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It's almost like we need some open source, transparent way of doing finance - where anyone can audit the books and companies have no ability to run off with use

It's almost like we need some open source, transparent way of doing finance - where anyone can audit the books and companies have no ability to run off with user funds. We could call it decentralized finance, or DeFi for short. Throw in some zk proofs for user level privacy to really make it shine.

theturtletalks 4y ago
Forgive my naïveté, but aren’t you describing a decentralized exchange (DEX) instead of what FTX was? Looks like Uniswap, a popular DEX, is still alive and well.
- conqueso 4y ago
  GP is most likely mocking what they see as circular logic in the crypto-sphere. Re: Uniswap - a study posted here few days ago found that 97.7% of tokens launched there are either scams or rug pulls: https://news.ycombinator.com/item?id=33572361 https://news.ycombinator.com/item?id=33572361
  - TimJRobinson 4y ago
    I'm sure 99% of emails are scams but that doesn't make email a bad technology.
    - polygamous_bat 4y ago
      1. I received useful emails each day, and spams are always around 10%. Maybe I am just conservative about wher I put my email? Not being in crypto may help as well, but it's definitely not 1%-99% for me, more like 90%-10%. 2. More importantly, an email provider that doesn't make an effort to distinguish between 99% of spam emails and 1% of legit ones is definitely useless and worthless.
      - TimJRobinson 4y ago
        Uniswap the protocol is like SMTP - it's open and permissionless. Uniswap the website is more like Gmail, it has a whitelisted set of tokens to swap. Because it's a protocol anyone can build a frontend on top of it to filter out any information they like, just like Email. Zapper, DeFi Saver and Zerion are examples of this. Element Finance runs using Balancer under the hood but you wouldn't know and aren't exposed to any tokens or pools they don't manage.
    - mwigdahl 4y ago
      Without the capacity for powerful spam blocking email is a bad technology, or at least an unusable one. DeFi seems to pride itself on _not_ blocking its equivalent of spam.
  - beaned 4y ago
    It doesn't sound like mocking scams, it sounds like mocking people not putting money where their mouth is. A lot of people already promoting "defi" are keeping their funds on centralized exchanges. Why? They still provide a performance edge and more features, but if all you need is basic trading, they should be being utilized even more. DeFi has no fiat gateway though, that's the biggest bottleneck. The gateway is the centralized exchanges, and I think people tend to park their money on them once they deposit/convert their dollars.
  - 40four 4y ago
    The more interesting part of that article was the ML techniques described, and the actual conclusion that using said techniques, scam versus not-scam projects can be identified very early on. But that was lost is the typical ‘I told you so’ from the ‘crypto is bad’ crowd.
- TimJRobinson 4y ago
  Yea I work at Balancer and love decentralized finance. It is the shining light of the crypto market and it unfortunately gets so little attention in mainstream media. We have a chance to make finance better with companies that are completely transparent. Where all funds are held by code which can be audited and proven that they can't steal funds. Decentralized versions of what FTX did already exist: - Exchanges: Uniswap, Balancer - Lending Markets: Aave, Compound - Options: Lyra, Ribbon - Perps: GMX, Perpetual We don't have to suffer through scammer after scammer until the end of time, and we don't need overbearing regulation to save us. We just need transparency. Real finance is already being done in these platforms and I wish more people would take it seriously and realise this can be a much better future for everyone. Plus because they're open source and composable we can innovate much faster but that's a thread for another time.
  - danrocks 4y ago
    Your "love" of decentralized finance is clouding your judgement. "We just need transparency" -> this is patently false. The decentralized exchanges you mentioned are supposedly open and transparent and yet 97% of coins listed on Uniswap are scams. Being open source and transparent solves nothing. What we need is better, more equipped, and less corrupt regulators.
    - TrapLord_Rhodo 4y ago
      You are conflating two things but they are not the same. FTX (The entity) going bust and losing all customer funds and you buying a shitcoin and losing your funds. One is FTX's fault, one is yours. If you are using a DEX, you understand that anyone can add their token to the list if they have enough liquidity.
  - lottin 4y ago
    The problem with DeFi is it can't handle credit risk. You see, banks can also eliminate credit risk. They could lend money, and then insist that the money be kept in a box under their supervision. That would eliminate credit risk, and the money would always be safe. Okay, but what would be the point of that? The entire point of lending is temporarily giving up control of resources so that other people can use them. Therefore credit risk is inherent to any lending activity that is useful. Lending without credit risk is pointless, it defeats the purpose. Most DeFi enthusiasts I have spoken with don't understand this.
polygamous_bat 4y ago
Paraphrasing one of my earlier comments here, because it is appropriate. > DeFi already exists, and have been existing for almost as long as FTX. Likes of FTX and Binance was created in the first place because decentralized, trustleas on chain transaction is slow and expensive, and people don't like slow and expensive. Just because FTX blew up doesn't mean DeFi is at a better place than it was in the past. "DeFi fixes this" is like saying "moving back to horse drawn carriages solves drunk driving fatalities!" Maybe, but no one wants to deal with horse shit.
- TimJRobinson 4y ago
  Except that DeFi has evolved since then. Transactions on Arbitrum and Optimism are basically instant and cost cents (soon to be fractions of a cent with EIP-4844) while being as secure as Ethereum. ZK rollups are coming out now that are even better than them. So you get speed, low fees, and full transparency and safety. There's a reason both Brian Armstrong and CZ have said they see DeFi replacing their exchanges eventually.
  - polygamous_bat 4y ago
    You surely mean to say "basically instant" (with a 7 day period where your transactions can be challenged)? The asterisk seems kinda important to me. Also, promising my half-assed project will be perfect by the time the finals roll around stopped working in the real world when I graduated from high school. Seems like only in crypto world it's acceptable to judge technology for not what it is but what it dreams to be.
    - lampshades 4y ago
      7 day challenge doesn’t exist for ZK rollups because they can be verified instantly through their fraud proof. Yes, right now if you use optimistic rollups there is a dispute window but I expect next time the bull market comes around we won’t be using them as much.
      - 4y ago
kkielhofner 4y ago
DeFi, the various bridges they tend to use, etc have suffered hacks in the billions[0]. Turns out that smart contracts have bugs like every piece of software ever written and opsec is hard. Then, like all things with non-custodial crypto wallets lets consider how many have been individually cleaned out from phishing, clicking the wrong link, the ridiculously complex nature of the entire space, and poor UI/UX all over. Plus there's the tendency for people to lose access to their wallets forever... I known some very sophisticated people in the space that have been burnt by all of these issues and more. From what I've seen it's basically at a point now where hacking a DeFi bridge essentially guarantees that you can keep 10% as that seems to be the standard for "bug bounties" now. That is, of course, unless you keep 100%... It's very likely that if DeFi as a whole had the user base of FTX (or major centralized $EXCHANGE) the losses would be similar if not higher. The only thing that has stopped this from happening is the fact that the average centralized exchange user doesn't have a chance of figuring out how to do DeFi (see points above). [0] - https://hacken.io/discover/top-defi-hacks-of-2022-and-how-to-protect-against-them/ https://hacken.io/discover/top-defi-hacks-of-2022-and-how-to...
- googlryas 4y ago
  Hacks are different from insider fraud.
  - kkielhofner 4y ago
    Tell that to the people who lose their money.
    - googlryas 4y ago
      Events having similar outcomes does not imply the causes, protections, or likelihoods are the same.
      - kkielhofner 4y ago
        I don't know how you got that from the points I've made. I'm also noticing the past two replies to my original comment don't attempt to address, debate, or refute any of the points I've made. I understand what you're saying but the result is the same and it's little consolation to the people who lose their money. If you get mugged and someone steals your wallet (FTX, crypto wallet, or physical wallet) = money gone. If you lose your wallet (physical or crypto) = money gone. If you get handed a counterfeit bill (physical hack) and it's detected and confiscated later = money gone (best analogy I could come up with for a DeFi hack). In any of these cases if those funds were needed to buy groceries for your kids or pay your rent the end result is the same. Whatever philosophical point you and the last commenter are trying to make means absolutely nothing to the very real people in the very real world who are significantly impacted by these events. People work for their money and the blase attitude and callousness shown towards victims in this space is very disturbing. We wouldn't remotely be having this discussion if someone gets robbed at gunpoint (victim of a crime) vs FTX (victim of a crime), DeFi hack (victim of a crime), wallet hack (victim of a crime), etc. In the real world outside of crypto these events are exceedingly rare. I've been mugged once and I'm an outlier. I report credit card fraud and it just goes away. I've never had a bank fail. I've never lost access to a bank, trading, etc account. I've never had a negative experience with a wire transfer. I could go on and on while meanwhile all of these things and worse are a daily occurrence for an outsized portion of people involved in crypto. The FTX failure alone is estimated to have impacted 1 million people. Celsius has 100,000 creditors. Who knows with DeFi, crypto wallets, etc but as I said originally I personally know an order of magnitude more people who have encountered these issues than the equivalents in the traditional financial system (real world).

theturtletalks 4y ago

Forgive my naïveté, but aren’t you describing a decentralized exchange (DEX) instead of what FTX was? Looks like Uniswap, a popular DEX, is still alive and well.

conqueso 4y ago
GP is most likely mocking what they see as circular logic in the crypto-sphere. Re: Uniswap - a study posted here few days ago found that 97.7% of tokens launched there are either scams or rug pulls: https://news.ycombinator.com/item?id=33572361 https://news.ycombinator.com/item?id=33572361
- TimJRobinson 4y ago
  I'm sure 99% of emails are scams but that doesn't make email a bad technology.
  - polygamous_bat 4y ago
    1. I received useful emails each day, and spams are always around 10%. Maybe I am just conservative about wher I put my email? Not being in crypto may help as well, but it's definitely not 1%-99% for me, more like 90%-10%. 2. More importantly, an email provider that doesn't make an effort to distinguish between 99% of spam emails and 1% of legit ones is definitely useless and worthless.
    - TimJRobinson 4y ago
      Uniswap the protocol is like SMTP - it's open and permissionless. Uniswap the website is more like Gmail, it has a whitelisted set of tokens to swap. Because it's a protocol anyone can build a frontend on top of it to filter out any information they like, just like Email. Zapper, DeFi Saver and Zerion are examples of this. Element Finance runs using Balancer under the hood but you wouldn't know and aren't exposed to any tokens or pools they don't manage.
  - mwigdahl 4y ago
    Without the capacity for powerful spam blocking email is a bad technology, or at least an unusable one. DeFi seems to pride itself on _not_ blocking its equivalent of spam.
- beaned 4y ago
  It doesn't sound like mocking scams, it sounds like mocking people not putting money where their mouth is. A lot of people already promoting "defi" are keeping their funds on centralized exchanges. Why? They still provide a performance edge and more features, but if all you need is basic trading, they should be being utilized even more. DeFi has no fiat gateway though, that's the biggest bottleneck. The gateway is the centralized exchanges, and I think people tend to park their money on them once they deposit/convert their dollars.
- 40four 4y ago
  The more interesting part of that article was the ML techniques described, and the actual conclusion that using said techniques, scam versus not-scam projects can be identified very early on. But that was lost is the typical ‘I told you so’ from the ‘crypto is bad’ crowd.
TimJRobinson 4y ago
Yea I work at Balancer and love decentralized finance. It is the shining light of the crypto market and it unfortunately gets so little attention in mainstream media. We have a chance to make finance better with companies that are completely transparent. Where all funds are held by code which can be audited and proven that they can't steal funds. Decentralized versions of what FTX did already exist: - Exchanges: Uniswap, Balancer - Lending Markets: Aave, Compound - Options: Lyra, Ribbon - Perps: GMX, Perpetual We don't have to suffer through scammer after scammer until the end of time, and we don't need overbearing regulation to save us. We just need transparency. Real finance is already being done in these platforms and I wish more people would take it seriously and realise this can be a much better future for everyone. Plus because they're open source and composable we can innovate much faster but that's a thread for another time.
- danrocks 4y ago
  Your "love" of decentralized finance is clouding your judgement. "We just need transparency" -> this is patently false. The decentralized exchanges you mentioned are supposedly open and transparent and yet 97% of coins listed on Uniswap are scams. Being open source and transparent solves nothing. What we need is better, more equipped, and less corrupt regulators.
  - TrapLord_Rhodo 4y ago
    You are conflating two things but they are not the same. FTX (The entity) going bust and losing all customer funds and you buying a shitcoin and losing your funds. One is FTX's fault, one is yours. If you are using a DEX, you understand that anyone can add their token to the list if they have enough liquidity.
- lottin 4y ago
  The problem with DeFi is it can't handle credit risk. You see, banks can also eliminate credit risk. They could lend money, and then insist that the money be kept in a box under their supervision. That would eliminate credit risk, and the money would always be safe. Okay, but what would be the point of that? The entire point of lending is temporarily giving up control of resources so that other people can use them. Therefore credit risk is inherent to any lending activity that is useful. Lending without credit risk is pointless, it defeats the purpose. Most DeFi enthusiasts I have spoken with don't understand this.

polygamous_bat 4y ago

Paraphrasing one of my earlier comments here, because it is appropriate. > DeFi already exists, and have been existing for almost as long as FTX. Likes of FTX and Binance was created in the first place because decentralized, trustleas on chain transaction is slow and expensive, and people don't like slow and expensive. Just because FTX blew up doesn't mean DeFi is at a better place than it was in the past. "DeFi fixes this" is like saying "moving back to horse drawn carriages solves drunk driving fatalities!" Maybe, but no one wants to deal with horse shit.

TimJRobinson 4y ago
Except that DeFi has evolved since then. Transactions on Arbitrum and Optimism are basically instant and cost cents (soon to be fractions of a cent with EIP-4844) while being as secure as Ethereum. ZK rollups are coming out now that are even better than them. So you get speed, low fees, and full transparency and safety. There's a reason both Brian Armstrong and CZ have said they see DeFi replacing their exchanges eventually.
- polygamous_bat 4y ago
  You surely mean to say "basically instant" (with a 7 day period where your transactions can be challenged)? The asterisk seems kinda important to me. Also, promising my half-assed project will be perfect by the time the finals roll around stopped working in the real world when I graduated from high school. Seems like only in crypto world it's acceptable to judge technology for not what it is but what it dreams to be.
  - lampshades 4y ago
    7 day challenge doesn’t exist for ZK rollups because they can be verified instantly through their fraud proof. Yes, right now if you use optimistic rollups there is a dispute window but I expect next time the bull market comes around we won’t be using them as much.
    - 4y ago

kkielhofner 4y ago

DeFi, the various bridges they tend to use, etc have suffered hacks in the billions[0]. Turns out that smart contracts have bugs like every piece of software ever written and opsec is hard. Then, like all things with non-custodial crypto wallets lets consider how many have been individually cleaned out from phishing, clicking the wrong link, the ridiculously complex nature of the entire space, and poor UI/UX all over. Plus there's the tendency for people to lose access to their wallets forever... I known some very sophisticated people in the space that have been burnt by all of these issues and more. From what I've seen it's basically at a point now where hacking a DeFi bridge essentially guarantees that you can keep 10% as that seems to be the standard for "bug bounties" now. That is, of course, unless you keep 100%... It's very likely that if DeFi as a whole had the user base of FTX (or major centralized $EXCHANGE) the losses would be similar if not higher. The only thing that has stopped this from happening is the fact that the average centralized exchange user doesn't have a chance of figuring out how to do DeFi (see points above). [0] - https://hacken.io/discover/top-defi-hacks-of-2022-and-how-to-protect-against-them/ https://hacken.io/discover/top-defi-hacks-of-2022-and-how-to...

googlryas 4y ago
Hacks are different from insider fraud.
- kkielhofner 4y ago
  Tell that to the people who lose their money.
  - googlryas 4y ago
    Events having similar outcomes does not imply the causes, protections, or likelihoods are the same.
    - kkielhofner 4y ago
      I don't know how you got that from the points I've made. I'm also noticing the past two replies to my original comment don't attempt to address, debate, or refute any of the points I've made. I understand what you're saying but the result is the same and it's little consolation to the people who lose their money. If you get mugged and someone steals your wallet (FTX, crypto wallet, or physical wallet) = money gone. If you lose your wallet (physical or crypto) = money gone. If you get handed a counterfeit bill (physical hack) and it's detected and confiscated later = money gone (best analogy I could come up with for a DeFi hack). In any of these cases if those funds were needed to buy groceries for your kids or pay your rent the end result is the same. Whatever philosophical point you and the last commenter are trying to make means absolutely nothing to the very real people in the very real world who are significantly impacted by these events. People work for their money and the blase attitude and callousness shown towards victims in this space is very disturbing. We wouldn't remotely be having this discussion if someone gets robbed at gunpoint (victim of a crime) vs FTX (victim of a crime), DeFi hack (victim of a crime), wallet hack (victim of a crime), etc. In the real world outside of crypto these events are exceedingly rare. I've been mugged once and I'm an outlier. I report credit card fraud and it just goes away. I've never had a bank fail. I've never lost access to a bank, trading, etc account. I've never had a negative experience with a wire transfer. I could go on and on while meanwhile all of these things and worse are a daily occurrence for an outsized portion of people involved in crypto. The FTX failure alone is estimated to have impacted 1 million people. Celsius has 100,000 creditors. Who knows with DeFi, crypto wallets, etc but as I said originally I personally know an order of magnitude more people who have encountered these issues than the equivalents in the traditional financial system (real world).