[TimJRobinson]

Most of crypto is used in Decentralized Finance, basically an open source version of the activities done on Wall Street. Very little is used for everyday goods (and you're right, why bother when credit cards give much better rewards)

Have you bought options with your credit card? Borrowed money against collateral? Purchased and collected revenue rights to music? Traded oil futures?

These are the kinds of things I'm doing frequently on Ethereum.

[knorker]

All of those things have better protection in traditional finance. Sure, they don't have credit card consumer protection, but they do have other protections.

Unless you're using blockchain financial instruments in order to do more blockchain stuff (the circular use case), the other options are better.

Trading oil futures doesn't need cryptocurrencies. And if you use it anyway then you expose yourself to additional risk not in traditional finance.

E.g. the difference between FTX shenanigans hurting investors (who are now being victim blamed for "not your keys, not your coin") and anyone financially reliant on Tether shenanigans (which includes all holders of BTC) is that Tether seems to be getting away with it, by so far not being subject to a liquidity check / bank run.

[TimJRobinson]

You can still always fall back to the government if disagreements occur. The advantage of smart contracts is they automate away the need for costly lawyers in the good case (which is most of the time). You don't need to pay so much overhead for "protection".

The benefit an open finance platform provides is you don't have to have some blessed middleman that conducts the trades or holds money. There are a LOT of these middlemen in finance and many of them are rent seekers abusing laws to their advantage, and working to add more laws to entrench their company as "part of the system".

Then there is the problem of bigger players using their power to "change the terms of the deal" and force smaller players to comply or spend years in court challenging them. When the terms are coded ahead of time and the platform is neutral there is no entity they can corrupt to get their way and the contract executes as specified.

Lastly these systems are transparent, anyone can monitor and report on companies doing dodgy things, rather than a few overworked government bureaucrats. It also makes everything composable with everything else, anyone can build their own Bloomberg terminal equivalent, which is amazing.

FTX isn't DeFi BTW, they were an unregulated opaque trading firm. They are exactly what is wrong with finance.

[knorker]

> You can still always fall back to the government if disagreements occur.

Does the government have an override mechanism on the blockchain? If yes then what was the point of blockchain. If no, then will the government fork the blockchain?

Does the government just put someone in prison until they give up the keys? Most countries don't have true "life in prison", and what are the implications for the wrongly convicted in the ones that do?

How would you invalidate an illegal smart contract where one party is the estate of someone who died, are in a coma, or gets put under conservatorship?

> The advantage of smart contracts is they automate away the need for costly lawyers in the good case (which is most of the time). You don't need to pay so much overhead for "protection".

Most of lawyer work is clarifying intent, and legal compliance. Smart contracts try to replace the former with coders, but without a common sense safety net. And without the knowledge about what contracts are even legal. As for compliance, that's still needed.

E.g. writing a smart contract to pay someone automatically needs to support garnishing a salary due to various court actions.

What lawyer work exactly becomes automated? Do you know lawyers, and what they spend time on? Every example of smart contracts seem to me to be incredibly arrogant, and even more ignorant about what lawyers do.

It has a smell of "I don't know what they do, which means it can't be hard. I can write a twitter clone in a weekend, so surely I can write a script to replace a lawyer".

You can write a "bucket shop" web app over a weekend, but you need a lawyer to tell you it's illegal, or under which circumstances it's illegal. That's the real "protection".

I mentioned FTX and Tether to point out that the industry is built on a house of cards. E.g. if Tether implodes then that affects your BTC. I'd say it's more likely that Tether implodes than that the US government implodes.