Trust, Centralization, and Usability.
(For the first post, see here: )
a) Some others know DeFi better than I
b) I don't know the future, I'm just guessing
c) Not investment advice
d) In the end value is in the eye of the beholder. It doesn't matter what I think, it matters what you all think.
Why is this, and what are ways out of this tradeoff?
a) don't trust anyone, assume everyone is selfish and incompetent
b) build great products that provide lots of value
Let's first start with something that does pretty well: atomic swaps.
Well, you use smart contracts. The central smart contract can check that both sides have funds.
You can do this via pre-programmed smart contracts with no middlemen who can fuck with things. And it does what users want.
But venture far beyond that and the product quality quickly degrades.
For example, take stablecoins.
How about DeFi?
The problem, really, is that a stablecoin is a dollar, and dollars are not on the blockchain; they're centralized in bank accounts. So if you only have the blockchain, you can't redeem for $1. But then what makes it stable?
What is worth $1 but doesn't rely on banking?
So we end up with stuff like . And DAI is a total mess.
It's not backed by dollars. That means you can't redeem it for a dollar bill. But in fact, you usually can't redeem it at all! What makes it "worth" $1?
So to recap: no creations, no redemptions, but yes liquidations.
(For a more in depth discussion of the dangers of DAI, see here: medium.com/@ministry_of_a…)
Well, you have mStable, and Curve, and lots of other attempts to build out a hybrid product.
Many DeFi projects need price feeds; so they use oracles, which.... usually draw from Coinbase (or Binance, etc.). Which is fine--that's what FTX futures do!
And if you want to trade BTC on Ethereum, most attemps ultimately have a pack of judges custodying the BTC.
Many of the answers aren't obvious. But that doesn't mean it's hopeless. There are powerful procedures to create trustless cross-chain behavior; there are blockchains that gain speed without sacrificing security.
In order for DeFi to grow, it's going to have to make a compelling case that the trustlessness justifies the hassle.