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Potentially dumb question here; I am no expert on crypto or finance. Isn't the collapse of FTX in some ways evidence in favor of decentralized currency rather

by nfw2 4y ago

Potentially dumb question here; I am no expert on crypto or finance. Isn't the collapse of FTX in some ways evidence in favor of decentralized currency rather than against it? As evidenced by 2008, firms gambling with other people's money doesn't seem to be specific to DeFi. If coin exchanges had some legal obligation to just be wallet and marketplace services instead of investment engines, could that help prevent this sort of fiasco (and the 2008 one) happening in the future? On the other hand, perhaps this solution could be equally applicable to traditional banks.

MacsHeadroom 4y ago
Absolutely, this was a failure of TradFi/CeFi. DeFi had no problems throughout these past few days. No Dex ever had withdrawals/transactions take longer than seconds, as always. No Dex ever used user funds secretly (impossible on a public ledger), etc. The lesson here is that TradFi is not safe. Not your keys, not your coins.
colinsane 4y ago
evidence for you, and i (though i’d argue it’s transparency more than decentralization that matters in this case), but that’s certainly not the widespread sentiment. consider also the number of non-custodial failures in this space ranging all the way back to The DAO. at the end of the day, Tether market cap is and has been >> Dai market cap for almost its entire existence. that tells you all you need to know.
mudrockbestgirl 4y ago
It's not a dumb question. You're right that it's absolutely an argument for DeFi, but it comes with tradeoffs: - Bugs in the code means all capital may be lost. That's potentially worse. - The profit margins aren't nearly as high. If you're a centralized entity or a bank you can do all kinds of shady stuff behind the scenes with customer funds to fill your own pockets. It has happened over and over again both in TradFi and CeFi. In DeFi, you can't do that since it's fully transparent and backed. Good for the consumer, but not not as good for business growth. Many traditional finance entities have become as big as they are because they did shady stuff but didn't get caught. I'm just not talking about crypto exchanges here, but also traditional banks.
randomsearch 4y ago
> had some legal obligation That's the problem, though. Crypto has wild gains because it's an unregulated wild west. And for the same reason it's full of pyramid schemes etc. As soon as you regulate, you fix the problems but head to centralisation and it becomes a boring service without big profits.

by nfw2 4y ago

MacsHeadroom 4y ago

Absolutely, this was a failure of TradFi/CeFi. DeFi had no problems throughout these past few days. No Dex ever had withdrawals/transactions take longer than seconds, as always. No Dex ever used user funds secretly (impossible on a public ledger), etc. The lesson here is that TradFi is not safe. Not your keys, not your coins.

colinsane 4y ago

evidence for you, and i (though i’d argue it’s transparency more than decentralization that matters in this case), but that’s certainly not the widespread sentiment. consider also the number of non-custodial failures in this space ranging all the way back to The DAO. at the end of the day, Tether market cap is and has been >> Dai market cap for almost its entire existence. that tells you all you need to know.

mudrockbestgirl 4y ago

It's not a dumb question. You're right that it's absolutely an argument for DeFi, but it comes with tradeoffs: - Bugs in the code means all capital may be lost. That's potentially worse. - The profit margins aren't nearly as high. If you're a centralized entity or a bank you can do all kinds of shady stuff behind the scenes with customer funds to fill your own pockets. It has happened over and over again both in TradFi and CeFi. In DeFi, you can't do that since it's fully transparent and backed. Good for the consumer, but not not as good for business growth. Many traditional finance entities have become as big as they are because they did shady stuff but didn't get caught. I'm just not talking about crypto exchanges here, but also traditional banks.

randomsearch 4y ago

> had some legal obligation That's the problem, though. Crypto has wild gains because it's an unregulated wild west. And for the same reason it's full of pyramid schemes etc. As soon as you regulate, you fix the problems but head to centralisation and it becomes a boring service without big profits.