7 ms·

One thing to note is that while Celsius, a centralized and opaque yield platform, collapsed, not a single major DeFi protocol failed during a period of enormous

One thing to note is that while Celsius, a centralized and opaque yield platform, collapsed, not a single major DeFi protocol failed during a period of enormous stress. MakerDAO, Aave, Uniswap, Curve, Lido and Compound all had perfect 24/7 uptime with zero losses due to unrecoverable debt. This pretty clearly strengthens the case for pure and transparent DeFi, where anybody can inspect the health of the protocol or the rules of the immutable code. In contrast Celsius failed because it was an opaque black box that primarily lent to other opaque black boxes like Three Arrows Capital. For a long-time a lot of people just getting into crypto felt like the CeDeFi platforms like Celsius or BlockFi were "safer" than the pure on-chain protocols like Aave or Curve because they didn't have to worry about managing their own keys, there were humans in charge, and a nice corporate entity standing behind it their deposits. As it turns out, decentralized autonomous protocols were substantially safer.

vkou 4y ago
Celsius seems to have been either a ponzi scheme, or a group of morons doing dumb speculative investment on margin, or (most likely) both, but I'd like to point out that MakerDAO is down 70% YTD, Aave is down 60%, Uniswap is down 60%, etc, etc. You'd have been better off just buying bitcoin on margin (Since BTC is only down 53% YTD). The point of this post is that you can't make something out of nothing. None of these tokens/firms/etc have any idea of how they can make money in the crypto space, because there is no way to make money in the crypto space - because it doesn't produce anything. It's all just negative-sum speculation, and shitcoins investing into other shitcoins, and it all evaporates as soon as the Fed tightens its purse-strings. Miners make money, people selling shovels make money, everyone else is just trading baseball cards around.
- TimJRobinson 4y ago
  Their tokens are down, but you don't have to buy them to use the platform, they're basically like shares in a company. I constantly use all those platforms without ever buying their tokens. AMZN being down 30% in the last 6 months has no impact on how useful Amazon or AWS are as products.
  - Wertigoyr 4y ago
    What does there platform provide then?
    - basch 4y ago
      Currency exchange. P2P Lending. Money services.
      - nradov 4y ago
        But the problem is that it's not real currency and you can't do anything useful with it beyond trying to trade it to a bigger idiot.
        whatisweb3 4y ago
        Some people want USDC, some people want non fungible assets, some people want ETH, some people want an ERC20 that backs an idea or organization. DeFi let’s these users manage these assets without placing them in the hands of a single actor. Saying nobody wants ETH or USDC is like saying nobody wants AMZN or AAPL shares. What you really mean is that you are not interested in those assets.
        nradov 4y ago
        Those are not "assets" in any meaningful sense. You're just making things up.
        whatisweb3 4y ago
        ETH or USDC are as much “assets” as stocks, gold, bonds, property, domain names. Humans and social consensus made all of this up.
- junofan 4y ago
  Goldfinch is doing ok. It’s a financial system—what do you expect?
- yokem55 4y ago
  > but I'd like to point out that MakerDAO is down 70% YTD, Aave is down 60%, Uniswap is down 60%, etc, etc. The health of the protocols is only very marginally connected to the value of the tokens that govern them. Even if the $UNI token went to zero, the liquidity pools and swap contracts would still work fine. $MKR and $AAVE are a little more complicated because if the governance tokens got too cheap, the protocols could be hijacked and some of the lending parameters could be set to 'broken' values, resulting in liquidations that didn't need to happen. But as of now, the protocols are still working as designed.
  - vkou 4y ago
    That's wonderful. But what are all these loans used for? Arbitrage? Trading other coins around? It's turtles all the way down - there's nothing that generates value at the bottom.
    - dcolkitt 4y ago
      We could easily put real economic assets and loans on-chain. The legal frameworks exist On-chain yields are now low enough and “real-world” interest rates high enough that there’d be demand. Delaware courts can and have enforced corporate entities governed by software. The problem is that all of this is currently illegal, because The SEC and Gary Gensler have made zero effort to build a regulatory framework for securities as tokens.
      - nradov 4y ago
        That is entirely hypothetical and there is zero benefit to putting real economic assets and loans on-chain.
      - vkou 4y ago
        We could, and we could also build cars that run on peanut butter. We don't, because there is no point to it, because it costs too much, and because it solves problems that have already been solved. It's not going to magically make inflation or interest rates go away. You are correct that the legal system would still be around, and will still be able to do pretty much everything that it's doing now. It's not illegal, because it's not actually in the realm of the SEC. What you describe - the background implementation of finance isn't an investment, it's just boring clerical work. [1] If there were a better way to do it with blockchains, people would adopt it. Unfortunately, blockchains do not solve the hard problems in this space, but they do make the easy problems both hard and expensive. [1] Yes, it's regulated, but the regulation allows for improvements. The regulation isn't the problem - getting everyone's workflows that are accustomed to how this clerical work is done is the problem! Nobody will switch to a system that's not better, and blockchains are not a better system for this [2]. [2] And if they were, no currently existing blockchain would be a better system for this. If stock clearing or whatever would somehow work better through a blockchain[3], there's no reason to do it on a blockchain that has already been pre-mined, and is being traded around by speculators. Why pay them a first-movers tax, when you can just fork and spin up your own? The hashing power of anything but BTC and maybe the ETH networks isn't sufficient to prevent attacks on something as important as this - so the existing coin ecosystems have zero value for this usecase. The organizations adopting this would have to control the hashing power, as well - and at that point, why pay third-parties for it? [3] It wouldn't.
- tsimionescu 4y ago
  > You'd have been better off just buying bitcoin on margin (Since BTC is only down 53% YTD). It's also funny to note that you'd have been better off just buying Turkish Lyra, which is "only" down ~29%. Most fiats, at least in Europe, are down waaaaaay less than that, of course. So much for crypto as a store of value.
  - aaaaaaaaata 4y ago
    Will we catch you right here next year, or the year after when it's at a new all-time high, saying the opposite?
    - tsimionescu 4y ago
      At worst I may be silent if that happens, but I have never believed in the long term value of crypto, even when friends and family members invested.
      - aaaaaaaaata 4y ago
        > At worst I may be silent Considering your expertise in the area, this sounds like "at best".
  - tim333 4y ago
    Yeah if you'd put $1000 into bitcoin five years ago, at current prices you'd only have $10,000 left. So much worse than leaving it in the bank.
    - tsimionescu 4y ago
      I responded to a comment about YTD, not 5 years ago.
Nursie 4y ago
> not a single major DeFi protocol failed during a period of enormous stress Was Terra/Luna/Anchor/Whatever not a DeFi protocol?
- wmf 4y ago
  I guess Anchor and Solend are (retroactively) not "major" DeFi.
  - thematrixturtle 4y ago
    Well, looking at their post-collapse valuations, they certainly aren't major anymore.
- TimJRobinson 4y ago
  They were a DeFi ponzi chain which was obviously going to fail to anyone who spent time looking into it. They were printing a stablecoin backed by nothing. Far different from the blue chip DeFi apps on Ethereum that the OP listed, which process billions of dollars per day without issue. DeFi makes things more transparent, but it doesn't make them risk free. I personally profited off the collapse because of the transparency. Couldn't do the same with Celsius or traditional finance.
  - 300bps 4y ago
    They were a DeFi ponzi chain which was obviously going to fail This is an excellent example of the “No True Scotsman” logical fallacy.
  - gcr 4y ago
    Calling "pilot error" in response to a service interruption of your least favorite token is like saying "sure, our perl CGI gateway was down, but that doesn't count as downtime since our caddy frontend and deno server is still up." If a token permanently loses 99.9% of its value, or if a major lender freezes withdrawals, I'd call that a service interruption because almost all users lost the value they held in the system.
adrr 4y ago
Defi has other problems like the smart contracts getting exploited. $12b have been stolen from them according to the source below. https://www.elliptic.co/resources/defi-risk-regulation-and-the-rise-of-decrime https://www.elliptic.co/resources/defi-risk-regulation-and-t...
- capableweb 4y ago
  That's true, it's a inherent risk when you deal with "programmable money" in a open and decentralized ecosystem. While it is a risk, major platforms (like the ones mentioned in parent comment [except Compound]) haven't actually had any exploits of that scope (yet?). rekt.news is probably one of the best sources of news when it comes to exploits in both "pure" defi and also centralized "defi" (which, doesn't even make sense but I digress) like Celsius. Only Compound has been mentioned there. Overall, the platforms have been running for a long time, during ups and down, and seem relatively stable at this point, if you're fine with the overall risk cryptocurrencies present.
rmac 4y ago
the Curve USTw-3CRV pool "failed"
darth_avocado 4y ago
> CeDeFi You gotta be Kidding me. That’s like frozen boiling water.
- aahortwwy 4y ago
  https://en.m.wikipedia.org/wiki/Properties_of_water#Triple_point https://en.m.wikipedia.org/wiki/Properties_of_water#Triple_p...
jrm4 4y ago
Sure, I'll take it a step further. Any storage of your money that doesn't involve you fully controlling your own keys is stupid because it is literally antithetical to the entire purpose of crypto. If you want to let someone else hold on to your money for yield, great. Use something already established, ensured, and proven. But not crypto. Not your keys, not your crypto. How many times must it be said?
- tsimionescu 4y ago
  This only works if you use crypto as a store of value and even then it doesn't scale to any significant fraction of the population, for most coins. BTC and Eth, at least, are simply too slow for everyone to have their own wallet and do their own on-chain transactions, even if rarely, if we imagine they will ever reach some significant portion of the population. And LN doesn't solve this in any way, before anyone claims otherwise.
  - TimJRobinson 4y ago
    Layer 2's do solve it, and will reach 14M TPS by 2030 [0], which is more than enough for the world. He has explanations of how the different components work in different posts on the site. 0: https://polynya.medium.com/conjecture-how-far-can-rollups-data-shards-scale-in-2030-14-million-tps-933b87ca622e https://polynya.medium.com/conjecture-how-far-can-rollups-da...
    - tsimionescu 4y ago
      The problem is that you need at the very least 1 on-chain transaction for every human participant, to get money into one wallet that they control. But BTC barely manages 5 TPS and ETH maybe 20. This means that BTC would need about 115 days to add 50M new people onto the block chain, and ETH could manage it in a month - only to have 1 wallet with some amount of coins in it (of course, assuming nothing else whatsoever is happening on the block chain in that time). Only after you get past this hurdle do you even have access to a L2. Of course, you then need extra transactions on the L1 chain to gain access to the L2 - with LN at least, this scales even worse, as you need some fraction of the number of pairs of people to communicate - so some fraction of (50M)² transactions - which fraction depending on how centralized the network will be. Then of course, L2s offer little in terms of guarantees for your money unless you can quickly and often close the channel and get the L1 guarantee. So no, BTC and ETH fundamentally can't scale to a large number of people using them, regardless of how many trillions of transactions per second L2s can do. They are failed technologies for anything similar to their original goals. It's barely even worth mentionibg that with 1 wallet per real person, you get worse privacy for your transactions than VISA offers you - as many have shown, for any kind of practical privacy you need many temporary wallets, bringing the total number of transactions required just to have a single Satoshi in those wallets to many times more.
dannyw 4y ago
Incorrect. Bancor, the first DeFi protocol and ICO, is in deficit (liabilities exceed assets). They offered 100% impermanent loss protection. Now, liquidity providers like me who deposited ETH are down 50%. It's only about a $18 million hole, but the Switzerland "non-profit" Bancor Foundation that has raised hundreds of thousands of ETH in ICO is nowhere to be seen.
- WXLCKNO 4y ago
  100% impermanent loss protection seems like a fundamentally flawed concept. At least it seems too good to be true.
- null0pointer 4y ago
  Ethereum was the first ICO.
Wertigoyr 4y ago
Funny how you just list so many different things and don't think that alone might ne a neck breaker.

vkou 4y ago

Celsius seems to have been either a ponzi scheme, or a group of morons doing dumb speculative investment on margin, or (most likely) both, but I'd like to point out that MakerDAO is down 70% YTD, Aave is down 60%, Uniswap is down 60%, etc, etc. You'd have been better off just buying bitcoin on margin (Since BTC is only down 53% YTD). The point of this post is that you can't make something out of nothing. None of these tokens/firms/etc have any idea of how they can make money in the crypto space, because there is no way to make money in the crypto space - because it doesn't produce anything. It's all just negative-sum speculation, and shitcoins investing into other shitcoins, and it all evaporates as soon as the Fed tightens its purse-strings. Miners make money, people selling shovels make money, everyone else is just trading baseball cards around.

TimJRobinson 4y ago
Their tokens are down, but you don't have to buy them to use the platform, they're basically like shares in a company. I constantly use all those platforms without ever buying their tokens. AMZN being down 30% in the last 6 months has no impact on how useful Amazon or AWS are as products.
- Wertigoyr 4y ago
  What does there platform provide then?
  - basch 4y ago
    Currency exchange. P2P Lending. Money services.
    - nradov 4y ago
      But the problem is that it's not real currency and you can't do anything useful with it beyond trying to trade it to a bigger idiot.
      - whatisweb3 4y ago
        Some people want USDC, some people want non fungible assets, some people want ETH, some people want an ERC20 that backs an idea or organization. DeFi let’s these users manage these assets without placing them in the hands of a single actor. Saying nobody wants ETH or USDC is like saying nobody wants AMZN or AAPL shares. What you really mean is that you are not interested in those assets.
        nradov 4y ago
        Those are not "assets" in any meaningful sense. You're just making things up.
        whatisweb3 4y ago
        ETH or USDC are as much “assets” as stocks, gold, bonds, property, domain names. Humans and social consensus made all of this up.
junofan 4y ago
Goldfinch is doing ok. It’s a financial system—what do you expect?
yokem55 4y ago
> but I'd like to point out that MakerDAO is down 70% YTD, Aave is down 60%, Uniswap is down 60%, etc, etc. The health of the protocols is only very marginally connected to the value of the tokens that govern them. Even if the $UNI token went to zero, the liquidity pools and swap contracts would still work fine. $MKR and $AAVE are a little more complicated because if the governance tokens got too cheap, the protocols could be hijacked and some of the lending parameters could be set to 'broken' values, resulting in liquidations that didn't need to happen. But as of now, the protocols are still working as designed.
- vkou 4y ago
  That's wonderful. But what are all these loans used for? Arbitrage? Trading other coins around? It's turtles all the way down - there's nothing that generates value at the bottom.
  - dcolkitt 4y ago
    We could easily put real economic assets and loans on-chain. The legal frameworks exist On-chain yields are now low enough and “real-world” interest rates high enough that there’d be demand. Delaware courts can and have enforced corporate entities governed by software. The problem is that all of this is currently illegal, because The SEC and Gary Gensler have made zero effort to build a regulatory framework for securities as tokens.
    - nradov 4y ago
      That is entirely hypothetical and there is zero benefit to putting real economic assets and loans on-chain.
    - vkou 4y ago
      We could, and we could also build cars that run on peanut butter. We don't, because there is no point to it, because it costs too much, and because it solves problems that have already been solved. It's not going to magically make inflation or interest rates go away. You are correct that the legal system would still be around, and will still be able to do pretty much everything that it's doing now. It's not illegal, because it's not actually in the realm of the SEC. What you describe - the background implementation of finance isn't an investment, it's just boring clerical work. [1] If there were a better way to do it with blockchains, people would adopt it. Unfortunately, blockchains do not solve the hard problems in this space, but they do make the easy problems both hard and expensive. [1] Yes, it's regulated, but the regulation allows for improvements. The regulation isn't the problem - getting everyone's workflows that are accustomed to how this clerical work is done is the problem! Nobody will switch to a system that's not better, and blockchains are not a better system for this [2]. [2] And if they were, no currently existing blockchain would be a better system for this. If stock clearing or whatever would somehow work better through a blockchain[3], there's no reason to do it on a blockchain that has already been pre-mined, and is being traded around by speculators. Why pay them a first-movers tax, when you can just fork and spin up your own? The hashing power of anything but BTC and maybe the ETH networks isn't sufficient to prevent attacks on something as important as this - so the existing coin ecosystems have zero value for this usecase. The organizations adopting this would have to control the hashing power, as well - and at that point, why pay third-parties for it? [3] It wouldn't.
tsimionescu 4y ago
> You'd have been better off just buying bitcoin on margin (Since BTC is only down 53% YTD). It's also funny to note that you'd have been better off just buying Turkish Lyra, which is "only" down ~29%. Most fiats, at least in Europe, are down waaaaaay less than that, of course. So much for crypto as a store of value.
- aaaaaaaaata 4y ago
  Will we catch you right here next year, or the year after when it's at a new all-time high, saying the opposite?
  - tsimionescu 4y ago
    At worst I may be silent if that happens, but I have never believed in the long term value of crypto, even when friends and family members invested.
    - aaaaaaaaata 4y ago
      > At worst I may be silent Considering your expertise in the area, this sounds like "at best".
- tim333 4y ago
  Yeah if you'd put $1000 into bitcoin five years ago, at current prices you'd only have $10,000 left. So much worse than leaving it in the bank.
  - tsimionescu 4y ago
    I responded to a comment about YTD, not 5 years ago.

Nursie 4y ago

> not a single major DeFi protocol failed during a period of enormous stress Was Terra/Luna/Anchor/Whatever not a DeFi protocol?

wmf 4y ago
I guess Anchor and Solend are (retroactively) not "major" DeFi.
- thematrixturtle 4y ago
  Well, looking at their post-collapse valuations, they certainly aren't major anymore.
TimJRobinson 4y ago
They were a DeFi ponzi chain which was obviously going to fail to anyone who spent time looking into it. They were printing a stablecoin backed by nothing. Far different from the blue chip DeFi apps on Ethereum that the OP listed, which process billions of dollars per day without issue. DeFi makes things more transparent, but it doesn't make them risk free. I personally profited off the collapse because of the transparency. Couldn't do the same with Celsius or traditional finance.
- 300bps 4y ago
  They were a DeFi ponzi chain which was obviously going to fail This is an excellent example of the “No True Scotsman” logical fallacy.
- gcr 4y ago
  Calling "pilot error" in response to a service interruption of your least favorite token is like saying "sure, our perl CGI gateway was down, but that doesn't count as downtime since our caddy frontend and deno server is still up." If a token permanently loses 99.9% of its value, or if a major lender freezes withdrawals, I'd call that a service interruption because almost all users lost the value they held in the system.

adrr 4y ago

Defi has other problems like the smart contracts getting exploited. $12b have been stolen from them according to the source below. https://www.elliptic.co/resources/defi-risk-regulation-and-the-rise-of-decrime https://www.elliptic.co/resources/defi-risk-regulation-and-t...

capableweb 4y ago
That's true, it's a inherent risk when you deal with "programmable money" in a open and decentralized ecosystem. While it is a risk, major platforms (like the ones mentioned in parent comment [except Compound]) haven't actually had any exploits of that scope (yet?). rekt.news is probably one of the best sources of news when it comes to exploits in both "pure" defi and also centralized "defi" (which, doesn't even make sense but I digress) like Celsius. Only Compound has been mentioned there. Overall, the platforms have been running for a long time, during ups and down, and seem relatively stable at this point, if you're fine with the overall risk cryptocurrencies present.

rmac 4y ago

the Curve USTw-3CRV pool "failed"

darth_avocado 4y ago

> CeDeFi You gotta be Kidding me. That’s like frozen boiling water.

aahortwwy 4y ago
https://en.m.wikipedia.org/wiki/Properties_of_water#Triple_point https://en.m.wikipedia.org/wiki/Properties_of_water#Triple_p...

jrm4 4y ago

Sure, I'll take it a step further. Any storage of your money that doesn't involve you fully controlling your own keys is stupid because it is literally antithetical to the entire purpose of crypto. If you want to let someone else hold on to your money for yield, great. Use something already established, ensured, and proven. But not crypto. Not your keys, not your crypto. How many times must it be said?

tsimionescu 4y ago
This only works if you use crypto as a store of value and even then it doesn't scale to any significant fraction of the population, for most coins. BTC and Eth, at least, are simply too slow for everyone to have their own wallet and do their own on-chain transactions, even if rarely, if we imagine they will ever reach some significant portion of the population. And LN doesn't solve this in any way, before anyone claims otherwise.
- TimJRobinson 4y ago
  Layer 2's do solve it, and will reach 14M TPS by 2030 [0], which is more than enough for the world. He has explanations of how the different components work in different posts on the site. 0: https://polynya.medium.com/conjecture-how-far-can-rollups-data-shards-scale-in-2030-14-million-tps-933b87ca622e https://polynya.medium.com/conjecture-how-far-can-rollups-da...
  - tsimionescu 4y ago
    The problem is that you need at the very least 1 on-chain transaction for every human participant, to get money into one wallet that they control. But BTC barely manages 5 TPS and ETH maybe 20. This means that BTC would need about 115 days to add 50M new people onto the block chain, and ETH could manage it in a month - only to have 1 wallet with some amount of coins in it (of course, assuming nothing else whatsoever is happening on the block chain in that time). Only after you get past this hurdle do you even have access to a L2. Of course, you then need extra transactions on the L1 chain to gain access to the L2 - with LN at least, this scales even worse, as you need some fraction of the number of pairs of people to communicate - so some fraction of (50M)² transactions - which fraction depending on how centralized the network will be. Then of course, L2s offer little in terms of guarantees for your money unless you can quickly and often close the channel and get the L1 guarantee. So no, BTC and ETH fundamentally can't scale to a large number of people using them, regardless of how many trillions of transactions per second L2s can do. They are failed technologies for anything similar to their original goals. It's barely even worth mentionibg that with 1 wallet per real person, you get worse privacy for your transactions than VISA offers you - as many have shown, for any kind of practical privacy you need many temporary wallets, bringing the total number of transactions required just to have a single Satoshi in those wallets to many times more.

dannyw 4y ago

Incorrect. Bancor, the first DeFi protocol and ICO, is in deficit (liabilities exceed assets). They offered 100% impermanent loss protection. Now, liquidity providers like me who deposited ETH are down 50%. It's only about a $18 million hole, but the Switzerland "non-profit" Bancor Foundation that has raised hundreds of thousands of ETH in ICO is nowhere to be seen.

WXLCKNO 4y ago
100% impermanent loss protection seems like a fundamentally flawed concept. At least it seems too good to be true.
null0pointer 4y ago
Ethereum was the first ICO.

Wertigoyr 4y ago

Funny how you just list so many different things and don't think that alone might ne a neck breaker.