Hacker News Reader

Comment by miohtama | Hacker News Reader

Cryptocurrencies might not answer to all of these questions. However there is one question where it gives an answer. It is how to create more efficient financial system. And part of this answer might lead to rebalancing some of distribution of the wealth, mostly by reducing operating costs and profit margins of the current Wall St and other local oligopolic financial institutions.

Blockchains do create fundamental value, not just speculative value. Tech people often dismiss this claim and do not want to analyse further. To demostrate this, I wrote a post where I am comparing stock and cryptocurrency trading venues and showing that a decentralised system is the most cost efficient choice at least with some data points and why it is so:

https://tradingstrategy.ai/blog/most-efficient-market-is-on-...

View on HN

I just had to laugh at this one:

> Maybe the shadiest form of these deals comes from the public equity markets from a no-fees online broker Robin Hood and its Payment For Order Flow (PFOF) because of the conflict of interest of a broker making more profit when it is "saving in customer transaction fees." > > In decentralised markets, such shenanigans do not exist.

MEV is an extremely well-known, well-studied empirical phenomenon that happens today and does not have a known solution, and it's exactly analogous to front-running. It's especially funny that you put out this blog post almost exactly on the 3rd anniversary of the publication of the Flash Boys 2.0 paper.

What I want to know is, are you just ignorant of MEV-related problems, are you trying to mislead your readers, or do you have some sincerely-held belief that MEV front-running is somehow morally okay in a way that PFOF isn't?

Thank you for a good insightful comment. You are incorrect, I have a sincerely-held belief MEV is not ok and your assumption what I do believe is wrong.

I am well aware of MEV issues, as I have been developing for Ethereum for the last 6 years or so. They hurt me as a user as well. However, due to the already long post, I decided not to include them in this post and hope to write a comparison in the future. As you said, the comparison could be really interesting.

I believe MEV hurts the ecosystem overall. It is wrong, but I know it can be technically solved, as opposite to solved with regulation, on multiple levels. Some of the current solutions include e.g.

- Avalanche commit and reveal subnet

- Short-term auctions like Cowswap

Basically, everything where you can wait for a better trade execution effectively counters some of HFT issues, both in traditional and crypto world. You can always decide which price you are willing accept and then just wait for it.

Unfortunately Ethereum 1.0 generation AMMs and swaps are not built this in mind, because they come from the era when MEV was not an issue yet. But as I said, this is being addressed in the next generation of the technology. Also unlike on stock markets, as a user you have more transparency on the execution so you can verify that you did not get screwed over (unlike with Robin Hood).

On the topic of the parent commenter's valiant content marketing effort: https://www.classaction.org/news/scam-tokens-class-action-al...

Thank you for heads up. I hope I was transparent enough with my content marketing efforts not to be rude and spammy. Maybe you can clarify if it is against HackerNews rules to link my own posts?

I agree, Uniswap has its issues with scams. Even with added compliance and listing policy, it is highly likely to be most cost efficient. For example what we can do is that we focus only known good trading pairs like Bitcoin and Ethereum that are not scams. These are not scams and they still trade more efficiently on Uniswap.

There are efficiencies you do not see in traditional financial systems like - Open source - Open data - Open ledger

I think the most relevant talking point is about the open source. We know Linux beat UNIXes on the server market. We know Android beat Microsoft Windows Phone.

More about this in-depth in the blog post, of course.

> I hope I was transparent enough with my content marketing efforts not to be rude and spammy.

In my humble opinion you were not, so I hope you don't mind me sharing some background context.

as a trader I know defi is not more cost-effective. the fact that most of the alpha in defi is in arbitrage tells the whole story.

the range of possible exploits on centralized equities and futures exchanges is very limited. HFT works, and works well, to drive down costs for retail and institutional traders.

there is no happy path in defi which results in narrower spreads, and less risk of block re-orgs, or other exploits which either drive up costs or massively undermine the entire ecosystem.

once again, trust is a lower energy state which pays for itself. this trustless, decentralized mania only serves a tiny subset of early entrants, arbitrageurs, and VCs. it does not result in a better market system by any way of measuring that I can see.

> As a trader I know defi is not more cost-effective.

> the fact that most of the alpha in defi is in arbitrage tells the whole story.

What measurements do you use to define cost-effective? I am happy to do an apple-to-apples comparison if you tell what would you like to see in comparison. Also if there is a post/study that shows that there is only arbitrate in DeFi I am happy to read it and try to understand if I am wrong. While this might have been a situation in the past, I am seeing it changing over the last year and half.

In my post, towards the end, I pointed out some facts that even with HFT and industry consolidation, traditional finance has not always worked in the favour of a consumer.

Reply on news.ycombinator.com