[unemphysbro]

why? i think it's the coolest thing ever.

anyone can write a contract to automate taking out a loan, investing it, and pulling out the money, develop exotic securities, and bespoke arbitration. anyone can do it regardless of credentials or connections; just a month of learning.

pretty darn cool to have unbridled access to a distributed computer.

[arcticbull]

The answer is pretty straight-forward. Every time we tried this before it collapsed into a giant ball of flame.

Nothing crypto is producing is new.

We've had stablecoins before in the form of wildcat banks. [1] They were backed at some point by barrels of nails with a few flakes of gold on top, and what little gold there was, was spirited around from bank to bank in front of the inspectors. That ended predictably.

We've had "ICOs" in the form of blue sky securities. [2] Companies that did nothing sold on the premise that you could simply sell the shares to someone else for more money. That ended predictably.

We've had "high yield investment platforms" in the form of actual honest-to-goodness Ponzi schemes before. That ended predictably.

We've had free reign access to leverage to buy more securities before - it led to the Great Depression. We had rhypothecation of securities and totally baseless collateral generation before - it led to the Great Recession.

Crypto hasn't created anything new fundamentally, it's just re-hashing all the stuff we outlawed before because it was an objective breeding ground of fraud and crime and grift. The only thing new about the crypto economy is that the pitches are structured as "${previously_failed_idea} except on the Internet."

[1] https://en.wikipedia.org/wiki/Wildcat_banking

[2] https://en.wikipedia.org/wiki/Blue_sky_law

[momojo]

> Crypto hasn't created anything new fundamentally

Orchids and Baseball cards and Beanie-Babies. We don't need a decentralized immutable, distributed ledger to verify something's value. We're already good at prescribing disproportionate value to arbitrary things. I don't think we ever cared that it was centralized or not.

[mattwilsonn888]

Why is it that everything a crypto die-hard says is held to the flame but when you are a skeptic you are allowed to be ignorant and obtuse? The space needs hard looks for every claim said, not just the positives.

Most people in crypto are aware of why Tether is bad. In fact a huge portion of stable-coins are handled algorithmically and backed by their network asset. You are building strawmen, likely out of ignorance.

[arcticbull]

> Most people in crypto are aware of why Tether is bad. In fact a huge portion of stable-coins are handled algorithmically and backed by their network asset. You are building strawmen, likely out of ignorance.

haha, I strongly suspect I know much more about this space than your average coiner. Simply because you disagree doesn't make my positions wrong. You haven't actually indicated anything wrong with my position other than your frustration and a few ad hominem attacks.

Algorithmic stablecoins are (a) a tiny fraction of the stablecoin space and (b) pegs. Pegs are honey pots for attackers. This is true in classical finance too - and attacking the peg can be extremely lucrative. Just yesterday MIM and UST got knocked off their pegs. I'm led to believe this isn't the first time UST got knocked off its peg and required airdropping hundreds of millions onto it. And knocking the GBP off its peg is how Soros made his money.

Fractionally reserved stablecoins that never lose their peg are a perpetual motion machine. [1]

[1] https://bennettftomlin.com/2021/07/27/my-second-appearance-o...

[yrral]

> The answer is pretty straight-forward. Every time we tried this before it collapsed into a giant ball of flame.

This is availability heuristic. Many financial innovations work out well and power everything we do today without a second thought. Credit cards, internet banking, mobile banking, etc etc etc. Should we ban all financial innovations because a subset can cause collapse?

For stablecoins, the difference here is that all data is open. So for example with the latest news with MIM/abracadabra, all the loans/treasuries and collateralization ratios are viewable by everyone [1] and on chain as well. For Dai/frax/etc as well.

[1] https://dashboard.abracadabra.money/

For ICOs, this exists today as well in our regular regulated markets as well. Don't tell me you think AMC or GME is worth what they are worth.

> Crypto hasn't created anything new fundamentally, it's just re-hashing all the stuff we outlawed before because it was an objective breeding ground of fraud and crime and grift. The only thing new about the crypto economy is that the pitches are structured as "${previously_failed_idea} except on the Internet."

I'm not sure this is true.

[arcticbull]

> This is availability heuristic. Many financial innovations work out well and power everything we do today without a second thought. Credit cards, internet banking, mobile banking, etc etc etc. Should we ban all financial innovations because a subset can cause collapse?

All of these tools are strictly regulated specifically to avoid that collapse. Because we learned from when they collapsed before not to let them run wild and do whatever they wanted because it's a bad time.

> For stablecoins, the difference here is that all data is open.

Only some fraction of the data is open. You have no access to exchange books. You can see where things are on chain, but the backing is completely opaque. Have you seen Tether's audits? I haven't. I know they wired all the cash to back one attestation over from Bitfinex the morning of the attestation and wired it back. Hat tip to the New York Attorney General. And they're far and away the largest.

Trustlessness can by definition only extend to what can be wholly represented on chain. Stablecoins cannot.

> For ICOs, this exists today as well in our regular regulated markets as well. Don't tell me you think AMC or GME is worth what they are worth.

They're not good investments because they're overpriced, but they're not zero-sum. They have customers and the intrinsic value of the shares increases (ideally) through dividends, buybacks and capital reinvestment over time. This means returns aren't exclusively generated by other shareholders but instead through a third party (customers).

Not every equity will win, and you can of course lose money buying them, but equities are positive sum.

Don't conflate a stock being "worth what they're selling for" with them being a zero-sum game like token offerings.

[yrral]

> All of these tools are strictly regulated specifically to avoid that collapse. Because we learned from when they collapsed before not to let them run wild and do whatever they wanted because it's a bad time.

But regulations didn't come before the credit card did right? Only after they were invented were regulations built. Let builders build.

> Only some fraction of the data is open.

We're talking past each other here. I'm talking about a subset of algorithmic stablecoins

> They're not good investments because they're overpriced, but they're not zero-sum. They have customers and the intrinsic value of the shares increases (ideally) through dividends, buybacks and capital reinvestment over time.

They're not zero sum. AMC, GME do not make money, so profits don't cover corporate expenses. They are quickly bleeding money.

[disruptalot]

> Trustlessness can by definition only extend to what can be wholly represented on chain. Stablecoins cannot.

Many algorithmic stablecoins like DAI can be fully audited on chain and have proved to be robust (so far, 4 years). They let you trustlessly borrow USD, top up your collateral and whatever else you would do with a loan but with no middlemen.

I've been reading your comments for a while, and have been getting real value from it but I think you are missing the mark on the detail. Unfortunately to really tell the difference, it requires an indepth exploration, preferably actually coding it. I know this is a cop out for an argument, but from experience it takes dozens of replies to really get to this depth.

[arcticbull]

> Many algorithmic stablecoins like DAI can be fully audited on chain and have proved to be robust (so far, 4 years).

You can't make something from nothing. Alogrithmic stablecoins are just the financial equivalent of honey pots. If you can knock them off their peg you can win big and this has happened many times. Perpetual motion doesn't exist and neither do stable long-term fractionally reserved algorithmic stablecoins.

This is true of all pegs - even in classical finance. This is literally how George Soros made all his money. [1]

MIM and UST are two fractionally reserved algorithmics that got knocked off their pegs yesterday. And this isn't even the first time for UST, I'm led to believe they required a capital infusion of a few hundred million greenbacks to maintain the peg a while ago.

> They let you trustlessly borrow USD ...

Not USD, no. A stablecoin with an opaque backing.

> ... top up your collateral and whatever else you would do with a loan but with no middlemen.

Of course there are middlemen, it's the validators or miners and contract authors and liquidity providers. There's a ton of middle men.

[1] https://www.investopedia.com/terms/g/soros.asp

[disruptalot]

Everything in the universe is built on something else. Let's speak the facts, can you demonstrate how DAI has been knocked off the peg substantially and with serious effects? Even with a reach should we find a an hour in history where it did wander more than 2-3%%, that by no means discounts it from the service that it provides in the rest of it's history.

> Of course there are middlemen, it's the validators or miners and contract authors and liquidity providers. There's a ton of middle men.

It's absurd to equate these entities with middlemen in the same sense as central banks and retail/investment banks are middlemen to loans. Again, let's speak the facts, demonstrate in DAIs history:

Where did a validator or miner, deny or cheat a loan? Plenty of examples in traditional finance.

Where did the contract authors or liquidity provides exercise power over the protocol that substantively affected the users of the protocol where it was not transparent and went against the rules which the users signed up for? The same happens all the time with tradfi.

[kyle-rb]

Who is offering automated loans? "Regardless of credentials or connections" sounds like I don't need any credit history or anything, how do they trust me with this free money?

And I already have unbridled access to my own computer, which seems to have more compute power than the EVM.

[exdsq]

Essentially, at the moment, over-collateralized loans. Deposit $100 and borrow $90, if you pay back $95 by tomorrow you get your original $100 back. There's actually some really cool and complex financial instruments you can build by combining these and the nature of atomic transactions on the blockchain (you can take a loan and pay it back in the same transaction while using the money in other txs to get a profit, it's really weird HFT).

[unemphysbro]

https://docs.aave.com/developers/v/2.0/guides/flash-loans

have fun :) play around on the testnets first.

[JaimeThompson]

Except humans haven't developed ways to write bug free code except in a very few limited circumstances none of which crypto uses.

[unemphysbro]

hence the recent renaissance in formal methods

eg.

https://www.certik.com/

[exdsq]

Formal methods doesn't necessarily mean that you're building the right thing which catches quite a few projects out. I do really enjoy getting to work with them though :D

[riskneutral]

> i think it's the coolest thing ever ... anyone can write a contract to automate taking out a loan, investing it, and pulling out the money, develop exotic securities, and bespoke arbitration. anyone can do it regardless of credentials or connections; just a month of learning.

That's all fine, until the SEC come knocking. The only advantage in the crypto space is that you try to skirt financial regulations. Establishing a new broker-dealer, bank, etc, requires a substantial capital investment to meet the minimum regulatory requirements. That gives some crypto companies an advantage (for now), since they can skip all that, but you can see sure that established interests are not taking this lying down and new regulations are in the pipeline. Once the global regulation of cryptocurrency is completed, either crypto will be dead or it will have to play the same rules as the rest of the financial industry.