[puranjay]

Ser, there is really no such thing as a under-collateralized loan in crypto.

The “ease of access” of crypto loans is not really as big as you think - any lender will happily give you an instant “loan” if you front 150% of the collateral.

Its, infact, a wildly inefficient use of capital. Imagine if the rest of the lending industry worked on that premise - would you get a loan for your house if you had to first front 150% of the price of the house to your bank?

[rglullis]

Who said anything about undercollaterized loans? I'm well aware of how it works.

Currently, we have only "capital-for-capital" collateral, but there is nothing stopping to have some other types of products in the future. One can envision smart contracts that control future revenue (e.g, a blockchain-based subscription service) and we could put that for collateral.

The point is that for the loans that are possible to do on the blockchain, they can be done without middlemen. We can take a blockchain-based systems and work to make them more efficient. We can not take traditional finance systems and make them more open or without middlemen.

[puranjay]

How do you settle pricing in this system? Its easy enough if your asset has enough liquidity and distribution to arrive at a fair market price, but what if the price isn’t transparently obvious - as it is for most assets.

In your example of a blockchain based subscription service used as a collateral, revenues would likely accrue in some native token. Which will likely be volatile. So you have to first settle on a volatility range. Then you have to settle on a fair market multiple for the asset. Do you go with 30x MRR? And is this MRR on the token’s current price, twap?

I’ve seen so many projects try to get loans against NFTs right and even most of them struggle to do it with the “blue chip” NFTs.

At some point, you have to ask if the middlemen in the current system exist for a reason. Perhaps the system organizes itself in this fashion - repeatedly throughout history - because offers some efficiencies and safeguards that are not worth completely discarding.

Its a flawed system of course. But the crypto system is arguably even worse for 95% of assets on the planet.

[rglullis]

I've repeated my argument already in multiple points of this thread and it's getting tiring. This will be my last attempt at clarifying the view, ok?

> the system organizes itself (...) because it offers some efficiencies and safeguards that are not worth completely discarding.

NO SANE PERSON WANTS TO COMPLETELY DISCARD THE EXISTING SYSTEM!

When the existing system works, it is great. They offer the best balance of cost/efficiency we have. They are not perfect but they are still around for a reason. The fact that established, tried-and-true institutions exist is not the problem. The problem is when the existing systems don't work. When we are dealing with corrupt institutions, or when the system was designed to serve the 95% of the cases and leave the remaining 5% out of it.

Crypto/Web3 is about optionality. It's about creating an alternative that can work without the institutions (even if not as efficiently) because at one point or another the institutions will fail, and we will wish to have something else, even if not as efficient.

You can stay all day talking about all the alternatives that have failed already, and I'd very likely agree with you. This does not mean that the pursuit is futile. Sometimes I think it's akin to the history of flight. 150 years ago, most people would say that flying was impossible. It took decades of varied attempts and approaches until we got to something that resembled the airplane. Today flying is a mundane experience, yet, no one (reasonably) expects to substitute flying for all the other existing methods of transportation.

[puranjay]

Look man I understand your frustration. Check my comment history - I thought this space was revolutionary at first too.

But after 2 years deep in the crypto hole, its very clear to me that there are some serious flaws in the current crypto system that is going to severely limit its growth.

The first is crypto's complete inability to self-regulate itself. You can launch a scam, wait a week, then launch another and people will still ape into it.

The second is the wildly unequal distribution of resources. Latecomers to any party are penalized, but in crypto's case, the penalty is too vast. People who bought Ethereum at $2 or Bitcoin at $10 are going to relentless dump on you when the market unwinds.

No knock on these people who bought early, but if you're going to try and create a newer, fairer system, you can't start with a foundation that's even more unequal than our current one. Anyone who buys into the crypto system in 2022 is already at a massive disadvantage and the system fails to take off. The collapse in prices in bear markets is good indication.

The third is speculators. Again, that's the nature of the market but speculators kill any crypto project. GameFi, for instance, doesn't work because speculators pump up token prices without actually participating in the game, putting actual players at a massive disadvantage. The initial cost for even playing the game become so high that you literally need "scholarships" to play it. And you're forced to play much more than you would just to recoup your initial costs (like with StepN currently - starting capital is like $1k just to buy digital shoes to play).

Crypto works beautifully well if all assets are on-chain. I would love a world where I can fractionalize my home and offer a yield to token holders based on the rental my home generates. But for that to happen, there will have to be some form of "trust on-ramp", and that requires a) regulation, and b) a fairer distribution of starting resources so that new participants aren't penalized that heavily.

Personally, I've also seen very little innovation and actual usage in DeFi. The biggest protocols by TVL are several years old (AAVE, MKR, CRV, COMP). And most of them offer plain vanilla overcollateralized loans. And in bear markets, usage drops drastsically

This is a very promising space but with huge, huge flaws that are killing adoption.

[rglullis]

> I thought this space was revolutionary at first too.

Seems like you don't understand my frustration at all.

I don't care about revolutions. I don't want disruptions. I want alternatives that can (at least) be viable for the current global systems. I want people to have the option to adopt something that can work for their situation without forcing them into a Procrustean Bed. I want to have more tools at the disposal of societies that can help them establish effective checks and balances.

> Personally, I've also seen very little innovation and actual usage.

You know what is funny? The same thing can be said about the Free Software movement. Detractors of FOSS love to point out that most open source projects are just copycats of the then-established projects. Plenty of people (even here very highly skilled people on Hacker News) will say that they have no interest in using Linux on the Desktop because it is not "convenient" for them.

Still, I don't care about the "lack of adoption". I don't need to convert the majority of people in order to have FOSS working for me.