But ye ... there should be a controlled collapse of these things. Immediate liquidification with depositors having priority.
In the financial service industry you can't really do a chapter 11, i.e. operate while being protected from your creditors, as your business is precisely to take money from creditors (unlike a car manufacturer). That left you as only solution of either doing a bail out (3rd party, typically state, injecting capital) or going bust Lehman's way.
Bail-in was introduced where the regulator has the power to declare a bank non viable, and to impose an extra-judicial restructuring over a weekend so the bank can operate normally on Monday morning. The losses in the restructuring follow a modified creditor hierarchy, which essentially follows the creditor hierarchy with some tweaks (tries to avoid restructuring deposits, complex liabilities or anything secured, and favors restructuring subordinated instruments and wholesale funding liabilities).
Crypto is reinventing all the financial scandals and fuckups of the last century and re-discovering the benefit of the financial regulations it was designed to avoid.
Controlled by whom?
The whole point of cryptocurrency is to get beyond such limitations as "FDIC insurance" and "accredited investor" and "anti money laundering", and allow people to give their money directly to Singaporean scammers without legal recourse.
The Russians didn’t rig Bernie Sanders out of the nomination of one of the two major parties twice either.
> USD is bad!!11
Does not compute.
If they're actually insolvent, they're obliged to do this. They have no more customers, and should discontinue all operations; they only have creditors of one form or another.
A "yield farm" seems to be just an unregulated shadow bank: "borrow short lend long", but lending into really risky assets like other cryptocurrency firms. It's not exactly Basel III.
Network will be there. Cheaper the better. Just an option that has some value, not a killer app, doesn’t need to be. Funny system since you can put any junk there.
Only as long as they can make enough money off it. At some point miners will start compacting the history they keep or just straight up turn off their systems.
the unique issue is how a 51% attack could rewrite history, but that's also mitigated by how often people branch bitcoin from various states in history to their own new chains that have their own miners, inheriting and persevering all the stored stuff.
If you know what you are doing and have luck you can make very high returns.
Mostly people don't know what they are doing though and get into big trouble.
Well, obviously. You can gamble on red in the casino and get 100% return (with a 50%+ risk of losing everything).
The point is that these scammers presented the 18% APY gambles as virtually risk free "investments".
Is that something that you see them doing elsewhere?
except in this case it's not really a ponzi scheme, more of high risk investment (think junk bonds) gone bad.
no its not a high risk investment. no actual business goes to these crypto firms asking them for a such a ridiculous loan. so where does the money come from then? a steady stream of investment from idiots of course. they pay the early investors using the later depositors money. eventually you run out of fools and then this happens
Behind the scenes many of them are making money from volume capture and tiny but lucrative transaction fees, no different than Robinhood or Citadel, the perpetual nature just isn’t guaranteed and longer dated payment promises are perilous.
Lets say an organization is really making 100% ROI but doesnt want shareholders, they offer a competitive 18% return in a bond and thats that. Many more people believe the same you do if you told them a higher and truer number. “35%? Obvious scam”.
There are many market inefficiencies that scale up to hundreds of millions and billions of dollars
People don't understand “senior convertible debt” they understand “18%”
Many yield bearing products in the crypto space offered floating interest rates that adjust to market realities, these fixed interest rates ones are the ones unable to adjust.
Laws don't function on what you think is equivalent
Banks are a lot more than "I will hold your money"
Your mattress is also not a bank
uh. no, it really can't. you can't even do this with a credit union.
if you think the major purpose of a bank is to store deposits, you don't understand what banks are.
.
> But the business is definitely bank-shaped.
holding deposits is not "being bank shaped"
many, many things in our society hold desposits, from insurance companies to blue chips, to stocks and investments, from annuities to rollovers, from awards to grants, from credit accounts to coupons, and even the local layaway
none of them are even slightly banks
the purpose of a bank is to give certainty by being bound to specific laws
i know, when i put my money in a bank, that it won't be invested by the bank in specific dangerous ways. i do not know that with a credit union. i definitely do not know that with some coin dot com that you imagine to be bank shaped.
this post is about coin holders learning one of the many differences
many banks - more than half - don't take deposits at all
this is a deep failure to grasp what a bank is, and why this isn't a bank
the crypto community is about to start learning about bank bindings around leverage that emerged in the 1920s
afterwards they're going to learn about floor limits that were set on actual banks in the 1930s, and why
after that, they're going to learn about the fdic, and that it doesn't apply to things that fans believe are "bank shaped"
"Yes, I'm sure your RandomCoin with unrealistic yields is just having a momentarly hiccup, no need to worry" /s
I wouldn't call this a yield farm, except in a hyperbolic and pejorative concatenation of words "since it has a lot of yield products"
at least in the DeFi version, any impropriety would be known instantly and its effect would be known instantly, users with insurance would be able to make a claim pretty quickly and get paid out, users without insurance would know their loss and be along for the ride or move on
Which is a shame, because whatever your feelings on crypto are, I'd rather see well-formed criticisms from crypto-literate people than critical or supportive comments from people who actually don't know anything they're talking about. $5-20 is enough to get an understanding of what defi is (fees on Polygon and Fantom are fractions of pennies), but it does perhaps require an investment of 5-20 hours as well.
Like how someone was immediately reimbursed by an insurance protocol following an exploit
Instead of a news article only about the exploit and losses
as an example, terra luna was a "decentralized" platform (ignore the anchor ponzi for a moment). Even its critics generally focused on anchor and did not question the decentralization part.
And yet such a decentralized platform very quickly disabled withdrawals (UST peg) as soon as it became clear that their ponzi had collapsed. now we can go in depth as to whether the mechanism they used was legitimate or whether the validators were factually independent of mr kwon but it really does not matter
that is why people dont and shouldnt take any such claims very seriously. its primary purpose is marketing only.
Terra paused IBC bridging capabilities. This action has specific validators needed to execute it.
It also did not stop you from trading UST away, on the terra Blockchain itself.
never claimed otherwise. its just that this scalar value is very very low, might as well be zero for most defi
>Terra paused IBC bridging capabilities. This action has specific validators needed to execute it.
thats fine. i am not convinced that these validators acted independently of mr kwon. functonally the whole terra ecosystem may well be a dictatorship under kwon
If they held depositor funds safely, they couldn't pay interest.
And they did pay interest for a while, that was the liquidity.
That's what the deal is, same as any unsecured loan: high risk of losing your deposit, in exchange for steady interest payments for indeterminate amount of time.
It's like a casino game that pays 1.1 on a win and 0 on a loss, and you play once a month or whatever your staking period is.