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The modern financial system is built on arbitrage, without it almost nothing works. Arbitrage typically takes advantage of small differences so it needs leverag

The modern financial system is built on arbitrage, without it almost nothing works. Arbitrage typically takes advantage of small differences so it needs leverage to make interesting levels of profit. Flash loans are great for arbitrageurs and they're also great for the other side too - imagine being able to make a profit from lending money at interest without having any risk of the party you lend to not being able to return the money. I think perhaps you're only hearing about blockchains in news stories, where of course the shadier aspects are emphasised. As for "stuck within this context", that's actually one of the areas that I think blockchains have a huge advantage over traditional finance. Of course, at the moment there's a lot more traditional finance than there is finance on blockchains, but hooking together different financial institutions and their products is a massive pain, with data sharing (frequently it's just csvs periodically uploaded to an ftp site), and reconcilation taking up lots of time and effort with each hop. Blockchains have the potential to make this much more efficient, standard, secure and transactionally interoperable.

hiq 4y ago
> Flash loans are great for arbitrageurs My point is that traditional finance doesn't need this because there's enough cash available to arbitrageurs already, so if you somehow made flash loans, they wouldn't be used anyway. It's also unclear what legal framework would accompany them, which is again something that Ethereum can ignore. Your last paragraph is an oft-repeated myth that using Ethereum forces transparency and interoperability between systems. But that's not true, it doesn't enforce that, I've seen my share of code trying to implement ERC20 and failing in subtle ways, and that's code trying to follow a common interface. Interoperability is hard, and you don't get by using $MAGIC_PLATFORM. Some projects also restrict access to their smart contract because legally it's really hard to make it fully open, or put a tiny part of their system there mostly for PR reasons ("we're on the blockchain"). Reasons why data sharing etc. are a massive pain include: * no incentive from financial institutions to improve that * legal reasons making it hard and costly to do anyway Ethereum is not solving these problems. In particular: > efficient, standard, secure * So far it's failing at "efficient", and it can only be more efficient by getting rid of the legal aspects of financial transaction, the tech is not the problem. * It's also failing at "secure" as evidenced by the link above. Another counterargument to the potential of this tech is, if indeed it brought such benefits, we'd have seen more than toy projects developed in traditional finance by now, but we're mostly seeing institutions like the ASX scaling down on such experiments.

hiq 4y ago

> Flash loans are great for arbitrageurs My point is that traditional finance doesn't need this because there's enough cash available to arbitrageurs already, so if you somehow made flash loans, they wouldn't be used anyway. It's also unclear what legal framework would accompany them, which is again something that Ethereum can ignore. Your last paragraph is an oft-repeated myth that using Ethereum forces transparency and interoperability between systems. But that's not true, it doesn't enforce that, I've seen my share of code trying to implement ERC20 and failing in subtle ways, and that's code trying to follow a common interface. Interoperability is hard, and you don't get by using $MAGIC_PLATFORM. Some projects also restrict access to their smart contract because legally it's really hard to make it fully open, or put a tiny part of their system there mostly for PR reasons ("we're on the blockchain"). Reasons why data sharing etc. are a massive pain include: * no incentive from financial institutions to improve that * legal reasons making it hard and costly to do anyway Ethereum is not solving these problems. In particular: > efficient, standard, secure * So far it's failing at "efficient", and it can only be more efficient by getting rid of the legal aspects of financial transaction, the tech is not the problem. * It's also failing at "secure" as evidenced by the link above. Another counterargument to the potential of this tech is, if indeed it brought such benefits, we'd have seen more than toy projects developed in traditional finance by now, but we're mostly seeing institutions like the ASX scaling down on such experiments.