DeFi risks and the decentralisation illusion • Hacker News Board

Re: DeFi risks and the decentralisation illusion

#131

Post by lottin » Wed, Dec 22, 2021, 6:41 PM UTC

cinquemb wrote: post #130

lottin wrote: post #128

Earlier quoted context omitted.

I think you're not understanding the fundamental problem that uncolletarelised DeFi lending faces, which is the fact that the borrower can simply walk away with the money. None of the companies that supposedly offer uncollaterilised borrowing do what they claim to do. This is obvious if you read the fine print. And it's to be expected, because if they did, borrowers would borrow all the available funds and walk away,…

> I think you're not understanding the fundamental problem that uncolletarelised DeFi lending faces, which is the fact that the borrower can simply walk away with the money. I understand it very well, that's pretty much the risk to be mitigated (or not) by who the loans are extended to on the protocol level (when not trying to do it in the KYC/ofchain legal agreement way which is how its done now for the most part).…

Thanks for the information, but none of that addresses the problem I described earlier. All these pseudo-decentralised lending platforms that you mentioned happen to rely on a central party that "approves" borrowers. Once a borrower gets "approved" they sign a loan agreement with the central party. In the case of default, the central party can initiate legal action against the borrower. This is how these "decentralised" loans work. The only reason they work is because they aren't decentralised at all. They're conventional loan agreements that are enforced by courts of justice. The pseudo-decentralised platform plays the same exact role as a financial intermediary in conventional finance. Decentralised lending platforms where borrowers can get uncollateralised loans DO NOT exist. The technology does not allow it. There are no mechanisms through which make the borrower repay the loan.

Re: DeFi risks and the decentralisation illusion

#132

Post by cinquemb » Wed, Dec 22, 2021, 9:13 PM UTC

lottin wrote: post #131

cinquemb wrote: post #130

Earlier quoted context omitted.

> I think you're not understanding the fundamental problem that uncolletarelised DeFi lending faces, which is the fact that the borrower can simply walk away with the money. I understand it very well, that's pretty much the risk to be mitigated (or not) by who the loans are extended to on the protocol level (when not trying to do it in the KYC/ofchain legal agreement way which is how its done now for the most part).…

Thanks for the information, but none of that addresses the problem I described earlier. All these pseudo-decentralised lending platforms that you mentioned happen to rely on a central party that "approves" borrowers. Once a borrower gets "approved" they sign a loan agreement with the central party. In the case of default, the central party can initiate legal action against the borrower. This is how these "decentralis…

> Decentralised lending platforms where borrowers can get uncollateralised loans DO NOT exist. The technology does not allow it. There are no mechanisms through which make the borrower repay the loan.

They do exist, Aave allows for this, there is no one to approve the flash loan. Just that you can only borrow the funds for specific context that I described and the borrower will have to pay off the loan or the loan wont be made and will fail. You can't do this at all in tradfi.

> They're conventional loan agreements that are enforced by courts of justice.

And even if these happen traditionally, no defi involved, the borrower many not be able to pay of the loan. Risk will be eaten by someone. Courts of justice can't squeeze blood from stone. But Aave doesn't face this risk. Maybe other protocols will, but thats the risk people have to accept when they engage with the different protocols.

Re: DeFi risks and the decentralisation illusion

#133

Post by ece » Wed, Dec 22, 2021, 9:18 PM UTC

delabay wrote: post #116

defaultprimate wrote: post #114

Earlier quoted context omitted.

The psychological momentum of cryptobros far exceeds that of central bankers. Cryptobros and affiliated parties are comprised of thousand of vanguard who have built their entire financial future and self worth on their very limited life experience and ignorance of even the most basic economic principles and history, and a technological screw driver behaving as a hammer looking for a nail. BIS participants are, at min…

Your comment takes me back to the 90s when fax machines were superior to email. You're clearly not paying attention to the space. Everybody in this space is 20-30 years old. Bet against demographics, I dare you.

For a hot minute I thought there might be truly scalable and cheap POS DeFi system with validation running on my phone. If this was an easy technical problem, an answer would already exist. There are plenty of POW/pre-mined/centralized coins, but even ETH/DOT have little to show in terms of progress here. POS/POW DeFi blockchains haven't scaled so far despite plenty of tries. This is fact, and hard to refute. Just look at transaction fees, TPS, and level of centralization.

Re: DeFi risks and the decentralisation illusion

#134

Post by lottin » Wed, Dec 22, 2021, 11:09 PM UTC

cinquemb wrote: post #132

lottin wrote: post #131

Earlier quoted context omitted.

Thanks for the information, but none of that addresses the problem I described earlier. All these pseudo-decentralised lending platforms that you mentioned happen to rely on a central party that "approves" borrowers. Once a borrower gets "approved" they sign a loan agreement with the central party. In the case of default, the central party can initiate legal action against the borrower. This is how these "decentralis…

> Decentralised lending platforms where borrowers can get uncollateralised loans DO NOT exist. The technology does not allow it. There are no mechanisms through which make the borrower repay the loan. They do exist, Aave allows for this, there is no one to approve the flash loan. Just that you can only borrow the funds for specific context that I described and the borrower will have to pay off the loan or the loan wo…

As a curiosity, a "flash loan" is a loan in which the principal is received and repaid simultaneously and therefore has little practical utility, other than facilitating wash trading and other forms of market manipulation, which are prohibited in regulated markets.

Re: DeFi risks and the decentralisation illusion

#135

Post by delabay » Wed, Dec 22, 2021, 11:36 PM UTC

ece wrote: post #133

delabay wrote: post #116

Earlier quoted context omitted.

Your comment takes me back to the 90s when fax machines were superior to email. You're clearly not paying attention to the space. Everybody in this space is 20-30 years old. Bet against demographics, I dare you.

For a hot minute I thought there might be truly scalable and cheap POS DeFi system with validation running on my phone. If this was an easy technical problem, an answer would already exist. There are plenty of POW/pre-mined/centralized coins, but even ETH/DOT have little to show in terms of progress here. POS/POW DeFi blockchains haven't scaled so far despite plenty of tries. This is fact, and hard to refute. Just lo…

"Little to show"? You're not paying attention.

Re: DeFi risks and the decentralisation illusion

#136

Post by cinquemb » Thu, Dec 23, 2021, 1:56 AM UTC

lottin wrote: post #134

cinquemb wrote: post #132

Earlier quoted context omitted.

> Decentralised lending platforms where borrowers can get uncollateralised loans DO NOT exist. The technology does not allow it. There are no mechanisms through which make the borrower repay the loan. They do exist, Aave allows for this, there is no one to approve the flash loan. Just that you can only borrow the funds for specific context that I described and the borrower will have to pay off the loan or the loan wo…

As a curiosity, a "flash loan" is a loan in which the principal is received and repaid simultaneously and therefore has little practical utility, other than facilitating wash trading and other forms of market manipulation, which are prohibited in regulated markets.

I guess there's those like yourself that would deem it of little practical utility for anyone to borrow permissionlessly and without a large pool a capital of their own to take advantage of arb opportunities that arise in markets (and make those markets more efficient for those that use it). Luckily, defi participants are not bounded by your opinions.

Re: DeFi risks and the decentralisation illusion

#137

Post by ece » Thu, Dec 23, 2021, 2:27 AM UTC

delabay wrote: post #135

ece wrote: post #133

Earlier quoted context omitted.

For a hot minute I thought there might be truly scalable and cheap POS DeFi system with validation running on my phone. If this was an easy technical problem, an answer would already exist. There are plenty of POW/pre-mined/centralized coins, but even ETH/DOT have little to show in terms of progress here. POS/POW DeFi blockchains haven't scaled so far despite plenty of tries. This is fact, and hard to refute. Just lo…

"Little to show"? You're not paying attention.

You seem to like Helium, and I see that their gateways cost ~$1000, where as The Things Network seems to point you to RPi hats at ~$200. If the crypto innovation is effectively making the network more expensive to use and increasing the cost to build it, all so the operators/miners can earn a little on the side, this doesn't seem like innovation at all. Seems like you could do this with some sort of micro payment scheme (where the initial cost can be paid off), especially since LoRa seems to cater to industrial IoT mostly.

If you had a solar powered Things Network, it would be effectively free to use, and you could add more nodes as required at a cheaper cost.

Re: DeFi risks and the decentralisation illusion

#138

Post by delabay » Thu, Dec 23, 2021, 3:42 PM UTC

ece wrote: post #137

delabay wrote: post #135

Earlier quoted context omitted.

"Little to show"? You're not paying attention.

You seem to like Helium, and I see that their gateways cost ~$1000, where as The Things Network seems to point you to RPi hats at ~$200. If the crypto innovation is effectively making the network more expensive to use and increasing the cost to build it, all so the operators/miners can earn a little on the side, this doesn't seem like innovation at all. Seems like you could do this with some sort of micro payment sch…

Helium has solved the coverage problem through creating deployment incentive. You're missing the point of helium to such a large degree your post almost sounds like satire.

Re: DeFi risks and the decentralisation illusion

#139

Post by lottin » Thu, Dec 23, 2021, 5:09 PM UTC

cinquemb wrote: post #136

lottin wrote: post #134

Earlier quoted context omitted.

As a curiosity, a "flash loan" is a loan in which the principal is received and repaid simultaneously and therefore has little practical utility, other than facilitating wash trading and other forms of market manipulation, which are prohibited in regulated markets.

I guess there's those like yourself that would deem it of little practical utility for anyone to borrow permissionlessly and without a large pool a capital of their own to take advantage of arb opportunities that arise in markets (and make those markets more efficient for those that use it). Luckily, defi participants are not bounded by your opinions.

It's unclear whether these flash loans can even be used to exploit arbitrage opportunities. Arbitrage involves simultaneous transactions in different markets, whereas flash loans only allow simultaneous transactions in the same blockchain. Anyway, arbitrage is not a sufficient condition for market efficiency. There's plenty of evidence showing that crypto-markets are rife with fraud and are anything but efficient.

Re: DeFi risks and the decentralisation illusion

#140

Post by ece » Thu, Dec 23, 2021, 6:31 PM UTC

delabay wrote: post #138

ece wrote: post #137

Earlier quoted context omitted.

You seem to like Helium, and I see that their gateways cost ~$1000, where as The Things Network seems to point you to RPi hats at ~$200. If the crypto innovation is effectively making the network more expensive to use and increasing the cost to build it, all so the operators/miners can earn a little on the side, this doesn't seem like innovation at all. Seems like you could do this with some sort of micro payment sch…

Helium has solved the coverage problem through creating deployment incentive. You're missing the point of helium to such a large degree your post almost sounds like satire.

Someone looking at TCO might think differently. Someone looking at expanding the network at 5x the cost likely would think differently.

LoRa also seems to be a proprietary standard owned by a single company, regardless, there have been mesh networks built with public and private funding that do not artificially keep costs high for longer than needed. If this isn't the goal for Helium, it would be tough to recommend or use.