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blhack

Where this is going to get really wild: tokenized securities backing the blockchain equivalent of an ETF.

Imagine you program a smart contract which is the frontend of a algorithmic trading system.

That future is coming.

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Kind of close with TokenSets[0] managing Mirror[1] backed assets.

Things like the DeFi Pulse Index[2][3] I believe are automatically re-balanced by evaluating the weights on the third week of the month and then applied the first business day of the following month. I'm not sure if a human is involved?

[0] https://www.tokensets.com/portfolio/dpi

[1] https://mirror.finance/

[2] https://www.tokensets.com/portfolio/dpi

[3] https://www.pulse.inc/

Common advice is to only invest in what you understand. If these markets are so obscenely complex only insiders can understand them then doesn't that limit their potential?

Very true, and the same was true for IT companies in the 90s/early 2000s.

Still, I'd say investing in IT stock is accessible for the layman today. Part of this is just that it's early days and we're right now in the midst of a cambrian explosion.

The interface to use MakerDAO (one of the defi projects mentioned) is a lot more straightforward than any bank I've ever used or had to deal with. Sure there are more complicated defi projects, but over time: a) they get more user-friendly, b) users become more educated.

It'll eventually be abstracted to where it's simple to be used by regular folks, or it'll be integrated into existing infrastructure.

Yup, I don't understand how a lot of traditional financial instruments work but I still use them. At least these are transparent.

That's one thing that I've really enjoyed so far - a lot of these projects are essentially lego bricks, and I can (and do) try and understand how all of the different pieces fit together. That's something that certainly isn't possible with a lot of traditional finance. Even if I wanted to figure it out, I don't have access to see everything.

Speaking of lego bricks, and I haven't used it yet myself, but https://furucombo.app/ looks really interesting!

I've played around with it a bit. I actually found a juicy arbitrage opportunity, and was trying to use it to chain a few trades together to take advantage. Unfortunately it didn't support one of the trading platforms I needed to use, so I ended up just manually making the transactions separately.

This really drove home how inefficient and full of opportunities Ethereum is if you know where to look.

Learning about flash loans and how they settle in the same transaction that they originated in really made the idea of the lego bricks click for me, it was like a light bulb moment.

DeFi is a very innovative field indeed. What I find most appealing is that some popular derivative protocols are yet inefficient in some ways, which means there is a lot of room for new solutions to come along.

For instance, I'm interested in options trading, and there is a lot of competing protocols [1] each one with it's advantages and disadvantages. One of the most popular, Hegic [2], employs liquidity pools pricing options at a really expensive value due to a simplified pricing model (good for writers).

Shameless plug: I myself have been playing with smart contracts in my free time and deployed a tokenizable options trading decentralized exchange [3] (on kovan testnet nonetheless!) trying to address some os these points. Learned a lot implmementing it, and I find amazing that anyone can come up with their own DeFi solution.

[1] https://medium.com/coinmonks/an-update-of-a-comparison-of-de...

[2] https://www.hegic.co/

[3] https://github.com/TCGV/DeFiOptions

In many ways, the future is here, there are billions of dollars locked in these defi projects, I'd say now it's more about adoption and user education.

And scaling. Transaction fees have gotten insane lately, scaling solutions cannot come soon enough.

Fees on other chains like Binance Smart Chain(EVM compatible), Terra and others are quite low now(around 0.2 - 1 USD per transaction). PancakeSwap is a Uniswap alternative on BSC and TerraSwap is a Uni alternative on the Terra blockchain.

The issue is that all of the platforms people want to interact with right now tend to be on Ethereum (which is part of the reason it is so expensive).

100% agree, right now it's like 80$ for a uniswap exchange, 200$ to open a maker vault, 100$ to transfer tokens, etc. I'm really looking forward to eth2 which will hopefully land without too much issues or delays.

It's not as bad if you're willing to wait a bit. Token transfers are like 10$ if you set the gas price to around 120 Gwei, should validate within an hour or two.

The tricky bit is the exchanges, though in my experience, the worst was around 60$ fee for a swap at a busy time.

I'm advising a team that is working on this problem right now; it will be a crowded field, but there are multiple distinct approaches. I'd describe the challenge as equal parts technical, legal/regulatory, and marketing/comms. If anyone is interested in potentially working on this or learning more, send me an email.

How close is Tzero to what you're talking about? https://www.tzero.com/

I'm attempting to build a data set ETF: https://rugpullindex.com

Check out keeperdao and keepers. They sort of do what you are describing.

That already exists in the form of yield farming.

Not as a frontend for traditional financial instruments as far as I know. Yield farming just trades other crypto asset, doesn't it?

Depends, there's some more complex formats defi systems out there now. Synthetix for example allows you to buy SNX tokens and then yeild farm on these against a B-Book which is filled with synth tokens (the synth tokens are derivatives of real assets e.g. sUSD, sAUD, sXAU, sFTSE) so you can trade against real financial instruments.

You can take a look at their litepaper [1] if you want to know more.

[1]: https://docs.synthetix.io/litepaper

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