That’s not to say there aren’t risks in DeFi. Many are worried that the frenzy around speculative activities such as “yield farming” and interconnected leverage could set off a systemic crisis. If that happens, maybe Bitcoin can offer an alternative, more stable architecture for it. Either way, ideas to improve DeFi are coming all the time – whether for better system-wide data or for a more trustworthy legal framework. Out of this hurly burly, something transformative will emerge. Whether it’s dominated by Ethereum or spread across different blockchains, the end result will show more cross-protocol synergy than the chains’ warring communities would suggest.
That network now sustains its financial system, a decentralized microcosm of the massive traditional one. It takes tokenized versions of the underlying currencies that users most value (whether bitcoin or fiat) and provides disintermediated mechanisms for lending or borrowing them or for creating decentralized derivative or insurance contracts. What’s emerging, albeit in a form too volatile for traditional institutions, is a multifaceted, market for managing and trading in risk.
Senate Banking Committee Remains Open to Idea of Digital Dollar in Tuesday’s Hearing. If you want a measure of how far things have come in terms of the acceptability of the digital dollar idea in Washington from something that a year or so ago would have been a nutty, fringe idea, read the opening paragraph to Nikhilesh De’s writeup of this hearing: “Not every U.S. lawmaker is on board with the idea of a central bank digital currency (CBDC) or digital dollar, but no one explicitly rejected it during a hearing of the powerful Senate Banking Committee.”
Yaz is a cryptocurrency technical analyst with over seven years of technical analysis trading experience. As an Economics graduate, he has taken a keen interest in the future potentials of blockchain in the financial industry. Removing crypto from the equation, Yaz loves to watch his favorite football team and keep up-to-date with the latest fights within the UFC.
This part of DeFi feels like a new form of market. Anyone can join and everyone is invited. It has no KYC/AML (know your customer/anti-money laundering) hurdles and lags, and if it looks like a duck, waddles like a duck and quacks like a duck, that duck is a shiny tech casino. Of course all markets are casinos but if you can come up with a new form of market and it’s fun, exciting, instant and can be used sensibly or in insanely risky, win big/lose big ways, you are going have a winner. And they do. And it’s all powered by Ethereum.
So, let’s dismiss claims like those of Ethhub.io co-founder Anthony Sassano. He argued that because bitcoin token transactions on Ethereum deny miners fees they would otherwise receive on the bitcoin chain, bitcoin is becoming a “second-class citizen” to ether. You’d hardly expect people in countries where dollars are preferred to the local currency to think of the former as second class. And just as the U.S. benefits from overseas demand for dollars – via seignorage or interest-free loans – bitcoin holders benefit from its sought-after liquidity and collateral value in the Ethereum ecosystem, where it lets them extract premium interest.
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