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Title: Liquidity Pools Sound Similar To Fractional Reserve Banking. Are They? Post by: topshelfcrypto on September 06, 2020, 07:45:02 PM I just read this article from CoinDesk to try to learn about yield farming. (good articel btw) ...
https://www.coindesk.com/defi-yield-farming-comp-token-explained When I came to the following quote ... Quote On Uniswap, there is at least one market pair for almost any token on Ethereum. Behind the scenes, this means Uniswap can make it look like it is making a direct trade for any two tokens, which makes it easy for users, but it’s all built around pools of two tokens. And all these market pairs work better with bigger pools. ... and found myself thinking, hmm, that sounds suspiciously like some kind of fractional reserve banking. Then thought, nahhh.... Then I read ... Quote If there were a run on Compound, users could find themselves unable to withdraw their funds when they wanted. and ... Quote It’s possible to lend to Compound, borrow from it, deposit what you borrowed and so on. This can be done multiple times ... and ... Quote And weird things have arisen. For example, there’s currently more DAI on Compound than have been minted in the world. ... then I was like, yeahhhh ... And this ... Quote In a simple example, a yield farmer might put 100,000 USDT into Compound. They will get a token back for that stake, called cUSDT. Let’s say they get 100,000 cUSDT back ... They can then take that cUSDT and put it into a liquidity pool that takes cUSDT on Balancer, an AMM that allows users to set up self-rebalancing crypto index funds. ... sounds like trading derivatives Title: Re: Liquidity Pools Sound Similar To Fractional Reserve Banking. Are They? Post by: topshelfcrypto on September 06, 2020, 07:47:58 PM Note to mods: Not sure if I posted this in the best section, please feel free to move it if you wish.
Title: Re: Liquidity Pools Sound Similar To Fractional Reserve Banking. Are They? Post by: topshelfcrypto on September 08, 2020, 08:15:06 PM Bump. This is an important question. Bitcoin was supposedly invented to circumvent the traditional banking system. Now it appears some part of crypto is following in the old path of unsound money. Anyone?
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