1/ Stablecoin panel @ #devcon5 with @MakerDAO @paradigm and @rDAI_dao
A thread on #DeFi risks and opportunities (not investment or legal advice)👇
2/ DeFi has many risks. Smart contract bugs, interdependencies across platforms (ie Compound, Maker, InstaDApp), centralized oracles and blurred lines between collateral types (USDC ! Censorship resistant)
3/ But #DeFi is an elegant system where assumptions and activity live onchain. This perfect information collapses information asymmetries and reduces principal agent problems. We can also price risk better. It incentivizes market participants to keep the system in check.
4/ The novelty of Maker protocol is that anyone can trade in collateral (ETH or multi collateral soon) for a stablecoin (Dai) pegged to the US dollar. The protocol has built in game theoretical mechanisms that incentivize market participants to keep the system stable.
5/ Open finance is in a hobbyists phase but won’t remain here for long. Innovation feels gradual until it’s explosive and goes mainstream. A few drivers that help us get there: better gateways and onramps (@argentHQ, Libra), fixed loans (Y Protocol) & roboadvisors (@SetProtocol)
6/ Last it’s important to put things in perspective. For the first time ever we have an open, permissionless and transparent financial system. If you’ve lived/traveled in the developing world, you appreciate how important this is. #DeFi is not perfect but we’ll get there. Onwards
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