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Current State of Defi Nonsense

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Written by   41
4 months ago

I've taken a look at DeFi lately. The lending part at least which has dominated the interest of everyone.

I concluded that DeFi is similar to Ponzi schemes and offers nothing at all. It produces nothing and probably going to collapse massively.

Lending with crypto collaterals and claiming that these smart contracts offer financial freedom from banks. No trust scores, everyone can borrow. For sure.

1st Red Flag: What exactly do you use as collateral to lend money? Other money (crypto) that is easily liquidatable into USD.

2nd Red Flag: Promise of high returns (yields).

3rd Red Flag: Twitter accounts as this:

4th Red Flag: Extremely complicated products and interconnected platforms. One goes wrong all will go down together.

5th Red Flag: The 4th Red Flag already happened and many victims lost money back in January.

What is DeFi in reality: We lend crypto with another crypto as collateral, to borrow more crypto and then lend that crypto again. And we have YouTubers telling us how we are missing out on this financial revolution. How is this any different from Bitconnect? Similar patterns. They were claiming to be a lending platform as well.

What is Lending in reality: Capital required by a business trying to expand its activities and produce more to cover the real needs of a community, nation, or the world's population.

Hopefully, all those that are farming yield won't be reaping loss soon.

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Avatar for zenthereum
Written by   41
4 months ago
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Comments

Excellent article. Personally I haven't even sunk my feet into DeFi, mostly because of your flag #4. All these weird hacks that happen in a few seconds (a guy loaned that there, then it took it as a collateral on this, then triggered this, then everything collapsed) makes me go 🤦‍♂️

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4 months ago

Thanks! I hope nothing happens and people don't lose their money again. I hope I'm wrong and everything works out. DeFi is presented as an unparalleled opportunity but there are real dangers that should be discussed as well.

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4 months ago

Oh it will happen again. The same problem with read.cash - every time you have rules written out in detail - people will find a way to screw them :)

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4 months ago