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> the worst one being that there's no human you can talk to when something goes wrong.

The worst part is that for a DeFi loan, you need something like 200% to 300% collateral (look it up, it varies but is usually around that amount). This makes it less than useless for just about all reasons people now get loans. The whole point of a loan is that you're willing to pay extra over time in order to have access to more funds at the present. With DeFi loans, you pay extra over time and have less access to funds than you would have had without the loan.

It only really makes sense for crypto gamblers, who are hoping that their collateral has insane appreciation that will offset the downsides. If anything, DeFi loans are less like actual loans and more like crypto gambling partnerships where one partner takes a position with lower risks and rewards and the other takes a position of higher risks and rewards.

>The whole point of a loan is that you're willing to pay extra over time in order to have access to more funds at the present

No, that's not the point of these loans at all. They are the equivalent of remortgaging your home to get cash. If need money for renovation and you have a lot of equity in your house you can borrow against it. They are doing the same thing with crypto. They don't want to sell their crypto because they want to speculate on it and they need money so they use it as collateral.

I personably think it's a very stupid idea to invest in something like crypto on credit. Lending your crypto to these morons looks like a pretty good idea if you can trust that the smart contracts doesn't have bugs. You get a stable and guaranteed >5% without all the risks of the stock market.

> They are the equivalent of remortgaging your home to get cash.

It's actually the opposite of remortgaging a home to get cash. Remortgaging a home to get cash is paying a premium to increase the amount of liquid assets available to you; this is the point of most loans. A DeFi loan is paying a premium and _decreasing_ the amount of liquid assets available to you. As you said, it's useful for juicing speculation, worthless for anything else.

> You get a stable and guaranteed >5% without all the risks of the stock market.

I think the long-term risks are actually greater than something like an index fund, since your collateral is all in crypto. The returns are also less than historical index fund returns.

A DeFi loan is paying a premium and _decreasing_ the amount of liquid assets available to you.

No, because from their point of view the crypto they put as collateral is NOT liquid. the entire point is do not sell them but somehow get cash from it.

Often you’re taking credit risk on the intermediary instead, I think - BlockFi, for instance.

A number years ago I was unemployed for an extended period of time while working on open source projects, and I ran out of money, so I took out a loan to cover my expenses. I lived off this money for several months until I found a suitable job, and after some time I repaid this loan. This type of personal credit financing would cost a fortune in regular finance (try going to a bank and taking out a loan because you're broke and unemployed), but because I had digital assets to pawn I had access to a line of credit at a reasonable rate.

Without this option, I would have to either finance myself at a criminal rate, or accept a job I wasn't ready for. I feel I'm much better off personally from having this option available.

Outside the personal anecdote, I don't understand how it's difficult to see the utility in having digital goods of value. It allows all sorts of use cases, and using them as collateral for loans is just one. I have a harder time accepting that goods of value simply cannot be digital. If I look at the past 30 years of history, literally everything is turning digital; our consumption of entertainment, our work, our communication, social connections. What is the argument for having all things of value be either be a physical thing, or something controlled by some central authority? It seems like a "because that's how things have always been" sort of position.

Wait, are you comparing a personal loan backed by an asset versus an unsecured personal loan from a bank? That seems pretty apples and oranges to me. I think the right comparison would be a broker letting you borrow money against stock, something they do all the time.

Cheaply, too - some brokers are offering in the mid 1% for USD. I don’t know what defi collateral requirements and rates are like at the moment, but I suspect much more onerous and higher.

I don't understand what you're trying to say or what any of that has to do with cryptocurrency. "Digital goods" is a very broad category beyond cryptocurrency. Also I agree with the other comment here, that's not an unsecured loan. You used collateral to get it.

That makes no sense.

> try going to a bank and taking out a loan because you're broke and unemployed), but because I had digital assets to pawn

"Broke" means you have no assets, thus you have nothing to pawn, therefore the loan would be unsecured. You COULD NOT have obtained such a loan via defi, and while you could have obtained one in the traditional finance system (which is strictly an advantage over defi...), it would be have been, yes, very expensive.

But you weren't broke! You had assets! The traditional finance system loves to lend money secured by liquid assets, does so all the time, and at lower interest rates!

> I don't understand how it's difficult to see the utility in having digital goods of value

...digital goods of value. Otherwise known as a number on a ledger somewhere, otherwise known as a bank account? Nothing in your story in any way depended on crypto/defi; every part of it is a normal, traditional part of the financial system. All crypto added here was higher costs and a worse UI.

Obviously I was not "broke" in the sense that I had no possessions of any value. With that definition nobody is ever broke unless they are naked with nothing left to sell other than their labor.

I had plenty of things of value, like a trading card collection, a personal computer, a phone. But no bank would ever accept any of these things as a collateral for a loan.

I could have sold things I owned, but I didn't want to lose any of the things I had collected over the years. Having access to digital things of value made it possible to take out a loan without having to sell anything.

You say crypto added higher costs and worse UI, but do you have any evidence for this? I was able to get a few months income on my bank account in less than an hour of work, at a rate that is more favorable than any mortgage rate currently offered by banks (with mortgage rates almost at an all-time low).

Digital value does not have to be limited to bank accounts, just like physical value does not have to be limited to cash. If I have other physical things of value (like collectible trading cards) I can trade these with other people directly or use them as collateral for cash loans with any third party. Why are digital things of value limited to bank accounts? If other digital things of value exist, and we have standardised interfaces for digital valuables, that enables incredible amounts of flexibility in financial transactions, such as using things I have as collateral for loans, without requirements for appraisal, risk assessment, fraud protections, etc.

If I had traditional financial assets I could have used those and use the traditional financial system to get credit, but I didn't have any of those. I had other things of value, and because they are digital, with standard interfaces, I was able to get credit, which I otherwise wouldn't be able to get.

I'm only offering some kind of anecdotal evidence here that some people do in fact get some utility from these things. To me personally, it was very convenient to have this option at the time. If I get into a similar situation in the future, I would use it again.

What’s was the rate and collateral ratio?

You got a loan and collateralized it using a priced and liquid asset. Your situation is not novel at all. You don't need defi to do this.

I think what you're missing here is that there's nothing about the fact this was crypto that matters. DeFi, at best, is getting you back up to the point the traditional finance system has been at for decades.

If you'd had a couple hundred $k of index funds in a brokerage account, you could have quickly and easily borrowed a significant amount of money secured by the shares at a very low interest rate. And yes, significantly cheaper than a mortgage. I think Interactive Brokers is charging well under 2% for a margin loan these days? (And under 1% if you have enough assets...)

> some people do in fact get some utility from these things

But strictly less utility than if you'd just bought non-crypto assets. Right?

> there's no human you can talk to when something goes wrong.

This goes both ways. I may not want a smart contract for my life insurance, but I can perfectly imagine myself taking a lot of very small, very short insurances on mundane things because of the very low fee and hassle of smart contracts versus actually signing contracts and paying for the humans that will support it.

Think flight insurance, etc

Travel insurance? There's literally no hassle on that other than checking a box at any airline website.

> I still haven't seen any reason anyone would actually want this, beyond the novelty factor. It's strictly worse than any other equivalent insurance or loan for a number of reasons, the worst one being that there's no human you can talk to when something goes wrong.

But people are using it, and (in the protocols I've seen) claims are handled jointly between an advisory board and community assessors, with a framework for appeals and community voting.

I think that's pretty interesting.

So basically, unpaid volunteers.

>claims are handled jointly between an advisory board and community assessors, with a framework for appeals and community voting.

So you mean like a company with a board of directors, shareholders and voting shares. I'm sorry I just I don't think that's very interesting, because companies already existed without blockchains and DAOs and smart contracts.

So it's still people doing the work, only the contract exists in a different type of database. I'm really missing something if that is supposed to be substantially different than the current relationship I have with my insurance company.

Although with my insurance company I at least know the assessor is qualified enough to look at pictures from a car accident and determine the sequence of events and who was probably at fault.

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>One could make the same argument for a dictatorship being superior to the rule of law. After all, you can always talk to a human to resolve your problem.

I'm sorry I don't understand what you're talking about, this makes no sense. The judicial system also requires humans who are tasked with resolving the problems who you can talk to, that's literally the whole point of it.

>Removing human decision making from a process makes it a game where everyone plays by the same rules.

First of all, no it doesn't because that presumes the machine is always going to be working correctly. Computers don't do this. Second of all, somebody always has to build and maintain the computers, so there is no situation where you can remove all human decision making from the process. I hear executives making these kind of comments all the time as an excuse for cost cutting but that's all it is. You can't make a tech company that isn't paying IT staff in some way.

>You ignored his point

No, you're wrong. His point was also wrong. I actually agree you can indeed reduce administrative expenses by using computer modeling, and most insurance companies already do that. My point is this has nothing to do with blockchains. You don't need blockchains to do that, and attempting to do that on blockchains only increases cost. We're getting into an area where everything is wrong again, please stop with this because I would rather not.

>If you keep making up your own bad arguments

Except this is not my argument. The parent comment just made it and I've heard it probably hundreds of other times. It's the same kind of comment as "maybe we can put the deed to my house on the blockchain" which is equally nonsensical and I've probably heard that hundreds of times too.

Your argument seems to be that there are other solutions that aren't blockchain, which I can't deny. That's true of any solution to most problems, and it neither invalidates the original proposed solution nor lessens its usefulness.

Blockchains create a completely transparent, decentralized ledger. If you don't see any novelty or potential value in that, then that's fine. As far as life is concerned, one's opinion on blockchains should probably fall pretty low on the priority list. I suspect we at least agree on that.

>and it neither invalidates the original proposed solution nor lessens its usefulness

Yes, you're right that by itself it doesn't invalidate the proposed solution. Aside from that, blockchains are still useless and that's what invalidates it. They don't do anything meaningful. Any blockchain-based solution is useful in spite of the blockchain, not because of it. I've never seen any use of blockchains to disprove this.

>Blockchains create a completely transparent, decentralized ledger.

No they don't, in theory they could do that if everything was perfect and if we didn't have to deal with the other side effects of open trade and capitalism, but in practice they don't. Every blockchain I've seen is heavily manipulated by private interests and has serious problems with centralized control. And those are just the big L1 chains. It only gets worse when you consider side chains, a lot of those have no attempt at providing transparency or decentralization at all and it's evident they're privately controlled by one company or group.

>If you don't see any novelty or potential value in that, then that's fine.

I agree there's novelty in it, but that's about it. There's no practical value whatsoever, current or potential. They're useless. I've been pretty consistent about this for the last year. Personally I humored crypto enthusiasts for the last 10 years before this and I listened to as many of their pitches as I could, I tried to look high and low for the good in it, but it's just not there. Enough is enough. It's all bad and nothing meaningful has been accomplished. There's no practical uses of this technology. However it is a very big lightning rod for scammers and fraud.

I am pretty anti-crypto generally but I feel compelled to reply to your maximalist position that there is "no practical value whatsoever, current or potential" to blockchains. The one use case I have seen for blockchain that is real is that cryptocurrency is great for moving money around the world when governments or banks maybe don't want you to do so. At the very least the experience of sending crypto is about as annoying or a little bit less annoying than sending a wire, and you can avoid all those pesky AML/KYC requirements that banks and payment processors impose.

I am not suggesting that this isn't ethically fraught -- of course it is. But one can imagine uses. I personally have known a couple people who fled Syria during the civil war, and bitcoin was a useful way to pull money out of the country, and much less dangerous than carrying a suitcase of cash.

But isn't this awfully close to saying: Blockchains/Cryptocurrencies are useful exactly for money laundering and sanction busting? And ... saying that publicly _and_ supporting the implementation tends to go very badly. (As it should imo, but that's a different story).

IF that is the summary conclusion to crypto (which I'm currently holding), then this is pretty close to "no practical value whatsoever", isn't it?

> But isn't this awfully close to saying: Blockchains/Cryptocurrencies are useful exactly for money laundering and sanction busting?

Yup.

> And ... saying that publicly _and_ supporting the implementation tends to go very badly. (As it should imo, but that's a different story).

Good. (I don't support the implementation.)

> IF that is the summary conclusion to crypto (which I'm currently holding), then this is pretty close to "no practical value whatsoever", isn't it?

For ordinary people who don't need such services, yes.

>The one use case I have seen for blockchain that is real is that cryptocurrency is great for moving money around the world when governments or banks maybe don't want you to do so.

No it isn't. You don't need blockchains to create illegal banks and exchanges or to launder money. All of that was around for a long time before blockchains. You could even create those things "as a service" without blockchains, it would be just as shady and illegal. I'm serious here, there is absolutely no practical value to blockchains whatsoever.

This is like saying you don't need a car to get downtown. It's true, of course, but it's not interesting.

Do you actually have any experience writing and debugging and maintaining code?