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The ledger ensures that the handing over of the "thing" can happen without trust in any intermediary. You still ultimately have to trust the counterparty to del

The ledger ensures that the handing over of the "thing" can happen without trust in any intermediary. You still ultimately have to trust the counterparty to deliver what they promise. Think of it like HTTPS. Nobody can sneak anything into the request, but the counterparty you're contacting could still be a fraud.

ChadNauseam 4y ago
There are fully-decentalized exchanges which have to have much less counterparty risk (because anyone could take the other side of your deal, so you don't want to trust them). As a simple example, imagine a contract which I send 1 ETH to, and if you send it 1000 USDC it'll send you the ETH. The big counterparty risk with that system is that the price of ETH will skyrocket and someone else will call the contract to make the trade before I can cancel it, but that kind of thing is hard to avoid in any system.
- LeafGuild 4y ago
  >but that kind of thing is hard to avoid in any system. No it isn't, that's what limit orders are for. There's still the exact same counterparty risk there anyway, in the form of USDC. Circle is another big dodgy centralized provider. The major critical flaw with all this defi stuff is that it can only reliably trade cryptos for other cryptos. Once you actually try to get any of it out into real assets, the counterparty risk immediately comes back again. No crypto defi stuff can ever solve that. The idea is just bad, it's a scam from the very beginning.
- topranks 4y ago
  The big risk with that system is a bug in the smart contract that lets me take all the ETH and USDC.
Digory 4y ago
But this isn't counterparty risk, it's fraud risk, right? It sounds like "Atrium borrowed a bunch of houses from FX, but FX didn't own the houses." When you check the Recorder (the blockchain for houses), the deeds should all say "John Doe owns 123 Main St." In the world with a Recorder of Deeds, Atrium is screwed, and FX might be screwed, but John Doe is easily confirmed as the owner of 123 Main. It sounds like people here gave their coins to FX, so that the "deed" shows FX "owns" the coin. In effect, they destroyed the 'trustless' part of the equation. And then SBF violated the trust. So, the next innovation seems to be a blockchain that shows an owner and an agent?
- fnordpiglet 4y ago
  I think technically you would look at this as exchange risk. Securities regulations exist because of precedent, and this isn’t specifically fraud but lack of customer funds segregation from the business risks.
- lupire 4y ago
  "fraud" is a subjective assessment of intent. Empirically, in the marketplace, fraud looks the same as incompetence.

ChadNauseam 4y ago

There are fully-decentalized exchanges which have to have much less counterparty risk (because anyone could take the other side of your deal, so you don't want to trust them). As a simple example, imagine a contract which I send 1 ETH to, and if you send it 1000 USDC it'll send you the ETH. The big counterparty risk with that system is that the price of ETH will skyrocket and someone else will call the contract to make the trade before I can cancel it, but that kind of thing is hard to avoid in any system.

LeafGuild 4y ago
>but that kind of thing is hard to avoid in any system. No it isn't, that's what limit orders are for. There's still the exact same counterparty risk there anyway, in the form of USDC. Circle is another big dodgy centralized provider. The major critical flaw with all this defi stuff is that it can only reliably trade cryptos for other cryptos. Once you actually try to get any of it out into real assets, the counterparty risk immediately comes back again. No crypto defi stuff can ever solve that. The idea is just bad, it's a scam from the very beginning.
topranks 4y ago
The big risk with that system is a bug in the smart contract that lets me take all the ETH and USDC.

Digory 4y ago

But this isn't counterparty risk, it's fraud risk, right? It sounds like "Atrium borrowed a bunch of houses from FX, but FX didn't own the houses." When you check the Recorder (the blockchain for houses), the deeds should all say "John Doe owns 123 Main St." In the world with a Recorder of Deeds, Atrium is screwed, and FX might be screwed, but John Doe is easily confirmed as the owner of 123 Main. It sounds like people here gave their coins to FX, so that the "deed" shows FX "owns" the coin. In effect, they destroyed the 'trustless' part of the equation. And then SBF violated the trust. So, the next innovation seems to be a blockchain that shows an owner and an agent?

fnordpiglet 4y ago
I think technically you would look at this as exchange risk. Securities regulations exist because of precedent, and this isn’t specifically fraud but lack of customer funds segregation from the business risks.
lupire 4y ago
"fraud" is a subjective assessment of intent. Empirically, in the marketplace, fraud looks the same as incompetence.