{"id":95072,"date":"2020-10-22T13:52:28","date_gmt":"2020-10-22T10:52:28","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/finance-redefined-is-defi-really-a-threat-to-centralized-finance-oct-14-21\/"},"modified":"2020-10-22T13:52:28","modified_gmt":"2020-10-22T10:52:28","slug":"finance-redefined-is-defi-really-a-threat-to-centralized-finance-oct-14-21","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/finance-redefined-is-defi-really-a-threat-to-centralized-finance-oct-14-21\/","title":{"rendered":"# Finance Redefined: Is DeFi really a threat to centralized finance? Oct. 14-21"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3405ac4a9ae\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3405ac4a9ae\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/finance-redefined-is-defi-really-a-threat-to-centralized-finance-oct-14-21\/#So_should_CeFi_representatives_be_afraid_of_DeFi\" >So should CeFi representatives be afraid of DeFi?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/finance-redefined-is-defi-really-a-threat-to-centralized-finance-oct-14-21\/#Uniswap_governance_epic_fail\" >Uniswap governance epic fail<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/finance-redefined-is-defi-really-a-threat-to-centralized-finance-oct-14-21\/#Another_day_another_FOMO_into_Cronjes_tests\" >Another day, another FOMO into Cronje\u2019s tests<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/buradabiliyorum.com\/en\/finance-redefined-is-defi-really-a-threat-to-centralized-finance-oct-14-21\/#Impermanent_loss_insurance\" >Impermanent loss insurance<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong># Finance Redefined: Is DeFi really a threat to centralized finance? Oct. 14-21 <\/strong>&#8221;<\/p>\n<div data-v-5a136f3a=\"\">No major euphoria-worthy moments h<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>ened this week \u2014 the ecosystem is still cooling off.\u00a0<\/p>\n<p>I think the biggest sign of that is Uniswap\u2019s trading volume. After hitting a peak of slightly less than $1 billion in daily volume in early September, those numbers steadily deflated.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.eu-central-1.amazonaws.com\/s3.cointelegraph.com\/uploads\/2020-10\/4682cdc1-1ccb-48af-9f7a-472d48ae916d.png\"\/><figcaption style=\"text-align: center;\"><em>Courtesy of Uniswap\u2019s sleek <\/em><a rel=\"nofollow noopener noreferrer\" target=\"_blank\" href=\"https:\/\/info.uniswap.org\/home\"><em>dashboard<\/em><\/a><em>.<\/em><\/figcaption><\/figure>\n<p>But despite the downtrend, I think even the current level is still well beyond the wildest imagination of a DeFi fan in 2019. For reference, those figures are roughly on par with Bitstamp or Bitfinex (even though as I write this, their volume seems to have skyrocketed with the PayPal <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">news<\/a>).<\/p>\n<p>This analysis of a survey on centralized exchange operators captured my attention though. What they <em>say<\/em> is that they don\u2019t fear DeFi, but the article\u2019s author posits that their actions betray their true beliefs. Given the plethora of \u201cCeDeFi\u201d platforms, we can definitely see a degree of co-opting done by powerful exchanges.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"So_should_CeFi_representatives_be_afraid_of_DeFi\"><\/span>So should CeFi representatives be afraid of DeFi?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Well, I think they should be concerned but not afraid. DeFi as it exists now in many ways repeats what these exchanges already do. Uniswap is obvious, but then you have stuff like Compound and Aave that are mostly used, as I and many others believe, for leveraged trading.<\/p>\n<p>That\u2019s just everything you can do with an over-collateralized loan backed by an ephemeral asset (as opposed to a house or car). Maybe some rich crypto whales could use these loans for a more tax-efficient use of their money without losing their crypto position, but even that is still a form of leverage \u2014 you lose more when it goes down compared to just selling the portion you need to pay for expenses.<\/p>\n<p>And of course, you can do all these things with CeFi, it\u2019s just that you may need to pass through pesky KYC to do so. So in that sense, DeFi will always have an advantage \u2014 it\u2019s a more im<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/social-mediaa\/\" data-internallinksmanager029f6b8e52c=\"1\" title=\"Social Media\" target=\"_blank\" rel=\"noopener\">media<\/a>te and uncensorable user experience, provided you\u2019ve set up your wallet.<\/p>\n<p>There are also issues related to fundamental design. AMMs like Uniswap or Curve will never really replace order book exchanges because they can\u2019t price things \u201ccorrectly\u201d on their own. Of course, the order book exchange doesn\u2019t have to be centralized, but we\u2019re still a bit far off from mass adoption of platforms like Serum or Loopring.<\/p>\n<p>I talked about this in-depth in my feature on DEXs, and I share the overall judgement expressed by Loopring\u2019s Matthew Finestone: centralized exchanges will definitely remain for those who <em>want <\/em>full regulation, for example institutions, plus as gateways for fiat. <\/p>\n<p>Such a scenario leaves a sizable piece of the pie for centralized venues.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Uniswap_governance_epic_fail\"><\/span>Uniswap governance epic fail<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>The Dharma-led governance vote to reduce the voting quorum on Uniswap failed\u2026 because it didn\u2019t reach quorum.<\/p>\n<p>The weirdest thing about this story is that any reasonable person would look at it and say, \u201cbut it did reach quorum!\u201d<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.eu-central-1.amazonaws.com\/s3.cointelegraph.com\/uploads\/2020-10\/89c1a595-cbb3-4f4c-904d-353157166630.png\"\/><\/figure>\n<p>The final tally is 39,596,759 UNI for vs. 696,857 UNI against, which does add up to slightly more than the 40 million required. Except that Uniswap (and Compound) for some reason considers \u201cquorum\u201d as \u201chow many people voted yes.\u201d The <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/general\/\" data-internallinksmanager029f6b8e52c=\"3\" title=\"General\" target=\"_blank\" rel=\"noopener\">general<\/a>ly accepted definition takes all votes into consideration, no matter which way they were cast.<\/p>\n<p>So why did this failure occur? Is it a coincidence that the vote would have passed under the standard definition of a quorum?<\/p>\n<p>I have strong doubts about that. Even some in the <a rel=\"nofollow noopener noreferrer\" target=\"_blank\" href=\"https:\/\/twitter.com\/scott_lew_is\/status\/1318225585370484736?s=20\">community<\/a> suggest that people really thought it would have passed. The logic is that once you reach the threshold there\u2019s no point to add more votes since it costs gas and work to rally voters.<\/p>\n<p>Maybe the vote really whiffed by a hair because it couldn\u2019t gather the community support it needed. <\/p>\n<p>But I wouldn\u2019t be surprised to learn that someone at Dharma just messed this up.<\/p>\n<p><template data-name=\"subscription_form\" data-type=\"defi_newsletter\"\/><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Another_day_another_FOMO_into_Cronjes_tests\"><\/span>Another day, another FOMO into Cronje\u2019s tests<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>At this point I\u2019m not even sure what to say anymore, but Yearn Finance founder Andre Cronje was once again \u201cthe cause\u201d of some people losing money in a pump &amp; dump scheme. (Hint: he really wasn\u2019t.)<\/p>\n<p>This time it was Keep3r, a sort of freelance platform for developer operations, a generic term for maintaining some technical infrastructure. Things like calling a smart contract or doing some tricky thing with smart contract deployment.<\/p>\n<p>Its token, KPR, was once again listed on Uniswap by people who discovered the contract. I know of one guy who joined in the fun, apparently making money while doing so \u2014 obviously at the expense of others not so lucky. This time the scale paled in comparison to stuff like Eminence, as only a few thousand dollars in volume was registered.<\/p>\n<p>Obviously, this wasn\u2019t even the final version of the project for that day. That\u2019s how Cronje tests his software, by iterating through code on mainnet. There are dozens of Yearns or YFI token contracts on Ethereum, as he revealed earlier.<\/p>\n<p>As I mentioned last week, this really has nothing to do with Cronje. There\u2019s just no way he could disclaim harder that people shouldn\u2019t throw their money into these contracts, and the losses are just due to the <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/game\/\" data-internallinksmanager029f6b8e52c=\"7\" title=\"Game\" target=\"_blank\" rel=\"noopener\">game<\/a>s these people play on Uniswap.<\/p>\n<p>There was a literal Ponzi smart contract that some guy released once, and people did put money into it. That\u2019s just crypto I guess.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Impermanent_loss_insurance\"><\/span>Impermanent loss insurance<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Bancor released the V2.1 of its exchange, which basically discards one of the key components of the earlier release. It used to be that the exchange would read market prices via oracles so that liquidity providers wouldn\u2019t suffer impermanent loss (also called divergence loss since you lose money when two assets in a pool diverge in price).<\/p>\n<p>It turned out that it didn\u2019t work. Oracles are too slow to update and are front-runnable, so Bancor has now embraced the harsh reality: you can\u2019t fix impermanent loss.<\/p>\n<p>AMM developers seem to be reaching the conclusion that there is no general solution to this issue \u2014 there is always some trade-off or drawback.<\/p>\n<p>In that sense, there is a perfectly functional way of reducing impermanent loss for Uniswap liquidity providers. Basically, the idea is that by providing liquidity they have a \u201cshort volatility\u201d position \u2014 they lose if volatility is high, and they make more money from fees if volatility stays low. <\/p>\n<p>Worth mentioning that I\u2019m talking about the concept of volatility as usually seen in option markets, which consists of decisive moves in a certain direction, as opposed to what most people associate with the term, which is how \u201cjittery\u201d the price is.<\/p>\n<p>So you can hedge impermanent loss by simply opening a \u201clong volatility\u201d position: buy an appropriate amount of both call and put options and roll them over as they expire.<\/p>\n<p>You\u2019ll pay a premium, but your impermanent loss should be fully covered.<\/p>\n<p>Maybe I\u2019ve lost you there with this options talk. But the good thing is that Bancor introduced a fairly similar mechanism of impermanent loss insurance. The cost is borne by the BNT holders through some fancy mint and burn mechanics, so liquidity providers on certain pairs can feel safe that they\u2019ll always make money if they hold the pool token for long enough.<\/p>\n<p>I expect more and more AMMs will start to follow a similar approach where the costs of impermanent loss are simply shifted somewhere else. Indeed, I strongly suspect that the upcoming Uniswap V3 will feature something like this.<\/p>\n<\/div>\n<p><script async src=\"\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener noreferrer\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more News articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener noreferrer\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/finance-redefined-is-defi-really-a-threat-to-centralized-finance-oct-14-21\" target=\"_blank\" rel=\"noopener noreferrer\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# Finance Redefined: Is DeFi really a threat to centralized finance? Oct. 14-21 &#8221; No major euphoria-worthy moments happened this week \u2014 the ecosystem is still cooling off.\u00a0 I think the biggest sign of that is Uniswap\u2019s trading volume. After hitting a peak of slightly less than $1 billion in daily volume in early September,&#8230;<\/p>\n","protected":false},"author":1,"featured_media":95073,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/s3.eu-central-1.amazonaws.com\/s3.cointelegraph.com\/uploads\/2020-10\/20c71b6c-972d-4358-b1e5-03a4f9124f4f.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74877,74868,74891,4965],"class_list":["post-95072","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-decentralized-exchange","tag-defi","tag-ethereum","tag-technology"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/95072","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=95072"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/95072\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/95073"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=95072"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=95072"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=95072"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}