Will DeFi Kill Banks?

[lkn]

4 hours ago, ThailandRyan said:

I am amused that the few who keep kicking the crypto currencies out the door not only on this form but elsewhere seem to have missed that this has taken hold

I am amused that the libertarians that want freedom from government do not see how this is obviously just dictators and would be dictators trying to get back control of their country’s currency. As I have recently posted about El Salvador, they are going from USD (not controlled by their government) to centralized banking run by the president’s cronies, from the NYT article I previously linked to: “Mr. Bukele has treated the bitcoin policy as a state secret. He has classified all information related to Chivo Wallet, which was created with taxpayer funds, but is run as a private enterprise by undisclosed individuals”.

 

4 hours ago, ThailandRyan said:

Meanwhile, in El Salvador, the country has made its first forays into Bitcoin 

mining using power generated by a volcano

And as the other article I linked to several days ago showed, not only is it done at a 17x loss (because energy is actually not that cheap in El Salvador), it is increasing the price of energy for regular consumers (who have replied to Bukele’s tweet about this by posting their electricity bill).

 

Bitcoin proponents shouldn’t use El Salvador as an example of adoption, even Vitalik (co-founder of Etherium) has condemned what is going on.

[ThailandRyan]

1 hour ago, lkn said:

I am amused that the libertarians that want freedom from government do not see how this is obviously just dictators and would be dictators trying to get back control of their country’s currency. As I have recently posted about El Salvador, they are going from USD (not controlled by their government) to centralized banking run by the president’s cronies, from the NYT article I previously linked to: “Mr. Bukele has treated the bitcoin policy as a state secret. He has classified all information related to Chivo Wallet, which was created with taxpayer funds, but is run as a private enterprise by undisclosed individuals”.

 

And as the other article I linked to several days ago showed, not only is it done at a 17x loss (because energy is actually not that cheap in El Salvador), it is increasing the price of energy for regular consumers (who have replied to Bukele’s tweet about this by posting their electricity bill).

 

Bitcoin proponents shouldn’t use El Salvador as an example of adoption, even Vitalik (co-founder of Etherium) has condemned what is going on.

You seemed to have missed the point on cryptos being adopted and not being shown the door.

[mjnaus]

3 hours ago, The Cipher said:

But unfortunately I lost my crypto wallet in a boating accident this past summer and now it's gone. ????‍♂️

 

That is so weird! I too lost all my bags during a horrible boating accident. All gone; let's move on.

[lkn]

Above graph shows average transactions per second for bitcoin over the last 3 years. Mainstream adoption? Judge for yourself ????

[lkn]

Both of you lost all your crypto money in a boating accident? I stand corrected, blockchain do allow things I previously didn’t think were possible ????

 

But sorry guys, I do sympathize with you, but I hope you realize that if you didn’t have any backups of your private keys, what is the chance that regular people will? People lose their phones all the time.

 

I am currently trying the lightning implementation of BlueWallet, I don’t think most people would even understand what they are supposed to backup from this wallet (when creating a lightning balance).

 

Edit: Just remembered, I have a family member who is into crypto (as a speculative asset), he is using some OTP generator for his wallet, and told me, that the forum he follows about all of this, a lot of people had lost their OTP generator’s seed, when migrating to a new phone, and was therefore locked out of their wallet. For this reason, this family member has decided to simply keep his old phone as a dedicated crypto wallet, and will never update it, and it is no longer his main phone. He is not a technical guy, so what he is doing is a rational practical solution, but it’s also quite ridiculous and funny.

[mjnaus]

50 minutes ago, lkn said:

Both of you lost all your crypto money in a boating accident? I stand corrected, blockchain do allow things I previously didn’t think were possible ????

 

But sorry guys, I do sympathize with you, but I hope you realize that if you didn’t have any backups of your private keys, what is the chance that regular people will? People lose their phones all the time.

 

I am currently trying the lightning implementation of BlueWallet, I don’t think most people would even understand what they are supposed to backup from this wallet (when creating a lightning balance).

 

Edit: Just remembered, I have a family member who is into crypto (as a speculative asset), he is using some OTP generator for his wallet, and told me, that the forum he follows about all of this, a lot of people had lost their OTP generator’s seed, when migrating to a new phone, and was therefore locked out of their wallet. For this reason, this family member has decided to simply keep his old phone as a dedicated crypto wallet, and will never update it, and it is no longer his main phone. He is not a technical guy, so what he is doing is a rational practical solution, but it’s also quite ridiculous and funny.

???? Memes are soooo much more fun when you have explain 'em. Try this on Google: "lost my crypto keys in a boating accident meme". Having said that, I really did loose my keys in a horrible boating accident. 

 

Using phones as anything but a hot wallet with restricted funds is a terrible, terrible idea. Phones have a limited lifespan, so you're always just kicking the can down the road. Furthermore, they're easy targets for hackers as long as the phone maintains a working internet connection. Significant funds should ALWAYS be stored on a cold wallet, preferable a hardware wallet like Trezor or Ledger. And when it comes to seed phrases, people tend to get creative. I typically do no disclose details about my strategies, but not having a single point of failure is a major theme ????

 

When it comes to handling wallets, keys, etc. I totally agree that the space still has a long, long way to go. The UX is still pretty horrendous, but tons of efforts from smart people are under way to make this better. Smart contract wallets with social recovery are promising and with more L2's appearing on the scene, these types of wallets are closer to becoming a reality (some already exist, however due to high gas fees on the L1 don't really work from a practical point of view).

 

[mjnaus]

1 hour ago, lkn said:

Above graph shows average transactions per second for bitcoin over the last 3 years. Mainstream adoption? Judge for yourself ????

I can't speak for anyone else in this thread, but I certainly would never argue that Bitcoin has hit mainstream adoption as a money. SOV is a different story, it'd be pretty easy to make the argument that Bitcoin has bit mainstream adaption as an alternative SOV asset. But as money, it sucks. Totally agree there. 

 

I think we need to move on from talking about Bitcoin. It's old, boring and the biggest news coming out of the Bitcoin world the past two months is that you can soon tip other Twitter users in Bitcoin. 

 

The world of crypto and blockchain tech is so much bigger than Bitcoin, so how about discussing something else than that boring pet rock? Heck, if I want to do anything even remotely interesting with my BTC, I need to deal with the hassle of moving it over to another chain. I get more use out of my BTC on Ethereum than I do on its own network. 

[ThailandRyan]

5 minutes ago, mjnaus said:

I can't speak for anyone else in this thread, but I certainly would never argue that Bitcoin has hit mainstream adoption as a money. SOV is a different story, it'd be pretty easy to make the argument that Bitcoin has bit mainstream adaption as an alternative SOV asset. But as money, it sucks. Totally agree there. 

 

I think we need to move on from talking about Bitcoin. It's old, boring and the biggest news coming out of the Bitcoin world the past two months is that you can soon tip other Twitter users in Bitcoin. 

 

The world of crypto and blockchain tech is so much bigger than Bitcoin, so how about discussing something else than that boring pet rock? Heck, if I want to do anything even remotely interesting with my BTC, I need to deal with the hassle of moving it over to another chain. I get more use out of my BTC on Ethereum than I do on its own network. 

It's why I have my 412 ETH2 tokens, which I converted from ETH in order to stake making 6%. Ethereum will be a solid player as they moved ahead with their conversion.

[lkn]

18 minutes ago, mjnaus said:

When it comes to handling wallets, keys, etc. I totally agree that the space still has a long, long way to go. The UX is still pretty horrendous, but tons of efforts from smart people are under way to make this better.

It’s a really really hard problem to solve. As I mentioned in previous posts, many European countries have introduced digital identities, and even here there are problems with both scams and friction among less technical people.

 

And here this is all centrally controlled, so there is recourse incase of fraud (and a legal system to prosecute the perpetrator), there are government service offices that will help citizens with problems, there are tax payer money to fund all this added security, fraud protection, hand holding, etc.

 

Overall though, the system works pretty well, but you can’t assume all users are highly educated and understand everything, nor can you assume that there will not be an army of people trying to attack the system from all angles (and these attacks can come from abroad).

 

18 minutes ago, mjnaus said:

Smart contract wallets with social recovery are promising and with more L2's appearing on the scene, these types of wallets are closer to becoming a reality (some already exist, however due to high gas fees on the L1 don't really work from a practical point of view).

From what I have seen, L2 wallets muddy the waters. If you subscribe to not your keys, not your coins, that is L2 wallets, and for some, it is really unclear who even holds the money. For example I tested one LN wallet, and you could fund your wallet by sending BTC to some address that I did not have the private keys to, I mean, <deleted>? I could just as well send the money to PayPal and pay less fees…

[mjnaus]

7 minutes ago, lkn said:

From what I have seen, L2 wallets muddy the waters. If you subscribe to not your keys, not your coins, that is L2 wallets, and for some, it is really unclear who even holds the money. For example I tested one LN wallet, and you could fund your wallet by sending BTC to some address that I did not have the private keys to, I mean, <deleted>? I could just as well send the money to PayPal and pay less fees…

You're focussing way too much on Bitcoin, which isn't the platform that is going to solve this. It does not have smart contracts, and a LN wallet is not the same as a smart contract wallet.

 

If we're looking at Ethereum for example, smart contract wallets (whether they're on L1 or L2) maintain the same security concepts as a regular wallet, hence they're secured by a private key. There's absolutely no doubt where the funds are, as it's all transparent and on-chain: the funds reside inside the smart contract wallet. Whether the wallet resides on the L1 or any L2 does not matter for anything other than finality and transaction costs: since the wallet is a smart contract and smart contract transactions use more gas than regular wallets, they tend to be more expensive on the L1, which is why L2's make these wallets more practical.

 

It goes without saying that sending any value to a wallet for which you do not have the private keys isn't a smart thing to do. 

[lkn]

39 minutes ago, mjnaus said:

You're focussing way too much on Bitcoin […]

I am evaluating the stuff that people tell me is actually working now, not in 18 months.

 

For L2 on Ethereum, did you see this blog post: https://medium.com/authereum/an-end-and-a-new-beginning-ae0e2e596e1b — they had a smart wallet that ended costing them $200 per on-chain sign-up, so now they are working on yet another new system to solve scalability (by doing L2 sign-up)…

 

It’s a jungle of projects that try to solve scalability, some of these people appear to be smart, but many seem to lack a basic understanding of complexity theory, and just poh-poh experienced computer scientists’ critique, and yet, after more than a decade, we still haven’t solved scalability, but just you wait 18 more months…

[billd766]

On 10/7/2021 at 2:47 PM, Sametboy2019 said:

Seems Moneygram thinks crypto has some value

Mandy Rice Davies quote applies here. Slightly modified.

 

"Well they would say that, wouldn't they?"

 

That is the business that they are in.

[mjnaus]

7 hours ago, lkn said:

I am evaluating the stuff that people tell me is actually working now, not in 18 months.

 

So who told you Bitcoin is "working" as what at the moment? Seriously doubt that anyone with even basic understanding of the industry would argue that Bitcoin, as money, as actually working. Or that smart contract wallets are functional, or even exist, on the bitcoin network (rather strange that one, since bitcoin does not have smart contract functionality). And who said anything about 18 months? To achieve what?

 

It seems a bit odd that you're toying with a LN (which uses state channels) wallet on bitcoin, and then extrapolate those experiences to smart contract wallets on other chain's L2's (most of which involve roll-up tech). The two couldn't be further apart, both in underlying tech as in user experience.

[lkn]

14 hours ago, mjnaus said:

Seriously doubt that anyone with even basic understanding of the industry would argue that Bitcoin, as money, as actually working

And yet that is what El Salvador picked, and (based on this thread) Brazil plus Sri Lanka are now looking at doing the same, so you say that all these people, and the posters in this thread, have no basic understanding? I wonder then, do you think that it is all driven by hype? ????

 

Of course Ethereum is different, right now though, it is showing lots of scaling problems, but as soon as we have a fair proof of stake system, L2 solutions, and solved the oracle problem, then we are all going to be rich! ????

 

[mjnaus]

54 minutes ago, lkn said:

And yet that is what El Salvador picked, and (based on this thread) Brazil plus Sri Lanka are now looking at doing the same, so you say that all these people, and the posters in this thread, have no basic understanding? I wonder then, do you think that it is all driven by hype? ????

Your point being what? This thread was about DeFi, not El Salvador adopting Bitcoin. You're the one that keeps dragging Bitcoin into this. I have literally seen two other posts that mention Bitcoin and at least half a dozen from yourself (probably more if I start digging through the entire thread). I don't claim to know what El Salvador's endgame is with their Bitcoin play, and frankly I don't really care. It matters very little in the grand scheme of things. But IMO, it's pretty obvious Bitcoin isn't going to take over local currencies as the main medium of exchange for small transactions. Who knows what Brazil and Sri Lanka are planning/thinking. Again, this thread was about DeFi, not the merits of Bitcoin as money.

 

1 hour ago, lkn said:

Of course Ethereum is different, right now though, it is showing lots of scaling problems, but as soon as we have a fair proof of stake system, L2 solutions, and solved the oracle problem, then we are all going to be rich! ????

 

L2 solutions are already there: https://l2beat.com/. Currently $3+ billion TVL and that's without Optimism even being fully open yet. Chainlink is doing just fine handling the oracle problem on Ethereum and other L1s. The beacon PoS chain is live, and has been for quite a while.  Ethereum is scaling. It's not a binary state, it's a spectrum on which a network progresses slowly. As anyone who's got their pulse on the finger would know, its heading in the right direction. Slowly, at times, but steady. Seriously doubt any of this is going to make you rich though ????

[HenryfromMalaysia]

Saw this in a UK website and wonder if UK fintech is getting into crypto.

Wonder which fintech it is.

 

[lkn]

On 10/11/2021 at 11:53 AM, mjnaus said:

Your point being what? This thread was about DeFi, not El Salvador adopting Bitcoin

You are right that the original question was if DeFi will kill regular banks, but El Salvador was brought up (even by OP) as, presumably, a sign that it is happening, and that is why I have given my view of what is happening in El Salvador (and as a tangent, how bad the technology used by El Salvador actually is).

 

If we go back to DeFi, which is short for Decentralized Finance. Some are certainly working toward enabling trustless and decentralized systems, but what we are seeing is that majority of people gravitate toward “trusted” (yet unregulated) third parties. For example, the entire ecosystem runs on stable coins, people stake their coins with third parties, exchange their coins on exchanges run by third parties, our OP has a prepaid Visa card with a third party which presumably hold some of his coins (in addition to the initial purchase of coins to get the card benefits), etc.

 

So what we are seeing is really just “unregulated finance” rather than “decentralized finance”. There is a reason we have regulation, as I said in one of my first comments, I came because of an interest in the technology, but I stayed (watching) because of all the fraud and scams. Something fascinating about big financial scams, and the crypto space has one every week.

 

Many jurisdictions are starting to wake up to this, and many of the big players have received inquiries from U.S. authorities, if not banned, and there have also been cease and desist orders sent to some of the players effectively offering unregulated securities.

 

One earlier comment brought up that “the space was created as a reaction to what happened in 2008” (I am paraphrasing). This might be true, but what happened in 2008 was caused by lax regulation, and no regulation is the wrong solution. If there is a chance to defraud other people, someone will do it. And unfortunately, if you tell people they can make money, many people will grab at the chance, not understanding the risk they are taking.

 

So that is a long way to answer a definite no to OP. DeFi will not kill banks, because it would be a major regression to go back to an unregulated system, and if we have to introduce regulation, you wouldn’t get the 17.78% interest for staking your money.

 

Speaking of which, Celsius Network made the news last week, when it was revealed that they have borrowed one billion USDT from Tether with bitcoin as collateral, and paying 5-6% interest rate.

 

This is interesting because Tether does not include this in their “digital tokens” holdings, so it must be under “secured loans”, but with the volatility of bitcoin, I doubt any accountant would approve this as a “secured loan”.

 

It’s also a bit puzzling that Celsius Network turn to Tether in the first place, and is willing to pay this high an interest rate to borrow money. They additionally raised $400m of investor capital, despite having received a cease and desist form Kentucky’s securities regulator.

[mjnaus]

On 10/4/2021 at 9:27 AM, GrandPapillon said:

wrong again, every ETFs that promoted cryptos as the underlying assets were denied registration by the SEC, for that last 5 years,

 

some ETFs make the registration claim with a PR announcement, only to be denied a few months later ????

Lol. https://decrypt.co/83521/sec-proshares-bitcoin-futures-etf-start-trading

 

Now, who was wrong again bud? 

 

Perhaps you should hit up Gensler and tell him what a huge mistake he's making ???? I'm sure he'd listen to a well-informed, knowledgable expert such as yourself. 

[lkn]

In other regulatory news: “Tether to Pay $41 million Over Claims that Tether Stablecoin was Fully Backed by US Dollars”.

 

From the CFTC document:

Quote

[…] the Tether order finds that […] Tether reserves were not “fully-backed” the majority of the time. The order further finds that Tether failed to disclose that it included unsecured receivables and non-fiat assets in its reserves, and that […] Tether reserves were not audited […] Tether […] comingled reserve funds with Bitfinex’s operational and customer funds; […] Tether and Bitfinex’s combined assets included funds held by third-parties, including at least 29 arrangements that were not documented through any agreement or contract, and that Tether transferred Tether reserve funds to Bitfinex, including when Bitfinex needed help responding to a “liquidity crisis.”

I am astonished that USDT can keep its peg, because the money are not there (and those running Tether, act like any deposits they do receive, are their personal funds to do with what they please). But as Upton Sinclair said, It is difficult to get a man to understand something when his salary depends upon his not understanding it.

[ThailandRyan]

Effective now Bitcoin and Cryptos have gone mainstream with licensed brokers RIA's and approved by the SEC

Financial Advisors Managing $110 Trillion Can Now Offer Crypto Trading to Clients via Interactive Brokers – Featured Bitcoin News

The company noted that while the offering is only available to RIAs in the U.S. initially, it plans to “launch the service for financial advisors in other parts of the world, in the future.”

[Neeranam]

On 10/19/2021 at 10:53 AM, ThailandRyan said:

Effective now Bitcoin and Cryptos have gone mainstream with licensed brokers RIA's and approved by the SEC

Financial Advisors Managing $110 Trillion Can Now Offer Crypto Trading to Clients via Interactive Brokers – Featured Bitcoin News

The company noted that while the offering is only available to RIAs in the U.S. initially, it plans to “launch the service for financial advisors in other parts of the world, in the future.”

Yep, yet there still are doubters. 

 

$1 billion in first day trading! 

[ThailandRyan]

17 minutes ago, Neeranam said:

Yep, yet there still are doubters. 

 

$1 billion in first day trading! 

Seems the naysayers have gone silent for now, or they just quit trolling and have always been onboard....lol

[Heng]

At some point, most of the naysayers probably 'listen' to themselves and realise that they sound like someone who is trying to talk people out of using ATM cards or air travel.

 

Just remember that it is still tech though.  One day it'll be likely that we (or maybe the next generation) will be laughing at things like the "secure" 2,048 BIP39 word list.   Can you believe that they thought it couldn't be cracked by my kid's ****** phone/communicator?   

 

When folks like Saylor say that they'll hold BTC (Defi's grandfather) for 100 years, I think in confidence many would admit that this particular iteration (not where it's headed as a whole) will have a sweet spot (just IMO) of maybe 20 years, of which we have already consumed half.  

 

 

[lkn]

The ETF just shows that this is all about getting rich quick.

 

You are not investing in businesses that create value via the blockchain or bitcoin, you are speculating on the price of the token to go up. How exactly is that adoption? It’s still just speculation, nobody actually uses bitcoin for anything, as I showed in an earlier post, it does around 3 transactions per second, the average fee is 3 dollars, and it is recommended to wait for 3 blocks before it is confirmed with reasonable certainty, i.e. 30-40 minutes.

 

The tech is ridiculous, that is why El Salvador didn’t actually adopt bitcoin as-is, but a closed source proprietary wallet app where nobody knows if the dollar balances of the users is actually backed, the token price itself is a negative sum game, but yes, number goes up, because everybody is pouring their money into this pyramid scheme, not realizing that all the value is not actually there, and majority of the stable coins are unbacked.

 

Proponents are so focused on “number goes up” that they can’t discuss the actual problems in the crypto space, and that is why the naysayers in this thread stopped trying have a rational discussion about what problems are being solved, how value is being created via blockchain, or which businesses have been disrupted by DeFi.

 

So have fun staying ignorant ????

[ThailandRyan]

2 minutes ago, lkn said:

The ETF just shows that this is all about getting rich quick.

 

You are not investing in businesses that create value via the blockchain or bitcoin, you are speculating on the price of the token to go up. How exactly is that adoption? It’s still just speculation, nobody actually uses bitcoin for anything, as I showed in an earlier post, it does around 3 transactions per second, the average fee is 3 dollars, and it is recommended to wait for 3 blocks before it is confirmed with reasonable certainty, i.e. 30-40 minutes.

 

The tech is ridiculous, that is why El Salvador didn’t actually adopt bitcoin as-is, but a closed source proprietary wallet app where nobody knows if the dollar balances of the users is actually backed, the token price itself is a negative sum game, but yes, number goes up, because everybody is pouring their money into this pyramid scheme, not realizing that all the value is not actually there, and majority of the stable coins are unbacked.

 

Proponents are so focused on “number goes up” that they can’t discuss the actual problems in the crypto space, and that is why the naysayers in this thread stopped trying have a rational discussion about what problems are being solved, how value is being created via blockchain, or which businesses have been disrupted by DeFi.

 

So have fun staying ignorant ????

Again your opinion and unfortunately you will just have to sit back and cry when you truly realize the world of the future cryptocurrency adoption is at hand.

[lkn]

13 minutes ago, ThailandRyan said:

Again your opinion and unfortunately you will just have to sit back and cry when you truly realize the world of the future cryptocurrency adoption is at hand.

As said, no room for rational discussion to be found here, just “number goes up” and anyone who dares question this mantra is just an envious nocoiner.

[ThailandRyan]

1 hour ago, lkn said:

As said, no room for rational discussion to be found here, just “number goes up” and anyone who dares question this mantra is just an envious nocoiner.

Sort of like buying stocks on speculation and then shorting them.....hmmmm, just a new game and a new name now isn't it.  Like when I was a teenager and I got into hog futures because I was in FFA and could see what was going on in real time.

[lkn]

1 hour ago, ThailandRyan said:

Sort of like buying stocks on speculation and then shorting them.....hmmmm, just a new game and a new name now isn't it.  Like when I was a teenager and I got into hog futures because I was in FFA and could see what was going on in real time.

You can find lots of examples of speculative asset bubbles. Stocks though represent an underlying company which value should be tied to their earnings. Sometimes the price of the stock gets decoupled from the underlying company, Tesla being a good example, which currently trade at 450 times their earnings, but at least the company does actually produce value (have profit). In a rational/effecient market, either the stock goes down to like a tenth of what it is currently trading at, or Tesla increase profit margins x2 and number of cars sold x5, while the stock sees little to no growth.

 

But with Tesla, investors might not be entirely rational, exemplified by how tweets by Elon Musk has lead to major moves in DOGE and SHiB.

 

Most other stocks in the major indexes though are priced fairly rational, taking the zero-interest environment into consideration.

 

If you want to compare crypto to stocks, you should probably look toward penny stocks. Although even though there has been a lot of scams related to pumping penny stocks, at least there still was an actual company, but I guess you could compare some of the penny stock companies pumped with the presence of a white paper for some of the coins also being pumped.

 

Not really sure about how you view Bitcoin: I think even most crypto proponents agree that 99% of the coins out there are useless and just exist to facilitate pump and dump schemes, and I think @mjnaus, based on his past comments, would consider Bitcoin just another sh*tcoin, if it was released today.

[Neeranam]

 

[Heng]

What a day.