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Comment by mrharrison | Hacker News Reader

They don't know they want it, till they know what it means. It means independence from central exchanges, it means the money in your savings account of .01% interest account can now be directly leveraged by loans on Aave, which return 5-9% interest. No middleman managing your money. Your assets can be directly accessed by people who need it.

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Defi loans are not actually useful though. You overcollateralize 150% of your ETH or whatever, to get say 100% back in some stablecoin.

But you could have just sold the ETH in the first place...? If it truly is a "currency" then why are you taking a currency loan on your currency? That's like putting up $150 of collateral to get a $100 loan, it makes no sense.

Unless it's not a currency, in which case this is just a margin loan - I think my speculative asset is going to go up in price, so I will take out a loan against it instead of selling it. Which has only two use cases: I need the dollars and I'm avoiding paying capital gains, OR I want this margin loan to speculate on more cryptocurrency!

That's a pretty small use case compared to like, "loans" in general. Plus if/when the ETH/USD price crashes, all of these loans will get liquidated and push the price down further. I fully expect a "portfolio insurance"-Black Monday type crash if ETH ever falls by more than 30%.

Web3 is definitely the new wild west of the internet. I agree there will be wild price swings, but it will stabilize as more people are onboarded.

I don't think you understand the relationship between interest rates and risk. The reason that bank savings accounts have low interest rates is that they are zero risk (FDIC). Any asset class with a 5-9% expected return carries a substantial risk of losing you principal. In other words, sometimes borrowers default.

DEXs and PLFs still lack integration into the traditional finance infrastructure. Outside of escrowed p2p sales of cryptocurrency, centralized exchanges are the only FIAT on and off ramps.

If stablecoins, custodial or noncustodial gain widespread adoption, DeFi will remain as a niche for hardcore crypto fans.

> If stablecoins, custodial or noncustodial gain widespread adoption, DeFi will remain as a niche for hardcore crypto fans.

Why? It seems the exact opposite to be — if stablecoins gain widespread adoption, there will be a lot more exposure to DeFi because you have stablecoins already and can directly partake in DeFi.

Right now the biggest hurdle is fiat -> crypto conversions and back, stablecoin or not. If you already have stablecoin because it’s widely used, then that won’t be a problem anymore.

I ought to proofread my comments before submitting, apologies.

Unless stablecoins, custodial or noncustodial, gain widespread adoption, DeFi will remain as a niche for hardcore crypto fans.*

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