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Why should you care about Ethereum Layer-2?

thecryptojournal.substack.com

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Re: Why should you care about Ethereum Layer-2?

#51

Post by cuteboy19 »

CurrentB wrote: post #41
lottin wrote: post #40

Earlier quoted context omitted.

Debt financing is definitely not simply harder but entirely impossible. If you think otherwise, please explain how the borrower can be made to repay the debt with this technology.

Borrowers cannot be "made" to repay debt in traditional finance either. Lenders must make decisions based on some measure of the credit worthiness of potential borrowers. The same mechanisms could be replicated on blockchains. See: https://docs.truefi.io/faq/ https://teller.gitbook.io/teller-docs/protocol-1/overview

The mechanism for "making" repayment mandatory is the state. Credit worthiness (or any other information) is useless if the debtor cannot be made to repay

Re: Why should you care about Ethereum Layer-2?

#53

Post by c-cube »

sterlind wrote: post #15
wruza wrote: post #3

tldr: because blockchain is too slow for practical uses and one has to resort to off-chain blockchains on blockchain with separate consensus, that go into blockchain. If you’re still confused why would you care about it, so am I.

a defense of it, from someone who's not in the cryptocurrency scene: blockchains are useful because they offer decentralized centralization. Ethereum has no policies, no embargoes, it's a neutral platform. this is because everyone can agree that what's on Ethereum is canon, and everyone can access Ethereum (except for how pricey gas is.) this is the opposite of federations where servers host their own state, with the…

That's just too funny: "ethereum has no policies". It had a superb bail out of the initial DAO in 2016, which was deemed too big too fail, and lead to a fork of the chain. So let's not pretend blockchains are neutral immutable ledgers, they exist purely for speculation.

Re: Why should you care about Ethereum Layer-2?

#54

Post by CurrentB »

lottin wrote: post #45
CurrentB wrote: post #41

Earlier quoted context omitted.

Borrowers cannot be "made" to repay debt in traditional finance either. Lenders must make decisions based on some measure of the credit worthiness of potential borrowers. The same mechanisms could be replicated on blockchains. See: https://docs.truefi.io/faq/ https://teller.gitbook.io/teller-docs/protocol-1/overview

What? Of course borrowers can be made to repay the debt in traditional finance. Get a loan from your bank, and refuse to pay it back. See what happens. If don't understand the basic mechanisms behind a loan agreement, there's no point in continuing this conversation.

> Get a loan from your bank, and refuse to pay it back.

I don't even know where to begin when it comes to examples of just that happening. Defaulting on debt is something that happens with every single form of credit. It's extremely fundamental to the idea of debt.

Re: Why should you care about Ethereum Layer-2?

#56

Post by syntheweave »

dcposch wrote: post #7

Kneejerk dismissals here are sad to see. L2 is, in my view, some of the most interesting research happening in computer science right now. The article above is not a great explanation--in particular, L2s are not off-chain as the article presents. The point of L2 is that it on-chain, inheriting the security and censorship resistance guarantees of L1. To simplify: L2 is about creating a fast, high throughput state mach…

Yes, ZK is cool. I expect to hear about it on other chains too. One of the lower visibility projects I follow, Symbol, has a similar concept of subchains and is already working towards applications on them.

Re: Why should you care about Ethereum Layer-2?

#57

Post by lottin »

CurrentB wrote: post #54
lottin wrote: post #45

Earlier quoted context omitted.

What? Of course borrowers can be made to repay the debt in traditional finance. Get a loan from your bank, and refuse to pay it back. See what happens. If don't understand the basic mechanisms behind a loan agreement, there's no point in continuing this conversation.

> Get a loan from your bank, and refuse to pay it back. I don't even know where to begin when it comes to examples of just that happening. Defaulting on debt is something that happens with every single form of credit. It's extremely fundamental to the idea of debt.

Nobody says defaults don't happen. Defaults happen all the time. When they happen the creditor will initiate legal action against the borrower. If the borrower continues to refuse to pay or is unable to do so, the court will seize the borrower's assets and will liquidate them in order to pay the debt to the extent possible. This is process is impossible to replicate with a "smart contract" because smart contracts lack the ability to seize assets.

Re: Why should you care about Ethereum Layer-2?

#58

Post by riptheworld »

lottin wrote: post #9
dcposch wrote: post #7

Kneejerk dismissals here are sad to see. L2 is, in my view, some of the most interesting research happening in computer science right now. The article above is not a great explanation--in particular, L2s are not off-chain as the article presents. The point of L2 is that it on-chain, inheriting the security and censorship resistance guarantees of L1. To simplify: L2 is about creating a fast, high throughput state mach…

The primary function of finance is to enable economic agents to trade future consumption for present consumption, by means of debt. And debt requires a trusted third-party that has the capacity to re-allocate assets. Otherwise the borrower can simply walk away with the money, and never repay the debt. Now, blockchains, not only lack a trusted third-party that can re-allocate assets, but they are designed with the exp…

You could use existing trusted lending Institutions, no? Investors can loan their excess Bitcoin to a lending institution that pools Bitcoin from multiple investors and loans it out to borrowers? In return, the investor receives interest on the loaned amount when it is paid back in full? If the loan isn’t repaid, the courts get involved to seize other physical assets from the borrower (cars, homes, etc.).

In some sense, we would be back to having banks with the exception that the bank now exists solely as an investment vehicle.

I guess I’m struggling to see what barriers prevent crypto currencies from being used in traditional financing?

Re: Why should you care about Ethereum Layer-2?

#59

Post by lottin »

riptheworld wrote: post #58
lottin wrote: post #9

Earlier quoted context omitted.

The primary function of finance is to enable economic agents to trade future consumption for present consumption, by means of debt. And debt requires a trusted third-party that has the capacity to re-allocate assets. Otherwise the borrower can simply walk away with the money, and never repay the debt. Now, blockchains, not only lack a trusted third-party that can re-allocate assets, but they are designed with the exp…

You could use existing trusted lending Institutions, no? Investors can loan their excess Bitcoin to a lending institution that pools Bitcoin from multiple investors and loans it out to borrowers? In return, the investor receives interest on the loaned amount when it is paid back in full? If the loan isn’t repaid, the courts get involved to seize other physical assets from the borrower (cars, homes, etc.). In some sen…

Nothing prevents crypto-currency denominated loans in traditional finance. That was not the claim. The claim is that financing operations are not possible in so-called "decentralised finance".
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