Comment by anjc | Hacker News Reader

Comment by anjc | Hacker News Reader

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> That is the basic business model of most retail banks.

Right

> All of those business cases already exist in a reasonably accessible form.

Disagree. I live in a wealthy EU country and payments from my bank account have been frozen many times for several days because, e.g., I sent a modest amount via Western Union. I essentially had to say "sorry, wont happen again" to get access to my own money. I am unable to get certain credit from my bank because of my employment contract (i.e. rolling yearly contract) even though I have a good income and savings. And what's the interest rate on deposits in the developed countries, 0-1%? Negative interest rates are being applied to certain deposit accounts in my country.

I see DeFi lending as a different business case just by way of its global nature and overall accessibility. Another commenter mentions that its just used to buy crypto, i.e., it's a house of cards. That some people currently use it for leverage is irrelevant. Middlemen have been completely removed from lending and exchange via DeFi and it can't be undone now. Even with strict KYC/AML and regulation at crypto off-ramps it can't be undone.

> Banking in the developing world is definitely a problem, personally I'm not sure using a pretty volatile currency like ethereum

You can lend/borrow stablecoins (USDc), even if you're in the developing world.

> I am unable to get certain credit from my bank because of my employment contract (i.e. rolling yearly contract) even though I have a good income and savings.

That's purely a risk appetite decision by the bank. If you looked around you would probably find the type of credit your after. You just might not like the interest rate.

In terms of frozen accounts/money, I don't really see a fully developed DeFi helping much with this. Your transactions would have triggered KYC/AML warnings in the bank who are then obliged to freeze your account (and not actually tell you why). If a DeFi were to be big enough they would fall under similar legislation or quickly become an avenue for money laundering or terrorism finance.

>Middlemen have been completely removed from lending and exchange via DeFi and it can't be undone now. Even with strict KYC/AML and regulation at crypto off-ramps it can't be undone.

I get the concept, I don't really get the business model. Are we talking P2P lending? If so how many people are comfortable with doing the risk analysis required for lending in this scenario?

From my perspective that is what the middlemen are for. I could loan money to someone who needs it (locally at least) right now. But I don't have the time or the skill set to gauge 1) How likely they are to just cut and run with my money. 2) How long it is likely for them to pay it back. 3) How realistic it is that what they need the money for will produce the required income to pay me back in full. I have to use these factors to then calculate an interest rate on the money I lend but also make sure said interest rate isn't so punitive they don't want the loan. Or I could provide my money to someone else (the bank in this case) and they can do all of that analysis and deal with collection/enforcement, legal contracts.

As to making it a global function, that just ramps up the profile even more. I now need to research what, if any, rights I have to recover my potential losses in another country.

> You can lend/borrow stablecoins (USDc), even if you're in the developing world. Sure, but what advantages does this have over the existing solutions in the developing world e.g. M-Pesa.

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