Bitcoin

Is DeFi Really a Threat to Centralized Funding ?, Mar 14-21 October

There were no moments worthy of euphoria this week. The DeFi ecosystem is still cooling down.

I think the biggest sign of that is Uniswap’s trading volume. After peaking at just under $ 1 billion a day in early September, these numbers have steadily declined.

Courtesy of the elegant blackboard from Uniswap.

But despite the downtrend, I think even the current level goes well beyond any DeFi fan’s wildest dream in 2019. For reference, these numbers are roughly on par with Bitstamp or Bitfinex (although, as I write this, the volume of these numbers appears to have skyrocketed on PayPal messages).

Is DeFi Really a Threat to Centralized Funding ?, Mar 14-21 October
Is DeFi Really a Threat to Centralized Funding ?, Mar 14-21 October

This analysis of a I noticed the questioning of central exchange operators. What You say is that they are not afraid of DeFi, However, the author of the article argues that his actions betray his true beliefs. Given the large number of platforms “CeDeFi”, We can definitely see that the most powerful exchanges have bachelor degrees in co-opting.

Should CeFi employees be afraid of DeFi?

Well I think you should be concerned but not be afraid of it. DeFi as it exists now repeats in many ways what this exchange is already doing. Uniswap is a breeze but then you have things like Compound and Aave which are mostly used as I and many others believe for leveraged trading.

That’s all you can do with an over-secured loan that is backed by a short-lived asset (as opposed to a home or car). Perhaps some of the richest whales could use these loans for more tax efficient use of their money without losing their cryptocurrencies. But even that is still some form of leverage. You lose more when they go down than if you just sell the part you need to cover the cost.

And of course you can do all of these things with CeFi, you just might have to go through the annoying KYC to do it. In this sense, DeFi always has an advantage. It’s a more immediate and uncensored user experience as long as you have your wallet configured.

There are also fundamental design problems. Automated market makers like Uniswap or Curve will never really replace the exchange of order books because they cannot evaluate things “correctly” themselves. Of course, an exchange of order books does not have to be centralized, but we are still a long way from taking over platforms such as Serum or Loopring en masse.

I talked about this at length in my article on DEXsand I share the general judgment of Matthew Finestone of Loopring: Centralized exchanges definitely remain for those who wants full regulationFor example institutions and gateways for fiat money.

Such a scenario leaves a sizable piece of cake for centralized venues.

Uniswap’s epic governance failure

The governance vote led by Dharma to reduce the voting quorum at Uniswap failed … because he has not achieved a quorum.

The strangest thing about this story is that every sane person looks at it and says: “But he reached a quorum!”

The final count is 39,596,759 UNI for against 696,857 UNI against, which is a little more than the required 40 million. Except that Uniswap (and Compound) for some reason Think of “quorum” as “how many people voted for it”. The generally accepted definition takes into account all votes, regardless of the form in which they were cast.

In order to, Why did this error occur? Is it a coincidence that the vote took place according to the standard definition of a quorum?

I have serious doubts about it. Even some in the Community suggest that people actually thought they were hit. The logic is that there is no point in adding more votes once the threshold is reached, as it costs gas and labor to collect voters.

Perhaps the vote really missed a haircut because it couldn’t muster the support it needed from the community.

But I wouldn’t be surprised to learn that someone in the Dharma screwed up all of that.

Another day, another FOMO in the Cronje tests

At this point I’m not even sure what to say anymore, but the founder of Yearn Finance, Andre Cronje was again “the cause” of some people losing money on a pump and dump program. (Note: Cronje was not involved.)

This time it was Keep3r, a kind of independent platform for developer operations, a generic term for the maintenance of a technical infrastructure. Things like calling up a smart contract or something complicated about implementing a smart contract.

His token KPR was listed again on Uniswap by people who discovered the contract. I know a guy who joined in the fun and apparently made money doing it, obviously at the expense of others who are not so happy. This time the scale pale in comparison to things like Eminence as only a few thousand dollars were recorded in volume.

Obviously, this wasn’t even the final version of the project for the day. In this way Cronje tests its software and runs through the code in the mainnet. exist Dozens of Yearns contracts or YFI tokens on Ethereum, as previously announced.

As I mentioned last week that really has nothing to do with Cronje. There is simply no way he can more firmly deny that people shouldn’t invest their money in these contracts and the losses are simply due to the games these people are playing on Uniswap.

There was a literal Ponzi contract that a guy got into once and people were putting money into it. This is probably just a crypto.

Temporary damage insurance

Bancor has released V2.1 of its exchange, This basically discards one of the key components from the previous version. It used to be that the exchange used oracles to read market prices so that liquidity providers would not suffer temporary losses (also known as divergence losses, as money is lost when two assets in a group diverge in price).

It turned out that this didn’t work. The oracles are too slow to update, so they can be started over Bancor has accepted the harsh reality: you cannot fix a temporary loss.

Automated market maker developers seem to conclude that There is no general solution to this problem. There is always a tradeoff or disadvantage.

With that in mind, there is a perfectly functioning way to reduce temporary losses for Uniswap’s liquidity providers. Basically The idea is that by providing liquidity, they have a “short volatility” position, which means they lose when volatility is high and make more money on commissions when volatility stays low.

It is worth noting that I am talking about the concept of volatility as commonly seen in options markets, which is made up of decisive movements in a particular direction, contrary to what most people associate with the term. That’s how “nervous” the price is.

Hence, you can easily protect yourself against temporary losses Opening a position with “long volatility”: Buying an appropriate number of call and put options and refinancing these options after they have expired.

You pay a premium, but your temporary loss must be fully covered.

Maybe I lost you with this conversation about options. The good news, however, is that Bancor has put in place a pretty similar mechanism for temporary property insurance. The costs are borne by BNT owners through elegant coin and burning mechanisms. Thus, liquidity providers in certain pairs can be sure that they will always make money if they hold the pool token long enough.

Hopefully more automated market makers will take a similar approach where the cost of improper losses is simply shifted elsewhere. In fact, I strongly suspect that the next Uniswap V3 will offer something like this.

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