"You can believe that 99% of crypto is bullshit while also believing that the 1% that isn't will change the world" - Preston Byrne
Is this a quote from someone?
Because you can believe anything, believes are not a good method to find what is truth. But it is part of the pump and dump strategy, make people believe that something is valuable and them dump on them all your worthless assets.
The reason I think it's relevant is that posts like Palmer's attack only the "scam side" of crypto (the 99%) without acknowledging the "new paradigm" (1%) side
Yes there are scams, yes there are pumps and dumps, yes there are insiders who control too much liquidity. But you also have to do justice to the promise of the tech.
It was not previously possible for anyone with an internet connection to take out a loan via a decentralised protocol (MakerDAO), or exchange assets via a decentralised contract (Uniswap), or have a digital proof of authenticity (NFTs). And all of this without middle-men taking fees, opaque leverage throughout the system (see Archegos) and gating access to only certain participants (the richer half of the world who have a bank account).
These days I tend to send skeptical folk this writeup on the problems with centralised finance, and associated DeFi solutions: https://john-street-capital.medium.com/fintech-3-0-re-archit...
It really is hilarious how similar the naysaying here is to the internet/email says.
My wife and I paid off our student loan debts with a 0% interest loan and no need to go through a bank. Our position is well over-collateralized and interest generated from other DeFi lending positions will pay off the loan in full.
Not to mention, Ethereum as a settlement layer for stablecoins is gaining exponential adoption. There's a non-insignificant chance it disrupts the traditional banking rails (i.e. ACH, wire, SWIFT, etc.).
I didn't go into detail in the initial post since it sounds a bit crazy, but the loan will actually pay itself off since Alchemix is depositing my $30k into Yearn. The yields generated from Yearn gradually pay down my debt automatically. Other interest bearing positions (apps like Compound and "yield farming" on various new protocols) will also help me pay off the loan faster.
The alternative to this is that I could've taken $15k from the initial $30k and paid off our loans outright. But, using Alchemix is more capital efficient. Student debts are now paid and I also have $30k of capital generating yield instead of only $15k if I had simply paid the loans upfront.
Also, this was not my scenario but a common view: it can make sense to draw a loan so that you're not liquidating long-term holdings. Imagine I hold $100k in bitcoin and need to pay off $15k in student debt. If I sell my BTC, I'll incur capital gains tax and also have a smaller long-term holding. Alternatively, I can borrow $15k against the BTC, pay no tax, and keep my BTC position in full. There are various ways to then generate interest on the BTC and pay back the borrowed funds.
Some platforms offering 0% loans include Liquity and Alchemix.
In fact this “DeFi” thing should have a negative interest rate to compensate for the fact that this borrower will be paying them more and more each payment.
What happened is that you used DeFi to leverage your financial position, not pay off debts.
Don't lie to people.
https://news.ycombinator.com/item?id=27845492
And I'm not increasing my overall debt position on my personal balance sheet. Rather, I shifted the debt from student loans at ~5.5% to a DeFi protocol where the borrow rate is effectively negative.
If so, that doesn't seem that groundbreaking. You could have simply liquidated enough of your gains to pay your student loans off. Instead, you're now in a leveraged position. It's very possible that your collateral could drop below the LTV threshold, causing a liquidation, which would magnify the losses you'd have if you weren't levered. There's no free lunch.
It's certainly interesting that DeFi creates new schemes for creating leverage, with minimal intermediation, but I wouldn't call it groundbreaking. It's an incremental development in financial engineering.
EDIT: read some of your other comments that you made while I was writing mine. It sounds like you're using stablecoins as your collateral, which seems like a smart move, and you've effectively converted your student loan into a DeFi loan at a lower rate. But I'd still be concerned that while your more mundane risks aren't that high (like asset prices and interest rates), you may have exposure to more complex risks.
I'm not saying this isn't innovative, but I still stand by the opinion that this is more incremental than revolutionary.
Building these options is alot of fun and very lucrative
And yes, there are definitely risks; it's not for everyone!
If Bitcoin hasn’t yet discovered a killer app, when will it?
But yeah yeah, it took tens of thousands of years between humans seeing lightning start fires and the charcoal grill… if it took that long, I'm sure it will be tens of thousands of years before Bitcoin finds a use. Better keep buying and holding!
Bitcoin was just the first blockchain to really find adoption, it’s nowhere near where 99% of the innovation in crypto is happening today. Far more interesting projects that are providing actual value today.
Bitcoin was released in 2009. The iPhone was released in 2007.
So its an unproductive assumption