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DeFi’s Rise to Shame: Its Problems and How to Fix Them

22 points by Wiligut45 4y ago

sebastien_b 4y ago
The first step is acknowledging that “DeFi” really means “Deregulated Finance” right now.
- chrisco255 4y ago
  It's a form of peer to peer finance. And you engage in "deregulated" financial activity every day. It's a basic human right.
  - beardyw 4y ago
    This is about human protections more than rights. Otherwise we have learned nothing in the last few weeks.
    - mypastself 4y ago
      What happened in the last few weeks regarding decentralized finance?
      - polygamous_bat 4y ago
        Turned out some decentralized projects like Serum are just the big boys in a mask grabbing all your money, or a counterparty that was losing all of their own client's money.
        trompetenaccoun 4y ago
        "Turned out"? Serum is built on Solana, the VC founded "blockchain" that Andreessen Horowitz heavily invested in and promoted, among others like coincidentally Alameda Research. No one who's seriously into defi thinks any of these projects are properly decentralized, it's hardly a step above something like Flow. At least they allow users to withdraw funds to their own wallets - that is when the chain isn't down as regularly happens ;) However way you look at it, it's the mainstream falling for vaporware and scammers, including this very forum as well. Something has crypto written on it, there will be hype around it and then when it inevitably collapses people lament that cryptocurrency is dangerous. Ignoring the new tech aspect, it's essentially the same thing that's been happening forever in finance. I know plenty of people who unironically think money itself is a scam. Their evidence is central and private bank shenanigans, the way creation isn't public and isn't tightly restricted, etc. All these are not money problems but people and institution problems. When you give your cash to some random guy on the street because he offers you winnings in a shell game, it's not the banknote's fault when you lose it or the issuer's but that of the scammer and your own for falling for it. In the same way, I would advice against transferring digital currency to some random guy faking to be an autistic trader genius, no matter how many politicians and media outlets endorse him (because they got bribed). This should be a lesson for people regarding herd mentality and trust. And that's exactly what blockchains are for, because people simply seem completely incapable of learning this lesson. We need to have financial systems that are built on verification, not trust. The exact opposite of something like FTX and legacy finance. Apparently no one even bothered to properly look at their books and the auditing was done by a Metaverse-present auditing firm called 'Prager Metis'. You can't make this up: https://www.coindesk.com/business/2022/11/11/meet-the-metaverse-night-clubloving-audit-firm-that-presided-over-ftxs-financials/ https://www.coindesk.com/business/2022/11/11/meet-the-metave...
  - hef19898 4y ago
    Too lazy to look it up, but I am quite sure "deregulated finance" is mentioned nowhere in the UN charter of human rights.
    - AbrahamParangi 4y ago
      The UN charter of human rights does not give us our rights. Some people consider the rights god-given, some consider that we have all negative rights until they’re taken away.
    - zoklet-enjoyer 4y ago
      The UN doesn't matter
    - chrisco255 4y ago
      The UN is not the authority on human rights. It's just a weak, ineffective political body that represents no one in particular. Certainly not me nor you. From the U.S. constitution: "The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people."
      - hef19898 4y ago
        Since I am not a US citizen, the US constitution doesn't really matter to me. The UN, as the only global body we have, does matter so.
        willmadden 4y ago
        There is a word for unelected groups that have power over you. The word is tyranny.
        chrisco255 4y ago
        The UN has no power. It is not an elected Congress nor does it have sovereign authority of any kind. It has every country in it, even those that routinely abuse human rights. It is purely intended as a preventative body for war. It's not even great at that.
- DennisP 4y ago
  Eh, no. Defi should continue to mean the sort of systems where failures like FTX can't happen. Uniswap for example has no admin functions; the only person who can move your funds is you.
- jeroenhd 4y ago
  Decentralisation means more people get responsibilities and therefore are liable if something really bad happens. It doesn't mean regulations don't apply. With the way Tornado Cash went down, I disagree that DeFi is "deregulated". The stakes are as high as ever for the people working on these projects. The people getting scammed by DeFi companies just don't have as much money to burn on lawyers and influence to take action when their deals turn out too good to be true.
  - woah 4y ago
    Tornado cash never went down. It continues to operate.
    - jeroenhd 4y ago
      It can't go down without Ethereum going down, in the same way several blockchains contain child porn that can never be removed without taking down the entire chain. Yet donations have been refused out of fear of being branded with the USA's sanctions for dealing with a sanctioned company.
- willmadden 4y ago
  No, it is a technology that omits third parties and centralized institutions from financial transactions. If FTX had been a DeFi platform, the fraud committed wouldn't have been possible. Granted, DeFi can't do everything FTX used to do, yet.
Kwpolska 4y ago
Kill it with fire, nuke it from the orbit. There, fixed.
dsimmons 4y ago
A journalist/marketer telling us how to fix things, cool. "You just... easy!"
hrunt 4y ago
> However, the technology does have quite a few advantages, provided that you’re investing in a legitimate project with a good & planned-out vision: > > 1. It’s a great and risk-free way of earning interest on your crypto holdings This section is where I basically stopped reading. Anything that earns interest is not risk-free. Full stop. The whole point of earning interest is to reward the lender (and to be clear, "staking" is lending to the system) for the assumption of the risk that they may not get their money back. There are low-risk opportunities (usually accompanied by low interest). And in the case of staking a token, the staking comes with the implicit risk that the value of the token may decline substantially. I see a lot of talk of "risk-free" opportunities in the DeFi movement, and that's why I stay away. It sounds too good to be true, and it is. There are other issues in that article -- in particular, most DeFi APY calculations are variable and constantly changing -- but that one was the full-stop for me.
- cuteboy19 4y ago
  They never answer the simple question: where does the money come from?
- Wiligut45 4y ago
  You are watching on DeFi as a hype-risk, but it is not. It's more about technology, for example bridges, oracles, staking.
danaris 4y ago
How To Fix Them: 1. Use A Bank 2. Admit That Cryptocurrency Only Solves Problems If You Like Crime
- hi5eyes 4y ago
  1. Use A Bank citizens of china, lebanon, and history would like a word ser 2. Admit That Cryptocurrency Only Solves Problems If You Like Crime if crime is the ability for the average internet user to custody their own money and to use it however they want without intermediary, then I would assume most enjoy crimes winkwink a good tell if one is on the right side of history or not, is whether they support the free flow of capital and the rights of individuals to own their own money/capital.. or not ;)
  - danaris 4y ago
    If the cost of enabling some banking for a small subset of people in countries with terrible governments is also enabling absolutely massive fraud, rampant speculation, and a transfer of wealth from less-financially-literate people to wealthy hucksters, then I think we need to find a better way to help the people in those countries. "Those people need help; this helps them; ergo, we must do this" is not sound logic.
    - deleted 4y ago
      [deleted]
    - deleted 4y ago
      [deleted]
- Wiligut45 4y ago
  1. You are from Africa, how will you use your money without banks, eh? 2. Not at all. In this logic, everyone who is a prisoner, 100% guilty?
lizknope 4y ago
Ban it. Problem solved
joemazerino 4y ago
DeFi summer was, if anything, a ride of high-octane. Now that capital has learned that high APYs are unsustainable the notion of "Real Yield" [1] should help stabilize DeFi. 1 - https://cryptobriefing.com/real-yield-mania-hits-defi-five-projects-watch/ https://cryptobriefing.com/real-yield-mania-hits-defi-five-p...
adam_arthur 4y ago
Can fix them easily by finding literally any valid use case. Maybe in another 10yrs
jbirer 4y ago
"Roman Wiligut @Wiligut Growth hacker, tech enthusiast, journalist, futurist, writer, entrepreneur."

22 points by Wiligut45 4y ago

sebastien_b 4y ago

The first step is acknowledging that “DeFi” really means “Deregulated Finance” right now.

chrisco255 4y ago
It's a form of peer to peer finance. And you engage in "deregulated" financial activity every day. It's a basic human right.
- beardyw 4y ago
  This is about human protections more than rights. Otherwise we have learned nothing in the last few weeks.
  - mypastself 4y ago
    What happened in the last few weeks regarding decentralized finance?
    - polygamous_bat 4y ago
      Turned out some decentralized projects like Serum are just the big boys in a mask grabbing all your money, or a counterparty that was losing all of their own client's money.
      - trompetenaccoun 4y ago
        "Turned out"? Serum is built on Solana, the VC founded "blockchain" that Andreessen Horowitz heavily invested in and promoted, among others like coincidentally Alameda Research. No one who's seriously into defi thinks any of these projects are properly decentralized, it's hardly a step above something like Flow. At least they allow users to withdraw funds to their own wallets - that is when the chain isn't down as regularly happens ;) However way you look at it, it's the mainstream falling for vaporware and scammers, including this very forum as well. Something has crypto written on it, there will be hype around it and then when it inevitably collapses people lament that cryptocurrency is dangerous. Ignoring the new tech aspect, it's essentially the same thing that's been happening forever in finance. I know plenty of people who unironically think money itself is a scam. Their evidence is central and private bank shenanigans, the way creation isn't public and isn't tightly restricted, etc. All these are not money problems but people and institution problems. When you give your cash to some random guy on the street because he offers you winnings in a shell game, it's not the banknote's fault when you lose it or the issuer's but that of the scammer and your own for falling for it. In the same way, I would advice against transferring digital currency to some random guy faking to be an autistic trader genius, no matter how many politicians and media outlets endorse him (because they got bribed). This should be a lesson for people regarding herd mentality and trust. And that's exactly what blockchains are for, because people simply seem completely incapable of learning this lesson. We need to have financial systems that are built on verification, not trust. The exact opposite of something like FTX and legacy finance. Apparently no one even bothered to properly look at their books and the auditing was done by a Metaverse-present auditing firm called 'Prager Metis'. You can't make this up: https://www.coindesk.com/business/2022/11/11/meet-the-metaverse-night-clubloving-audit-firm-that-presided-over-ftxs-financials/ https://www.coindesk.com/business/2022/11/11/meet-the-metave...
- hef19898 4y ago
  Too lazy to look it up, but I am quite sure "deregulated finance" is mentioned nowhere in the UN charter of human rights.
  - AbrahamParangi 4y ago
    The UN charter of human rights does not give us our rights. Some people consider the rights god-given, some consider that we have all negative rights until they’re taken away.
  - zoklet-enjoyer 4y ago
    The UN doesn't matter
  - chrisco255 4y ago
    The UN is not the authority on human rights. It's just a weak, ineffective political body that represents no one in particular. Certainly not me nor you. From the U.S. constitution: "The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people."
    - hef19898 4y ago
      Since I am not a US citizen, the US constitution doesn't really matter to me. The UN, as the only global body we have, does matter so.
      - willmadden 4y ago
        There is a word for unelected groups that have power over you. The word is tyranny.
      - chrisco255 4y ago
        The UN has no power. It is not an elected Congress nor does it have sovereign authority of any kind. It has every country in it, even those that routinely abuse human rights. It is purely intended as a preventative body for war. It's not even great at that.
DennisP 4y ago
Eh, no. Defi should continue to mean the sort of systems where failures like FTX can't happen. Uniswap for example has no admin functions; the only person who can move your funds is you.
jeroenhd 4y ago
Decentralisation means more people get responsibilities and therefore are liable if something really bad happens. It doesn't mean regulations don't apply. With the way Tornado Cash went down, I disagree that DeFi is "deregulated". The stakes are as high as ever for the people working on these projects. The people getting scammed by DeFi companies just don't have as much money to burn on lawyers and influence to take action when their deals turn out too good to be true.
- woah 4y ago
  Tornado cash never went down. It continues to operate.
  - jeroenhd 4y ago
    It can't go down without Ethereum going down, in the same way several blockchains contain child porn that can never be removed without taking down the entire chain. Yet donations have been refused out of fear of being branded with the USA's sanctions for dealing with a sanctioned company.
willmadden 4y ago
No, it is a technology that omits third parties and centralized institutions from financial transactions. If FTX had been a DeFi platform, the fraud committed wouldn't have been possible. Granted, DeFi can't do everything FTX used to do, yet.

Kwpolska 4y ago

Kill it with fire, nuke it from the orbit. There, fixed.

dsimmons 4y ago

A journalist/marketer telling us how to fix things, cool. "You just... easy!"

hrunt 4y ago

> However, the technology does have quite a few advantages, provided that you’re investing in a legitimate project with a good & planned-out vision: > > 1. It’s a great and risk-free way of earning interest on your crypto holdings This section is where I basically stopped reading. Anything that earns interest is not risk-free. Full stop. The whole point of earning interest is to reward the lender (and to be clear, "staking" is lending to the system) for the assumption of the risk that they may not get their money back. There are low-risk opportunities (usually accompanied by low interest). And in the case of staking a token, the staking comes with the implicit risk that the value of the token may decline substantially. I see a lot of talk of "risk-free" opportunities in the DeFi movement, and that's why I stay away. It sounds too good to be true, and it is. There are other issues in that article -- in particular, most DeFi APY calculations are variable and constantly changing -- but that one was the full-stop for me.

cuteboy19 4y ago
They never answer the simple question: where does the money come from?
Wiligut45 4y ago
You are watching on DeFi as a hype-risk, but it is not. It's more about technology, for example bridges, oracles, staking.

danaris 4y ago

How To Fix Them: 1. Use A Bank 2. Admit That Cryptocurrency Only Solves Problems If You Like Crime

hi5eyes 4y ago
1. Use A Bank citizens of china, lebanon, and history would like a word ser 2. Admit That Cryptocurrency Only Solves Problems If You Like Crime if crime is the ability for the average internet user to custody their own money and to use it however they want without intermediary, then I would assume most enjoy crimes winkwink a good tell if one is on the right side of history or not, is whether they support the free flow of capital and the rights of individuals to own their own money/capital.. or not ;)
- danaris 4y ago
  If the cost of enabling some banking for a small subset of people in countries with terrible governments is also enabling absolutely massive fraud, rampant speculation, and a transfer of wealth from less-financially-literate people to wealthy hucksters, then I think we need to find a better way to help the people in those countries. "Those people need help; this helps them; ergo, we must do this" is not sound logic.
  - deleted 4y ago
    [deleted]
  - deleted 4y ago
    [deleted]
Wiligut45 4y ago
1. You are from Africa, how will you use your money without banks, eh? 2. Not at all. In this logic, everyone who is a prisoner, 100% guilty?

lizknope 4y ago

Ban it. Problem solved

joemazerino 4y ago

DeFi summer was, if anything, a ride of high-octane. Now that capital has learned that high APYs are unsustainable the notion of "Real Yield" [1] should help stabilize DeFi. 1 - https://cryptobriefing.com/real-yield-mania-hits-defi-five-projects-watch/ https://cryptobriefing.com/real-yield-mania-hits-defi-five-p...

adam_arthur 4y ago

Can fix them easily by finding literally any valid use case. Maybe in another 10yrs

jbirer 4y ago

"Roman Wiligut @Wiligut Growth hacker, tech enthusiast, journalist, futurist, writer, entrepreneur."