most cases.
- dubswithus 4y ago
  Most of the discussion about HN is not about technicalities of smart contracts or block times or ledgers. The skeptics are interested in repeating the same lines but have a very poor understanding of how it works.
  - jpgvm 4y ago
    That is much less of a problem than the reverse scenario. Being sceptical of something doesn't necessitate a strong understanding, being an advocate does, or at least should. Remember the existing systems work and thus far crypto isn't offering anything new, just alternatives with different trade-offs. That places an awfully high burden of proof on any crypto advocate and such a bar is far from being reached.