You're still missing the forest for the trees. All of this was created in the last 2-3 years and already it's replicated most of what's in traditional finance. It's the rate of innovation that is important, not the current y-intercept.
Furthermore this is a global system that anyone can contribute to. How hard do you think it is for I as an Australian to build a financial firm that interfaces with Bank of America or the NYSE? It's almost impossible. In DeFi I can spin up my own app in days.
Aave is used for being able to borrow against your crypto assets, so if you need a loan you don't have to sell, this isn't a service any bank offers. You can also just deposit your assets and earn interest on them.
In 2009 most of my colleagues similarly dismissed AWS "Oh it's just some easy storage with a way to spin up servers, big deal. Bare metal is cheaper and easier". It wasn't until most business components were automated that it became an obvious choice.
Now imagine you're starting a new financial firm and want to offer an exchange, options, perpetuals, savings accounts, loans etc. You could build all these pieces yourself for a few million dollars and a few years work. Or you could use DeFi protocols, build a nice easy to use front-end and be up and running in a few months.
>> You're still missing the forest for the trees. All of this was created in the last 2-3 years and already it's replicated most of what's in traditional finance.
Making a copy of an existing technology while repeating every historical mistake on the way is not innovation but rather poor learning ability. It's been 13 years since the advent of blockchain and we are yet to see anything actually useful. Yet all we see is smuggling, money laundering and fraud. With stories like FTX we also see incredible ineptitude, incompetence and ignorance. I am so tired of seeing these same groundless arguments over and over again, especially now, once money got dear and all of the crypto started crashing down.
It's almost as if the "anyone can do it without permission" argument is one of the reasons traditional finance evolved into the regulated system it is today.
TradFi - Anyone can do it without permissions and lie, except regulations force accounting practices, revealing malfeasance.
DeFi - Anyone can do it without permissions, and everyone can see they didn't lie.
Crap-coin FTX Crypto Bros - Let's lie, do "TradFi" and call it "DeFi", comply with no regulations or accounting practices, and steal the Crypto. What could go wrong?
HN low-research "Eternal September" Bros: Told ya Crypto was all a scam, yer dumb!
You're No-true-Scottsman'ing DeFi by excluding FTX after the fact.
I posit there is no way to tell apart the "real" DeFi from the Crap-coins. If you can tell them apart, which tokens and/or exchanges will fail next, and when?
There's a pervasive aura of "secret knowledge" in crypto, where the in-group think of themselves as superior operators who scoff as the noobs get fleeced[1]; yet these suave traders continually fail to recognize peaks and troughs and trade accordingly.
1. Sometimes while trying to scam the noobs themselves. The whole "to the moon"/HODL/meme-stock episode was naked preying on unsophisticated traders/bag-holders
Pretty much everyone credible has been warning people to get off all exchanges, since well, forever. Because you can't (and shouldn't) "trust" someone. If you want to trust someone, go to a bank. This isn't really too much a matter of "secret knowledge", but historical fact. But, hope springs eternal.
And, self-referential Crap Coins (like Luna) are just, well, insane at first glance. Trust-based "Staking" for returns w/ no revenue model? Nuts! But, I've been modelling the behavior of wealth-backed currency systems for 15 years, so maybe it seemed obvious to me. I've been boring people to death with warnings about these for as long as they've existed. Again, this time it's different!
And, the risks to all but the absolutely largest PoW and PoS networks are well known (relatively trivial 51% attack, see OFAC "compliance" disaster). And to "permissioned" networks (XRP, etc.); perfect for CBDCs, for liberty not so much. And the list goes on...
So, spare me the "No True Scottsman" whitewash.
The signs were all there, and the warnings were blaring. Dedicated, competent and highly-funded attackers are at work. Central/commercial banks, Treasuries, etc. cannot abide any fire-exit that is not chained shut, for what's coming.
So, the stakes for attackers are high. The stakes for liberty-valuing citizens: even higher.
I think most reasonable people would agree that desiring the freedom to invest your personal wealth in non-government approved investments isn't "tax evasion, fraud and laundering money".
Investing in small businesses isn't legal because you need to be an accredited investor which only the top 1% of the wealth pyramid qualify for.
It's these kinds of rules to "save people from themselves" that have the bonus effect of the rich gatekeeping the best investments that make a lot of people mad and see the current system as corrupt.
Being able to spend and invest my money how I want should not be a crime.
Maybe unregistered securities is what I want to buy. What gives the government the right to say I'm not allowed to enter into a consensual agreement with someone selling them? Why do I have no way of opting out of these protections unless I'm rich already? Sometimes it feels like I'm explaining water to a fish on here.
> Investing in small businesses isn't legal because you need to be an accredited investor which only the top 1% of the wealth pyramid qualify for.
Whaaaaat? Sorry, but that comment makes no sense. You can buy a share in any small business you want.
You're mistaking this for some types of stock market investments[1], which are made to "save people from themselves", from back in the day before 1929 when access was free for all and hawkers peddling crappy stock brought the entire world economy to a halt by getting the general population to join the stock market casino (slight exaggeration, but not by much).
[1] And guess what, your sister's lemonade stand isn't listed on the NYSE or even on the Romanian BVB :-p
Sounds like you live in the USA right? And probably have a good income?
I tried for years but angel list never accepted me being an investor because of income or nationality restrictions. And other methods of gaining access to silicon valley startups didn't work out.
Now imagine how hard it is for someone in India or Thailand to invest in USA startups.
In crypto I can buy their token in seconds from anywhere in the world, no kyc required, and no middle men taking their cut to custody it for me.
So go invest in something else and make your money there. The income limit is only $200K. I don't understand why you're so fixated on this one thing.
This limitation was put in place for an extremely good reason: to protect people from getting scammed and also to prevent bailouts. A lot of people think they're savvy investors when they're not.
> and forgetting that's not a good thing to most people.
you are living in a bubble to assume that governments are always good and anyone bucking their government is a bad actor. Try to learn more about Venezuela, Iran, Russia, North Korea or Syria. Or even truckers in Canada whose accounts were frozen because of peaceful protests.
At this point, the best thing for crypto would be for someone like Trump to freeze all the finances for some people like BLM protestors. Then perhaps people will get out of "ye subvert yer gubmint? ye traitor..." mindset.
> The rest of this is pure irrational FUD. Democracies are not dictatorships.
Please get your facts straight. This happened in Canada, one of the supposedly best democracies out there
"The Attorney General of Ontario sought and was granted an Ontario Superior Court of Justice court order under Section 490.8 of the Criminal Code of Canada against GiveSendGo,[69] to freeze the funds collected from two campaigns, "Freedom Convoy 2022"—US$8.4 million and "Adopt-a-Trucker"—over $686,000,[73][74] and prohibit their distribution.[72][69] The court order binds "any and all parties with possession or control over these donations".[73] The Mareva injunction was issued on February 17 by Justice Calum MacLeod.[75] GiveSendGo funds go directly to campaign recipients such as The Freedom Convoy campaign, so Canadian banks cannot interfere. The largest donation, which was anonymous, as were six of the other top ten, was US$215,000.[74] The Canadian House of Commons Standing Committee on Finance (FINA) members, who are investigating Freedom Convoy's fundraising, voted on February 10 to include a study of the "rise of ideologically motivated extremism".[74] The FINA Committee invited GiveSendGo to testify.[74]
By February 19, at least 76 bank accounts linked to the protests totalling CA$3.2 million were frozen under the Emergencies Act.[76] Most accounts had been unfrozen by February 23.[77]"
And you're letting your simplistic take on democratic government being "nice" color your own thinking.
Canadian banks and regulators looking into money laundering might be reasonable when carefully permitted by tried legal procedure. A bunch of freely donated money for a peaceful protest of a type with lots of basic precedent being suddenly frozen for blatantly political reasons by pressure from the country's leader is not the same thing. Quite the opposite, it's a small bit of third world tinpot, would-be authoritarianism that has no place in the legal proceedings of a highly developed country like Canada.
We are giving you facts which are pertinent to this thread. Please provide a factual rebuttal of your own rather than claiming "conspiracy", which this is not.
Looking into? Totally fine. Blocking accounts? That crosses the line, which happened in Feb for 4 days. So yeah, if you don't have any reasonable arguments, don't just yell "conspiracy". I am giving you facts with evidence. Please respond with facts.
> Dedicated, competent and highly-funded attackers are at work. Central/commercial banks, Treasuries, etc. cannot abide any fire-exit
First-world tech bros drinking cool-aid and shoveling money by the truckload with zero understanding of finance, and in it just for scams, get rich schemes and money: check.
"It's a coordinated attack by the Big Money and State Actors" whine: also check.
> So, the stakes for attackers are high. The stakes for liberty-valuing citizens: even higher.
Spare us the bullshit.
"DeFi" is literally just currency speculation and flash loans, all of them happening with fantasy tokens. But it's a big circle jerk because blockchain and programs in esoteric programming languages on inefficient esoteric VMs (yes, that's what "smart" "contracts" are).
All of the crypto scams and failures are entirely on those in crypto space. No highly-funded attackers needed. You're busy doing it to yourselves.
> You're No-true-Scottsman'ing DeFi by excluding FTX after the fact.
You are trying to fit the square peg of scam otherwise known as FTX into the round hole of DeFi. It was apparent since the day of its founding that FTX is not DeFi nor trustless.
I've been making more than a few jokes lately that Games Done Quick should have pre-banned categories like "Great Depression-era Wall Street Finance Speed Run ANY%".
This just reinforces my view that the only value crypto provides is evading government financial regulations. Is it actually good that anybody can spin up a new financial firm in a few months with little oversight or regulation?
>Aave is used for being able to borrow against your crypto assets, so if you need a loan you don't have to sell, this isn't a service any bank offers.
Every bank offers this service, unless you're just talking about getting a loan with crypto as collateral.
Have you ever implemented a smart contract? If not, I highly recommend you do so before holding an opinion on blockchains. I've never owned crypto, and I've recommended others to stay away from investing in crypto. Yet, I think the computing platform has a lot of promise. Implementing a smart contract for fun helped me see why.
The block-chain can be thought of as cryptographically secure state. That is, everyone agrees on the state of the blockchain and no one can modify it save for modifications in accordance with the "rules". A smart contract can be thought of as a cryptographically secure program, i.e. it cannot be modified. So you have cryptographically secure inputs (the blockchain), and a cryptographically secure program (the smart contract), which means the output is also guaranteed to be cryptographically secure. That is quite a strong premise. You can give your program to anyone and they can execute it for you without you needing to worry about nefarious modifications. This level of trust allows for the creation of a global computing platform. Software authors need only to bring their program and can have it executed on-demand without needing to maintain their own infrastructure. That is quite an innovation.
Of course, in its current form, this "global computing platform" is actually pretty shitty. It is prohibitively expensive to store / operate on a lot of data. However, crypto-currencies are there first viable "apps" built on this platform. If you think about it a crypto-currency is basically a very primitive program that stores a series of transactions as two addresses and an amount. The total amount of data per transaction is tiny. And yet, just by operating on this tiny amount of data you can basically implement the entire financial system: currency, stocks, bonds, options, etc.
We're basically in the dot-com bubble for crypto. People are starting to realize that this new computing platform is cool and has a lot of potential, just as many realized the computers and the internet were cool in the late 90s. Yet, just like in the 90s, the tech sucks and isn't good enough to bring much of anything valuable to the market.
I feel like I've heard this argument a lot over the last decade or so: it's early days, the valuable stuff is yet to come.
I've gone through about three phases of opinions on crypto:
1. "Blockchain is an interesting primitive that you could probably build something neat (besides a cryptocurrency) out of! I can't think of anything good off the top of my head, but I look forward to seeing what valuable thing people come up with."
2. Smart Contracts are an interesting primitive that you could probably build something neat (besides rebuilding existing finance tools without regulation) out of! I can't think of anything good off the top of my head, but I look forward to seeing what valuable thing people come up with.
3. NFTs are an interesting primitive that you could probably build something neat (besides speculative digital assets) out of! I can't think of anything good off the top of my head, but I look forward to seeing what valuable thing people come up with.
In each case, the tech looks like a neat idea, but I continue to wait for the actually valuable use-case to emerge. At this point, I'm starting to just pattern-match all crypto to "unlikely to provide real value ever."
> A smart contract can be thought of as a cryptographically secure program, i.e. it cannot be modified. So you have cryptographically secure inputs (the blockchain), and a cryptographically secure program (the smart contract), which means the output is also guaranteed to be cryptographically secure.
The output is not guaranteed to be correct, what you intended, or even what you agreed to. Even the most trivial computer programme can have unexpected properties.
No, the output is guaranteed to be correct. Correct, as in what you specified in the contract, which may not be what you had intended, but that’s besides the point. Can you explain how the output would differ from the contract specification?
"The code does what it does" is not a useful statement; insisting that a smart contract is an executable specification is not helpful unless there's a really very small semantic step from how the user intentions are formed - which again is not the case here.
I think you’re moving the goal post. As I mentioned in my original post, smart contracts allow for the creation of a global computing platform we call a blockchain. Maybe you want formal verification, but not everyone cares about that.
Yes, the output is guaranteed to be correct. Let’s say you give me a program and ask me to run it for you. Can you guarantee that I won’t tamper with the executable? No you can’t. You can’t trust the output of an arbitrary program you give me to run. The only way you could trust my result would be to run the program yourself and verify I provided you the correct output. If you run the program yourself, then what’s the point of paying me to run your code? With a smart contract, you can trust the output. That’s the difference.
This brings me back to my main point. You clearly have not implemented a smart contact and have misconceptions about what it does. I suggest you implement one first. You can still think the idea is stupid afterwards. That’s fine. But right now, it seems like you are arguing about how you think the blockchain works, which doesn’t necessarily match how it actually works.
If your point is that the EVM byte-code that's deployed to the blockchain is immutable and that transactions which don't agree with the results of executing code will be rejected, yes, that is a true statement.
I think what everyone is quibbling with is the assertion that this is the same as "correctness", which is (by and large) considered a different property that relates user expectations to actual runtime behavior.
Sorry but that’s a total straw man. Yes, if you redefine the words I used then you can make any argument you want.
In CS, correctness means with “behaves in a consistent manner with respect to a specification”. The smart contract is the specification, so yes the output of the smart contract is guaranteed to be correct with respect to the specification. Of course, there can always be be errors in the specification. If you have another definition of “correct”, let me know.
I'm not the one redefining words here: you've redefined "code" as "specification".
Canonically, within the industrial context, there are two processes for achieving compliance of implementation with specification ("correctness"). The first is testing, the second is formal verification. In either case, you need an artifact at a higher level of abstraction (the specification) and one at a lower level (the implementation).
In testing, someone who has access to the specification can evaluate the dynamic behavior of the implementation and determine whether it matches. In formal verification, you can do the same by static analysis and proof.
If you say "the code is the specification" then correctness becomes completely vacuous. The code is correct because it runs. Great. So what? If the implementation results in behavior that is completely unintended by the author (e.g. your smart contract contains a re-entrancy problem: a notorious source of bugs, or isn't robust to EVM stack exhaustion) and you still want to claim it's "correct" then I just don't know what to suggest - we're never going to agree, and I don't think your usage is anything like standard.
Ok fair. But you can formally verify your smart contracts or you can test them, so this notion of "correctness" seems orthogonal to the discussion. Even if you formally verify a normal application, you can't trust your verification once you give it to me to execute.
I think there's one other aspect here that needs to be considered, which is what happens when undocumented features appear, as with the Polkadot fiasco, among others, where bugs in the shared walletsplus some thirs party actions used by many led to $hundreds of millions being completely inaccessible to all (ineptness, or malice, it is not clear).
The contracts were verifiable and correct enough, it seems, but some of the infrastructure turned out to be faulty, leading to a platform that was not trustworthy.
Then almost by definition I can't really trust your smart contract, except for airtight formal verification, which nobody really does plus I highly doubt smart contract programming languages are formal verification languages.
So this:
> Yes, the output is guaranteed to be correct.
is provably wrong and you either know it and are malicious or you don't know it and this discussion is useless.
I think we're talking about two different things. Imagine you have a generic program A that you've formally verified. Now you ask me to execute it for you. I say: "ok, the output of the program is X." Can you trust the output? No, you cannot trust the output even though you've formally verified the program. If you formally verify the smart contract, you can trust the output.
Contracts are agreements between legal entities, human and non-human.
"Smart" contracts in it's current form allows for automatic execution between parties, where one or both parties can be another SC. I would put them im the juridical person or non-human camp legally speaking. This property can generate quite an advanced exexutiom through cascadation effect with a lot of deployed SC on the blockchain and is publicly auditable by anyone and will be audited by a lot of people if a huge amount of financial stake is present.
I personally see an immense upside in this approach rather then current contract law in TradFi, based solely on promises and insurance to customer front.
IMO one such deployed contract does indeed not make it smart but an inter-connected network of them can generate systems that can be indeed called smart.
May as well say "that's why software isn't useful" which obviously isn't true.
Most contracts end in the happy case 99% of the time, it seems very worthwhile to automate that happy case and fall back to the traditional legal system in the failure case where either party isn't happy with the outcome.
I think you’re conflating legal contracts and smart contracts. Legal contracts are instruments used by two or more parties that outlines their responsibilities to one another in a way that is protected by civil law. A smart contract is just a program that runs on the blockchain.
Do you see how the name "smart contract" makes no sense? They aren't smart. In fact, they are obviously dumb. They do what the code says. They aren't a contract in the legal sense. Smart contracts are neither smart, nor contracts.
So we’ve gone from debating the technical merits to debating the name?
The name likely comes from options contracts, which are technically contracts but traded like equities. Most options are very simple tuple: (equity, strike price, call / put). The smart in smart contract can mean writing a smarter option contract.
In my experience, virtually all kinds of substantially useful smart contracts depend on observing or modifying the world outside of the blockchain, which means you have the oracle problem, or you have the side effect problem.
Not entirely coincidentally, aside from plain faulty implementations and operational security failings, these two problems represent the ways most successful attacks on smart contracts are accomplished.
Smart contracts are useless and will always be useless for two reasons:
1. It is impossible to write code that always works exactly how you want, all of the time, forever.
2. Law exists. The legal system exists. The moment you have a problem with a smart contract, it's going to court.
You might as well save yourselves the time, expense, hassle and potential embarrassment by just going to a lawyer in the first place and having them draft a contract.
On regulations: FTX and SBF were the main proponents of regulations. Not because it solves anything, but because it eliminates a competition and for them it gave more freedom to do a fraud. So I'm not sure it's always a good thing.
On loans: Give me a bank that can loan me $100M without even asking for an ID? Without a collateral, of course. Like Aave Flashloan provides on blockchain.
It's great for levelling the playing field of finance. In traditional finance only the most capitalised players are able to do small arbitrage opportunities, and many firms make billions of dollars this way. In DeFi anyone can take advantage of them using flash loans.
> How hard do you think it is for I as an Australian to build a financial firm that interfaces with Bank of America or the NYSE? It's almost impossible. In DeFi I can spin up my own app in days
This sounds nice in theory, but aren't most of the guard rails of the financial institutions for complying with government regulation? If anyone could interface with these companies then it would be too easy for abuse. USG is not going to let that happen, which is why these DeFi applications will be limited to unregulated cryptocurrencies where the user will have to trust the "bank" that has no Federal Reserve backing.
> Aave is used for being able to borrow against your crypto assets... You can also just deposit your assets and earn interest on them.
Why would any crypto supporter want to hold their decentralized currency in a centralized exchange after the FTX fiasco
> if you need a loan you don't have to sell, this isn't a service any bank offers
I mean, the bank will make sure you aren’t North Korea first. Which crypto will not. So that’s a plus, if you’re North Korea. (Collateralised lending is incredibly commonplace in finance, including against crypto.)
Permissionless means hizbulla or the Syrian regime can make revenue generating financial products just as easily as an Australian. As long as there is conflict (forever), permissionless systems will not be embraced by the global powers. There is potential for lower permissions within some sort of financial sandbox where there’s strong controls at the entrance to the system and strong auditing and logging within the system, but there’s no potential for a global permissionless system.
That's unclear. From a game theory perspective you don't want to be the government that stifles your country by restricting access to a financial system everyone else adopts, so I think many are waiting to see how that plays out.
This sort of nonsense thinking is exactly why governments have been such a soft touch and allowed scam after fraud after Ponzi after rug-pull to bloom.
Fingers crossed that sort of time is over and the cryptocurrency space can be made to comply with regulations or be cut off from on-ramps.
Furthermore this is a global system that anyone can contribute to. How hard do you think it is for I as an Australian to build a financial firm that interfaces with Bank of America or the NYSE? It's almost impossible. In DeFi I can spin up my own app in days.
Aave is used for being able to borrow against your crypto assets, so if you need a loan you don't have to sell, this isn't a service any bank offers. You can also just deposit your assets and earn interest on them.
In 2009 most of my colleagues similarly dismissed AWS "Oh it's just some easy storage with a way to spin up servers, big deal. Bare metal is cheaper and easier". It wasn't until most business components were automated that it became an obvious choice.
Now imagine you're starting a new financial firm and want to offer an exchange, options, perpetuals, savings accounts, loans etc. You could build all these pieces yourself for a few million dollars and a few years work. Or you could use DeFi protocols, build a nice easy to use front-end and be up and running in a few months.