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Comment by wickoff | Hacker News Reader

It's understandable why people consider 100% of crypto to be a scam.

But several projects have an actual P/E ratio now. You can't deny a P/E ratio. Value is being created here.

In 2013 bubble everything was bitcoin clone but "better". No cash flow. In 2017 it was unregulated securities - illegal, no cash flow. In 2021 with Defi you don't need to struggle to explain anything.

People get paid for providing capital at a higher rates than in traditional finance because smart contracts are removing friction. Stakeholders get paid dividends for governance, just like a normal company.

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> You can't deny a P/E ratio. Value is being created here.

Oh yes, yes you can. You're talking about a currency exchange, not a commodity. I guess you weren't around for the last two bubbles.

There literally is no value being created. Coinbase earnings are based on people paying to use its service, and that service is trading imaginary currency with no intrinsic value. Unlike a semiconductor, oil, or even industrial labor.

Coinbase provides KYC compliance which then gives it government blessing to be a gateway between crypto and the US dollar financial system. That is the value. Otherwise, there are DApps that allow trading between cryptos and don't require employees, offices, centralized server infrastructure, etc. that would take the place of Coinbase.

it is value based on vaporware. don't be a K=1 thinker.

So it's like a mobile game with in-game purchases and loot boxes. It's the entertainment industry in the finance industry's clothing.

Madoff had a price to earning ratio too. I don't think that variable doesn't say what you think it does. Higher rates implies more risk which certainly applies to cryptocurrencies.

LOL defi is a neat idea but the current reality is order of magnitude slower and orders of magnitude more expensive than "legacy". It adds a lots of friction. Players "get paid" because folks can't read smart contracts and see that behind the cover story it's just flows from new players to exiting players, which looks good as long as inflows are larger than outflows, which of course will last forever.

Can you please give specific examples which are enabling things that aren’t intra crypto speculation?

The only examples I’ve seen tend to be services that make money off crypto investing, which is obviously circular: those revenues ultimately depend on there actually being value in crypto.

But perhaps there are cases I’ve missed.

Let's say I have some Bitcoin and I want to buy a car without selling any Bitcoin. I can take out an over-collateralized loan in a stablecoin at 4% APR. I can transfer my stablecoin to an off-ramp exchange and pay for the car. Now two things can happen - either I pay off the loan myself or the price of bitcoin drops and my collateral is liquidated to pay off the loan, then it's no different than buying a car with bitcoin.

The existing financial system already lets you take out loans against houses, stocks, etc. How is this different?

Global availability, no questions about the purpose of the loan, not difference in rates depending on purpose, transparency enforced by a smart contract, no hidden fees or upfront costs.

> Global availability

Good in theory, but how much does this matter to anyone in a country with a functional financial system? I have access to many loan products

> not difference in rates depending on purpose

Isn’t this bad for borrowers with valuable purposes or good credit? They’d potentially expect higher rates.

> transparency enforced by a smart contract

For most people this is akin to saying “you can examine the code yourself!” Most people can’t do that. And it’s not especially difficult to read a loan contract, if you would have the ability to understand a smart contract.

How many people taking crypto loans have no idea about liquidation, or capital gains tax obligations in the event of liquidation?

> no hidden fees

See previous question: it seems like for many sudden liquidation or owing capital gains tax in such an event may be unexpected.

> upfront costs

Loans normally don’t have upfront costs.

The loans seem neat for bringing collateralized lending to crypto, but it doesn’t seem like you’d have much advantage in selling stock and moving to crypto for loans. Or am I missing something?

I think you’re missing a key point here, which is that all of these are also available instantly, 24/7. There is no need to negotiate financing with your bank or otherwise work around a traditional banking schedule.

Further to that point, there are new DeFi products like Alchemix which allow for loans on collateral that cannot be liquidated, so not only do you get your money but you don’t run the risk of ever paying interest or gains tax via a liquidation.

Fair, that’s some benefit. Speed and ease do unlock potential.

Can you expand on the second point? If something can’t be liquidated/sold, how can it be collateral?

> now. You can't deny a P/E ratio. Value is being created here.

Which ones?

https://sushi.com is the best example.

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