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Give a man a gun and he'll rob a bank... Give a man a bank and he'll rob everyone

Родители постоянно выбивали из меня дурь – но я всегда знал, где достать еще!

My new article published on stealthex.io. Share your thoughts and ideas below (but please avoid overquoting at all costs)

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Decentralized Finance (DeFi) can be rightfully considered a third revolution in the crypto space. If you wonder what the first two are, these are the invention of blockchain itself along with the technology's firstborn, Bitcoin, and the inception of the smart contract tech. Just like blockchain provides the basis for smart contracts, the latter give rise to DeFi. It is often said that smart contracts are poised to revolutionize the ways both humans and organizations interact in their contractual relationships. In this sense, DeFi is the stage where these relationships are set to emerge and develop. With a bigger picture in mind, it is the world that the blockchain technology lays the foundation for, while smart contracts help to build it. Why we need DeFi, how it is possible, what makes it tick and click are the main themes of this article.

But seriously, why do we need it?

As most financial services in existence today are provided by or involve third parties, for example, banks, exchanges, investment companies, insurance agencies etc, DeFi is an attempt to build an alternative environment, an ecosystem of applications offering the same set of services but now powered by public blockchain networks in a decentralized, transparent and permissionless way. By and large, the basic idea that guides DeFi is essentially the same ethos that drives innovation with crypto as such, but at an entirely different level.

Just like cryptocurrencies try to wrest the state supremacy over money from the hands of rogue governments and central banks, DeFi takes it further and aims higher. With DeFi, it is no longer a matter of creating a coin in an effort to replace fiat money, which mostly doesn’t work anyway. However, building a whole new domain of financial services available fairly and squarely to anyone, with full control over the assets but without corrupt governments and greedy intermediaries sticking around, may pan out better after all.

So, answering the question posed at the beginning of this section, we need DeFi for basically the same reasons we need cryptocurrencies. Or, put differently, if we need cryptocurrencies, an assumption that has been proved indisputable, it is inevitable as well that we will sooner or later become interested in decentralized financial services powered by these cryptocurrencies through smart contract blockchains. We can’t just create Bitcoin and say that’ll do. It is a natural development, a Maslow's hierarchy of needs, in a sense.

How is it ever possible?

As mentioned in the introduction, DeFi emerges thanks to smart contract tech and decentralized applications (or simply dApps) running them. So how does it work in practice? To better understand the idea, let’s take a closer look at a relatively simple example of a decentralized crypto-backed stablecoin which can be created through a smart contract. Stablecoins are coins whose value is pegged to a stable asset such as a commodity like gold or a fiat currency like the US dollar.

There are a few different types of stablecoins that exist in the wild. For the purpose of this exposition, we are interested in crypto-backed stablecoins. Like stablecoins collateralized by fiat, these stablecoins use cryptocurrencies as collateral. However, the key difference is that a fiat-based stablecoin is pegged to the fiat currency which is backing it up. Kinda obvious. A crypto-backed stablecoin, on the other hand, is pegged to one asset, say, the American dollar, but backed up by a completely different one, for example, Ether. Things get tricky.

A crypto-collateralized stablecoin is possible through the magic and the beauty of the smart contract governing it. If the price of such a stablecoin rises above its peg, or parity, you can create more stablecoins and sell them at a premium. If the price of the stablecoin falls below parity, you can buy stablecoins and liquidate them at a discount. If the collateral itself crashes, undercollateralized stablecoins will be liquidated with their collateral now backing up fewer stablecoins. As a result, the price always gets pushed back to parity.

And all this rather complicated stuff is done on the blockchain in a decentralized and automatic fashion with no banks or other third parties involved. Consequently, more services are easily possible too. And quite a few at that.

Okay, what decentralized financial services are available?

Well, one such service we have just described above. Cryptocurrencies are infamous for being extremely volatile, and stablecoins are designed to deal with this issue. There are many stablecoins out there like Tether, TrueUSD, or Gemini Coin, but they are all based on trusting third parties. Easily one of the best known crypto-backed stablecoins is MakerDAO’s DAI, which is pegged against the US dollar with a basket of crypto-assets as collateral in a truly decentralized and trustless way, that is, a blockchain way.

Crypto-based stablecoins can be used on their own by offering a hedge against the price volatility of such popular cryptocurrencies as Ether or Bitcoin. Aside from that, they are also instrumental in other DeFi services, for example, in decentralized exchanges like IDEX or BiKi.com. With stablecoins, it becomes possible to create fiat trading pairs in addition to crypto ones in entirely decentralized, non-custodial trading environments as opposed to centralized exchanges like Bitfinex or Binance, which are vulnerable to high-profile hacks and personal data leaks.

Unlike MakerDAO, Ampleforth doesn’t strive to create a rock-solid stablecoin. Instead, it comes up with the notion of “adaptive money built on sound economics”, with its mission stretching out as far as to marry “the scarcity of Bitcoin with the elasticity of fiat”. It tries to go beyond the relatively simple concept of a stablecoin and brings forth the idea of elastic money supply that can expand and contract depending on market demands, as well as allow the creation of a valid form of collateral for DeFi based on that idea.

Obviously, DeFi is not just about stablecoins or the financial services using them. Blockchain-based borrowing and lending is another important DeFi arena. With platforms like Compound, dYdX, Dharma, you can deposit your crypto assets to either earn interest on them or use these assets as collateral for borrowing. Smart contracts automatically match borrowers and lenders, offering dynamic interest rates based on supply and demand. And with tools like LoanScan, you can also easily shop around for the best interest rates on the block.

These examples are far from exhaustive, of course, as the space is rapidly expanding and evolving. However, there are some fundamental issues that put grit into the wheels of the DeFi war machine.

So where’s the catch?

There are many advantages of DeFi, but to be of any practical use, it needs up-to-date information that would be reliable and authentic. Smart contracts that DeFi is based on are hopelessly on-chain, but the data they need for processing is mostly off-chain. Without a bridge to close this gap between a smart contract and its source of external information, smart contracts are entrapped in closed-off dungeons of their blockchains. To be sure, no crypto-based stablecoin is going to work correctly without a real-time price feed for the assets taken as its collateral and used for maintaining the peg.

To get around this roadblock, a concept of blockchain oracles has been suggested. But as the chain cannot be stronger than its weakest link, blockchain oracles seem to be that weak link in the field of DeFi and beyond as obtaining information in a verifiable way can be an intimidating task. What approaches dApps are taking to procure and verify sources of truth in the external world is the topic of our upcoming article about blockchain oracles. Stay with us and stay tuned!

Сучки могут стать украшением любого проекта

Expect local windbags to declare you a troll, for even admitting such a possibility

Well, I'm not entitled to disclose any information but expect more to come

Other than that, you evidently refer to relative profits, in more mundane terms, as expressed as %%. However, even if technically you are correct (in this relative frame of reference), your profits in absolute terms may still amount to something worthy setting it up. For example, if you invest 1k dollars and are able to make, say, 30-50 dollars a month, I still consider it a good result. Another question, though, is how long a casino will let you get away with it. This is basically the only objection or opposition to martingale irrespective of its specific implementation

And why is it so small?

Right, because all those sovereign wealth fund and pension managers cannot invest in cryptocurrencies as their investment declarations don't list crypto as a legitimate asset for investment. Aside from that, you wouldn't really want your pension money invested in a speculative asset with nearly zero real life use. From their point of view (and it is not very far from how things stand in practice), crypto is just one big casino. Would you play with your life savings in a casino? Even if you would, most people wouldn't

This has never been the case

Moreover, as past Bitcoin rallies indisputably prove, when Bitcoin becomes too expensive, people start to fix profits and sell it in order to invest in altcoins instead. This is what many experienced traders have noticed, For example, Michael van de Poppe, who is a full-time daytrader at the Amsterdam Stock Exchange, says that people should look into altcoins as Bitcoin moves to sideways action:


If you were following the markets for at least a couple of years, you would know that even without de Poppe telling you so. People start to dump altcoins when Bitcoin plummets, to buy it cheap while they can. And it plays out in reverse as well

You can't expect a President who has slept with porn stars to care about infectious diseases

People don't see the forest for the trees

If there is no effective demand, i.e. no demand backed by the ability to pay, this automation doesn't make sense. Okay, you can lay off thousands of people, but who will be buying your goods and services if most people are now unemployed? One way or another, the society will readjust, some fields will disappear (like accounting) and new fields will necessarily emerge to support all this extra production. It is a natural process, and if you are willing to learn throughout your entire life, you should actually welcome these new developments as they open new opportunities. Just don't sit on your hands

You are overgeneralizing here

Martingale is useless with Bitcoin (the point which I always try to emphasize), but there are other coins. and the best among them is Dogecoin. Or why do you think it has become a coin of choice for generations of cryptocurrency gamblers (if I can say so)? In any decent casino you can start rolling with as small as 0.00000001 DOGE. How much is it in dollars? I don't know but should very little, given that 1 DOGE is worth around 0.0035$. And how many bets should you make till the amount begins to give you jitters? A lot!

All of that assumes that the hacker was an outsider

But if it was an insider job or not a hack at all, 400M as a reward can be another little shenanigan on the Bitfinex part. The reward is too good to be true, honestly speaking, unless they have something else up their sleeve. Indeed, they won't tell what they are trying to achieve with this. However, why did they wait 4 years? For the dust to settle and cover up some touchy spots?

Reaching back to my earlier post, WHO spokesman Christian Lindmeier said:


He also said that countries should definitely follow "general guidelines, regulations, and rules on how to deal with the safe development of vaccines" to confirm that the vaccine is actually working and has no dangerous side effects

So much for new vaccine

I'm not sure what you mean by debatable

But it seems that you refer to squashing volatility into, say, single digits. This is possible if Bitcoin's value (or value of any cryptocurrency, for that matter) is determined not through currency exchanges (like now) but in real markets (like in a proverbial grocery store) where you can buy things with it and sell them for it. In this manner, people will have a solid frame of reference, i.e. they will know what one bitcoin is actually worth in real terms. Only in this capacity, i.e. Bitcoin as a real currency, it won't be as volatile as hell

It is impossible to make Bitcoin stable through currency exchanges

As you notice correctly, some billionaire can easily manipulate the prices of the whole cryptocurrency market (in fact, manipulating Bitcoin alone will suffice for most practical purposes). So are we stuck in an endless self-enforcing and self-sustaining volatility and manipulation loop? A short answer is, there's no definitive answer. A longer one is, it depends of further developments

On the one hand, if Bitcoin remains only an asset for speculative gains (which it is at the moment), manipulation along with volatility is not going anywhere. On the other, however, if most bitcoins are used as a currency (like fiat), market manipulation will become prohibitively expensive as no one will be selling coins below their true value and no one buying above that value as determined by circulation and the entirety of goods and services which can be bought with it

Which games are you talking about?

The last time I checked, which was right now, they only had two games, and those are dice and HiLo. I can't actually imagine how anyone wouldn't be able to understand dice. Regarding HiLo, I don't understand it either, so it is definitely not a big deal (read, you are not alone in your blissful ignorance)

With these coins it doesn't matter whether the market is bullish or bearish

Newcomers are set to fail just for the fact they are newcomers. Their only chance to reap profits with such coins is through luck alone. More generally, you can't actually ask them to be wise as the process which makes one wise is essentially the same process which turns one from a newcomer into a seasoned and experienced trader

Today's situation has nothing in common with 1929

If we were back in 1929 but with a current financial system based on fiat money, the Great Depression wouldn't even start. The government would simply pour as much money as needed into the economy as it did in 2008 and is doing right now. Understandably, you don't like it (rather, you don't like the situation that is being resolved in this way). However, you don't know how bad things might be if the events of 1929 and later were really back for real

You can safely discard both

The Chinese one won't be effective, Russians are selling another pig in a poke. Seriously, it is not yet quite clear how the virus is working, and they already come up with vaccines. But you can mark this post and return to it in two months. And still better in a year to see how things really are now