Bitcoin discussion and news

[q_w_e_r_t_y]

Are these actually up and running now? Been talked about for a long time but i didn't hear that it had actually been made to work and being used.

Yeah - lightning network has been running for quite some time now.

Here's a demo of a self-serve beer pump using it.

 

[q_w_e_r_t_y]

2021's statistics from the same source say that 49.5% of people in El Salvador have no internet access (link) and they also note in their report that the World Bank (where I got my figures) says 34% of people in El Salvador have internet access, as does the UN. The same report also says that only 6% of Salvadorans make online purchases, and only 6% pay bills online, while only 3.5% have a mobile banking account.

So to reiterate my point, whether the figure is 66% unbanked, or 49% unbanked (and I trust the 66% more than 49%) the same people will be left unbanked in a bitcoin system as are already unbanked in the conventional system. The people who will benefit most from this news will be the wealthy 6% that conduct regular financial affairs through the internet.

Those stats look strange, it says that those with internet access went up 15% between 2020 and 2021, but absolute numbers show a decline. I wonder if that is broadband give that internet penetration is lower than social media users and much lower than mobile users.

Lets say 50% are unbanked. To get banked, they need someone to approve them having a bank account.
But to go bankless, all they need is a data connection, (or even just access to an internet cafe for basic savings accounts).

 

[q_w_e_r_t_y]

It does already

Ah, yes, all those wars funded by bitcoin huh?

 

[q_w_e_r_t_y]

In general you don't need to pledge an item worth 1.5x the value of your loan amount to get access to a bank loan. Cefi operates exactly as an offline pawn shop would. Defi does the same but using a smart contract to reduce the risk that the lender will run off with your security.

My point was a general one. There are lots of things that go wrong in retail lending contracts. Locking the security into a smart contract on the lender's terms is a bad idea because smart contracts remove all of the flexibility from the relationship between the lender and borrower, to the advantage of the lender. There is no scope for renegotiation if anything goes wrong, even if it is something that can be fixed relatively quickly and painlessly, because the contract is self-executing.

Why to the advantage of the lender? Non-liquidatable loans pass all the risk to the lender.

Its true it cannot be modified tho and you dont get a 30 day cool-off period (although of course a contract could be written to introduce that

That's like saying that the real 'contract' between me and a vending machine is the dispensing of the product after I push the button. In actuality, me putting my money in and selecting the product is also part of the contract. The vast majority of smart contracts are just subsidiary parts of hybrid written agreements that contain standard contractual language in addition to code. In fact, I would conjecture that almost all smart contracts (apart from those used simply to transfer cryptocurrency from one wallet to another) have a written element.

No they most certainly are not. (And indeed its one of the risks of defi that a product could be messaged incorrectly and people could believe what is written rather than believing the code). There is no written contract at all, there is only you, your wallet and the code.

And as an aside, of course you can change a smart contract when it's been deployed - it just requires specific coding. That may be the way forward for retail lending smart contracts.

How? Find me a smart contract that has been modified since deployment

I cannot think of a single smart contract platform that allows this, I guess its possible that some of the corporate ones do, but I'd suggest thats a damn good reason to give them a wide berth and use a permissionless one just in case they do have this kind of backdoor hack built in.

I'll just give 3 examples:

1. Bankruptcy
2. An Asset Freezing Order (e.g. an s37 Freezing Order)
3. Supervening Illegality (e.g. the UK government making defi illegal)

In all 3 cases the law changes the status of a transaction. Having an asset bound up in a self-executing contract in any of these cases is a great way to know that something bad is going to happen, but be completely unable to do anything about it. Note that the law in each of these cases doesn't affect the operation of the smart contract. That's not necessary if the law operates at another level to affect the transaction.

OK - so the UK government decides that it is illegal to use defi, they will freeze all my assets if I do and bankrupt me.
Let them try.

They're regulated by so-called analogue AML/CTF rules and data protection rules to name a few. As I mentioned, any written sections of a hybrid agreement will be governed by a particular legal system too. Indeed, there's a whole section in the defi report that you just linked to that talks about how existing regulations and new regulations can and are applied in the defi context.

There are no written sections tho, unless you consider the code base as a "written section".

I have to confess I havent read that report in its entirety, and certainly there are attempts to regulate (like the FCA banning crypto derivatives), but in practice it is toothless. Paypal are currently offering crypto derivatives throughout the UK with a tonne of signups, no action taken ...and Paypal - as a formal legal entity, incorporated under company law and a primarily fiat-based user base are the easiest target ever.

How you going to track down a DAO with anon governance actors using unstoppable code to service anon wallets.

The second part of your post deals with regulatory enforcement, not regulation itself. That's moving the goalposts - like saying that murder is legal in Afghanistan, and when challenged arguing that the lack of central state power in isolated areas makes law enforcement difficult.

Yeah, I suppose that bit is true. Governments can pass any ridiculous law they like, but unless they can enforce it, it is meaningless.

 

[ffsear]

Yeah - lightning network has been running for quite some time now.

Here's a demo of a self-serve beer pump using it.

Bitcoin probably went up/down 10% while that half pint was being poured

 

[Colin Hunt]

Those stats look strange, it says that those with internet access went up 15% between 2020 and 2021, but absolute numbers show a decline. I wonder if that is broadband give that internet penetration is lower than social media users and much lower than mobile users.

Broadband has a much lower rate of penetration (the World Bank estimated it at around 10% in 2017). I think the variation in stats from year to year in their data is caused by a change in data collection methods from 2020 to 2021. It is interesting that you are choosing to split hairs with regard to the percentage of people who have no internet access instead of engaging with my broader point that the people who will benefit from bitcoin will be the 6% of people who already have both internet access and a bank account and are already carrying out financial transactions online.

Lets say 50% are unbanked. To get banked, they need someone to approve them having a bank account.
But to go bankless, all they need is a data connection, (or even just access to an internet cafe for basic savings accounts).

The reasons for people being unbanked are very similar to the reasons people lack internet connections. Poverty, poor regional infrastructure, lack of trust in service providers, etc. A young woman working a poorly-paid menial job in a remote area of El Salvador is unlikely to make the walk to an internet cafe to invest in bitcoin, whereas someone living in the capital who is already wealthy and carrying out their transactions online may be tempted.

 

[Colin Hunt]

Why to the advantage of the lender? Non-liquidatable loans pass all the risk to the lender.

Its true it cannot be modified tho and you dont get a 30 day cool-off period (although of course a contract could be written to introduce that

It's to the advantage of the lender because they're the party that writes the contract. And, as I mentioned, if you are going to default there is no ability to preemptively renegotiate the terms of the agreement. You just lose your security. That puts you in a worse situation than most retail borrowers at e.g. a pawn shop.

No they most certainly are not. (And indeed its one of the risks of defi that a product could be messaged incorrectly and people could believe what is written rather than believing the code). There is no written contract at all, there is only you, your wallet and the code.

The terms of service are also part of the agreement between you and the institution. They're written down. Blockfi also have a 27 page loan contract (again, written down) if you want to use your cryptocurrency as security for a loan. This contract is governed by the law of Delaware. Aave's terms and conditions state that Swiss law is the governing law and I'm presuming they have a written contract too. As I said above, these written contracts are standard form and give most of the power to the lender (Aave's terms even require you to submit to mandatory arbitration in cases of dispute, which further skews the balance of power).

How? Find me a smart contract that has been modified since deployment

I cannot think of a single smart contract platform that allows this, I guess its possible that some of the corporate ones do, but I'd suggest thats a damn good reason to give them a wide berth and use a permissionless one just in case they do have this kind of backdoor hack built in.

Would it not be better to have a permissioned blockchain that allows off-ramps to be coded into smart contracts in the event of certain events happening? That's already happening in international trade finance. I'd certainly rather borrow against an asset safe in the knowledge that if I know I'm going to make a late payment, I can renegotiate my loan so that I won't lose my security.

OK - so the UK government decides that it is illegal to use defi, they will freeze all my assets if I do and bankrupt me.
Let them try.

This is bizarre apocalyptic thinking that doesn't really engage with my point. My point is that if the nature of your transaction changes, traditional contracts give you a way to avoid either breaking the law or losing your money. Smart contracts are unable to do that by design, which limits their effectiveness in complicated areas such as retail lending. I was talking about borrower-side risks, not 'what if the government decides to take all my money?' speculation which is pretty unhelpful (at least in the UK context).

There are no written sections tho, unless you consider the code base as a "written section".

I have to confess I havent read that report in its entirety, and certainly there are attempts to regulate (like the FCA banning crypto derivatives), but in practice it is toothless. Paypal are currently offering crypto derivatives throughout the UK with a tonne of signups, no action taken ...and Paypal - as a formal legal entity, incorporated under company law and a primarily fiat-based user base are the easiest target ever.

How you going to track down a DAO with anon governance actors using unstoppable code to service anon wallets.

I've just given the example of Blockfi's 27 page long loan agreement. That is definitely written down. It is naive to assume that retail lending is going on in any meaningful way without there being a written agreement.

When it comes to regulating the market, you don't need to track anyone down. You just need to require that they have a license to operate in your market, and comply with all existing regulations. Those companies that wish to operate in large markets will have to abide by those rules, or remain a niche product. Companies in general prefer to make money rather than operate outside of regulatory frameworks due to libertarian magical thinking.

Yeah, I suppose that bit is true. Governments can pass any ridiculous law they like, but unless they can enforce it, it is meaningless.

See my point above about libertarian magical thinking. Submit to FCA regulation and gain access to the UK's retail lending market or operate outside of those regulations and remain perpetually on the edge of that market? Billionaire-backed companies like Blockfi are not going to settle for the edge of a market.

 

[q_w_e_r_t_y]

Broadband has a much lower rate of penetration (the World Bank estimated it at around 10% in 2017). I think the variation in stats from year to year in their data is caused by a change in data collection methods from 2020 to 2021. It is interesting that you are choosing to split hairs with regard to the percentage of people who have no internet access instead of engaging with my broader point that the people who will benefit from bitcoin will be the 6% of people who already have both internet access and a bank account and are already carrying out financial transactions online.

The reasons for people being unbanked are very similar to the reasons people lack internet connections. Poverty, poor regional infrastructure, lack of trust in service providers, etc. A young woman working a poorly-paid menial job in a remote area of El Salvador is unlikely to make the walk to an internet cafe to invest in bitcoin, whereas someone living in the capital who is already wealthy and carrying out their transactions online may be tempted.

I wasnt really picking, I was just wondering where the stats came from. I'm not particularly familiar with El Salvador, but I know in Africa, internet penetration is generally under-reported because most access the internet through mobile phones.

Again, all you need to engage with btc is an internet connection, and the digital divide is very real, but there are plans for universal access by 2022 through Coatl and of course there is also a crypto based solution to the issues of limited internet access.

 

[q_w_e_r_t_y]

It's to the advantage of the lender because they're the party that writes the contract. And, as I mentioned, if you are going to default there is no ability to preemptively renegotiate the terms of the agreement. You just lose your security. That puts you in a worse situation than most retail borrowers at e.g. a pawn shop.

You might get some bespoke contracts that are written by the lender (although I cant think of any off the top of my head) and this might become a thing once the London upgrade goes live as contract deployment will become much less expensive, but in general contracts are written by protocols and then both lender and borrowers use those generic smart contracts.

And there a few different protocols offering non-liquidatable loans that you cannot default on, in the example I quoted above, your loan even pays itself back of its own accord.

The terms of service are also part of the agreement between you and the institution. They're written down. Blockfi also have a 27 page loan contract (again, written down) if you want to use your cryptocurrency as security for a loan. This contract is governed by the law of Delaware. Aave's terms and conditions state that Swiss law is the governing law and I'm presuming they have a written contract too. As I said above, these written contracts are standard form and give most of the power to the lender (Aave's terms even require you to submit to mandatory arbitration in cases of dispute, which further skews the balance of power).

Blockfi is cefi not defi, so yes, that could be regulated.

I've never really read these terms, I doubt if anyone does, or even knows they exist. They are quite amusing to read tho. For example, Rari Capital - which (famously) was founded by teenagers, says that under 18s cannot use that service! I can just imagine the convo at their school

Anon teen 1 - Hey, the lawyers say we should put up these terms of service that say we cant use the code we've built
Anon teen 2 - Oh no, I better stop using it immediately.
Anon teen 3 - Yes. It is very important that we follow that instruction. If I catch any of youse using what we are building I will tell your mum.

Incidentally, its no coincidence that Delaware is the preferred choice of legal jurisdiction, as you can register a company in Delaware and open a fiat bank account in the company name through an anon eth wallet. Go on - try it!

Would it not be better to have a permissioned blockchain that allows off-ramps to be coded into smart contracts in the event of certain events happening? That's already happening in international trade finance. I'd certainly rather borrow against an asset safe in the knowledge that if I know I'm going to make a late payment, I can renegotiate my loan so that I won't lose my security.

Why do want to ask permission? Why not just use a non-liquidatable protocol if you are that risk averse?

This is bizarre apocalyptic thinking that doesn't really engage with my point. My point is that if the nature of your transaction changes, traditional contracts give you a way to avoid either breaking the law or losing your money. Smart contracts are unable to do that by design, which limits their effectiveness in complicated areas such as retail lending. I was talking about borrower-side risks, not 'what if the government decides to take all my money?' speculation which is pretty unhelpful (at least in the UK context).

I've just given the example of Blockfi's 27 page long loan agreement. That is definitely written down. It is naive to assume that retail lending is going on in any meaningful way without there being a written agreement.

There is $53 bn locked in defi.

I doubt if even 1% of that belongs to people who have ever signed anything off chain. I certainly havent.

When it comes to regulating the market, you don't need to track anyone down. You just need to require that they have a license to operate in your market, and comply with all existing regulations. Those companies that wish to operate in large markets will have to abide by those rules, or remain a niche product. Companies in general prefer to make money rather than operate outside of regulatory frameworks due to libertarian magical thinking.

Yes, companies do, but the majority of entities in defi are not companies, they are DAOs.

See my point above about libertarian magical thinking. Submit to FCA regulation and gain access to the UK's retail lending market or operate outside of those regulations and remain perpetually on the edge of that market? Billionaire-backed companies like Blockfi are not going to settle for the edge of a market.

Yeah, thats true, another reason why defi is superior to cefi.

 

[q_w_e_r_t_y]

Go on - try it!

Security warning: do not try this with a wallet that you have funds in.

If you are going to spin up a delaware company on the blockchain do it with a fresh wallet.

 

[littlebabyjesus]

I guess it is a bit mad that a loaf can cost

25,000 sats on 1st Jan 2019,
14, 000 sats on 1st Jan 2020,
3,100 sats on 1st Jan 2021

but I'm not really complaining

You're not a baker, I trust.

There is a weird underlying myopia here from you and all the other enthusiasts that can't see past the fact that you've made money out of buying and selling bitcoin. Somehow because you made money out of it, perhaps a lot of money, I don't know, therefore it can't be a bad thing. Do you extend the same generosity of thought to people who make billions out of shorting currencies?

 

[Colin Hunt]

And there a few different protocols offering non-liquidatable loans that you cannot default on, in the example I quoted above, your loan even pays itself back of its own accord.

Which protocol was that? If it was Ruler Protocol then it is explicitly stated on their website that in cases of default your security is lost.

Blockfi is cefi not defi, so yes, that could be regulated.

Defi can be regulated and is already regulated by numerous legal regimes, as I've already said and as the WEF report that you provided explicitly states.

I've never really read these terms, I doubt if anyone does, or even knows they exist.

That doesn't mean you're not bound by them. Nor does it mean that they don't exist.

Why do want to ask permission? Why not just use a non-liquidatable protocol if you are that risk averse?

The central problem of smart contracts is their lack of flexibility, which limits their usefulness in many business sectors. Studies have shown that very few commercial contract breaches end in the courts and most are solved by negotiation or other informal methods. Smart contracts ignore that commercial reality by forcing parties to abide by specific consequences for breach, which I think is caused by people who have no clue how the law works making assumptions. My post was simply trying to explain a way that more flexibility could be built into a smart contract, giving the example of international trade where such flexibile arrangements have been made. And I'm not sure that the situation I described would unfold any differently under a non-liquidatable protocol - you'd still lose your security if you defaulted, with no ability to renegotiate (although if your point above is talking about a protocol other than Ruler I'd be happy to be corrected).

There is $53 bn locked in defi.

I doubt if even 1% of that belongs to people who have ever signed anything off chain. I certainly havent.

At minimum they've signed the terms of service.

Yes, companies do, but the majority of entities in defi are not companies, they are DAOs.

So what makes 'defi entities' different from companies with regard to incentives to comply with regulators and gain new customers. Do DAOs not want additional money, customers and security?

 

[q_w_e_r_t_y]

Which protocol was that? If it was Ruler Protocol then it is explicitly stated on their website that in cases of default your security is lost.

It was actually Alchemix I was referring to.

Ruler works slightly differently, as it is fixed term loans - you borrow against collateral for x period of time, then you can either default and give up all or some of the collateral, or repay the loan+interest and redeem the collateral.

Defi can be regulated and is already regulated by numerous legal regimes, as I've already said and as the WEF report that you provided explicitly states.

That doesn't mean you're not bound by them. Nor does it mean that they don't exist.

OK, they exist, but how are they going to enforce regulations

For example trading in crypto derivatives is banned in the UK. How exactly are
1. the FCA going to stop me trading in them?
2. the FCA going to stop me writing a derivatives contract that other people can use?

The central problem of smart contracts is their lack of flexibility, which limits their usefulness in many business sectors. Studies have shown that very few commercial contract breaches end in the courts and most are solved by negotiation or other informal methods. Smart contracts ignore that commercial reality by forcing parties to abide by specific consequences for breach, which I think is caused by people who have no clue how the law works making assumptions.

There are decentralised courts systems, although they dont deal with smart contracts, only analogue ones.
Check out Kleros.

My post was simply trying to explain a way that more flexibility could be built into a smart contract, giving the example of international trade where such flexibile arrangements have been made. And I'm not sure that the situation I described would unfold any differently under a non-liquidatable protocol - you'd still lose your security if you defaulted, with no ability to renegotiate (although if your point above is talking about a protocol other than Ruler I'd be happy to be corrected).

The strength of smart contracts is their immutability, that they cannot be renegotiated.

It would certainly be possible to have fixed term rolling contracts where the terms get renegotiated at intervals. So you could have an hour long contract that gets renewed or not, on the same terms or not, in perpetuity until one or other party decided not to renew on the terms offered.

It is possible to write an incomplete contract but it would generally be seen as undesirable and a security risk, there does seems to be some folks working on deliberately incomplete legal primitives. I dont know much about this tho, and I cant see why anyone would want such a thing.

At minimum they've signed the terms of service.

I have certainly never signed anything analogue to use any defi protocol.

You did send me off on a blockchain hunt here, just to see if I had ever signed a terms of service on-chain that a protcol had slipped in to their authentication without me noticing, and as far as I can see I have never done so. I would also imagine that it would be quite a big deal if any protocol ever did. There is certainly no need to sign a terms of service, even if a protocol did try enforce it, you could just directly interact with the contract, through something like etherscan.

A protocol could blacklist a wallet for violating their TOS, I guess, or only whitelist wallets that signed....but then either you use a non-blacklisted wallet, or someone forks the code and removes the whitelisting requirement.

So what makes 'defi entities' different from companies with regard to incentives to comply with regulators and gain new customers. Do DAOs not want additional money, customers and security?

Some DAOs will want additional "money" and "customers" and may be prepared to compromise security by conspiring with regulators to get it.
But most value permissionlessness, censorship-resistance, borderlessness, openness and neutrality above the trappings of Morloch.

 

[Colin Hunt]

It was actually Alchemix I was referring to.

OK so if I've got this right Alchemix allows you to take a loan out of up to 50% of the collateral that you've deposited. This loan is then paid back by the yield from your collateral. Which begs the obvious question: what happens if the yield isn't of the required level to pay back the loan?

Alchemix is also not fully decentralised which poses a security risk, and the transaction fees are relatively high which is a barrier to entry for users who aren't wealthy.

In any case don't forget that this whole discussion started because you claimed that defi and cefi platforms were like banks. We're now so far removed from that discussion, talking about risky and complicated investment products for high net worth individuals with exceptional technical expertise, that it's almost surreal.

OK, they exist, but how are they going to enforce regulations

Again we're at the nexus between regulation and enforcement due to you moving the goalposts. As specific regulations of defi platforms are in the works any ideas regarding enforcement are purely speculative. However, strict liability of coders for any losses caused by their products, combined with safe harbour for defi platforms that work with regulators, would be one idea. In the case of semi-decentralised platforms like Alchemix you could also go after the people who hold governance powers, and their assets.

There are decentralised courts systems, although they dont deal with smart contracts, only analogue ones.
Check out Kleros.

I remember reading the Kleros whitepaper and thinking that they don't understand anything about international arbitration, and that many of their use cases would be impossible to implement, and possibly illegal.

The strength of smart contracts is their immutability, that they cannot be renegotiated.

We're just going round in circles on this point. In some cases the strength of smart contracts is in their immutability. In many other cases, particularly in complex fields, renegotiation is a normal part of contracting. Smart contracts are ill-equipped to deal with this business reality. Earlier I gave three examples of cases where traditional contracts allow people to exit painlessly from agreed deals: bankruptcy, court orders, and supervening illegality. You failed to explain how self-executing smart contracts can deal with those scenarios, and side-stepped the issue. So I'll ask again, how is it a strength if a contract is too inflexible to deal with relatively common legal issues?

Some DAOs will want additional "money" and "customers" and may be prepared to compromise security by conspiring with regulators to get it.
But most value permissionlessness, censorship-resistance, borderlessness, openness and neutrality above the trappings of Morloch.

I'm not sure if this is libertarian magical thinking or not to be honest. In any case, those DAOs that work with regulators will benefit and those that don't will remain niche products.

As we keep going round in circles about certain key issues, I'll give you a final chance to answer my questions about the weaknesses of smart contracts in certain situations. If you don't answer me then I'll presume that you're not interested in having a good faith discussion. If so, there's no point in me continuing to respond to you.

 

[q_w_e_r_t_y]

I am genuinely happy to have a good faith discussion, but I feel its like talking in a different language.

OK so if I've got this right Alchemix allows you to take a loan out of up to 50% of the collateral that you've deposited. This loan is then paid back by the yield from your collateral. Which begs the obvious question: what happens if the yield isn't of the required level to pay back the loan?

Negative yield you mean?

In practice it is extremely unlikely to occur and even if it did, its unlikely to be so negative for a sufficient period of time that you would end up in "negative equity", although yes, I do suppose its theoretically possible.

Alchemix is also not fully decentralised which poses a security risk, and the transaction fees are relatively high which is a barrier to entry for users who aren't wealthy.

Both of those are true - and a hybrid model is how most DAOs are operating at the moment and yes, fees are high. The industry is literally 3? 4? years old however and the path is made by walking. Enhanced governance is critical and L2 solutions, like Matic, Fantom etc will bring down fees, as will the London hard fork scheduled for July.

In any case don't forget that this whole discussion started because you claimed that defi and cefi platforms were like banks. We're now so far removed from that discussion, talking about risky and complicated investment products for high net worth individuals with exceptional technical expertise, that it's almost surreal.

No, I said Cefi was like a bank.
Defi is not like a bank, which is why I like it.

Again we're at the nexus between regulation and enforcement due to you moving the goalposts. As specific regulations of defi platforms are in the works any ideas regarding enforcement are purely speculative. However, strict liability of coders for any losses caused by their products, combined with safe harbour for defi platforms that work with regulators, would be one idea. In the case of semi-decentralised platforms like Alchemix you could also go after the people who hold governance powers, and their assets.

Well, yeah, you could. But you'd have to find them first, remember that there is no guarantee that any wallet is controlled by one person, or even multiple people (bots are a thing remember!). Then work your way though things like delegated staking, delegated staking to smart contracts, hope that they never used a tumbler or a 2key contract, and that the protocol governance didnt use homographic encryption or zksnarks and thats before you start looking for their assets.

Things are sloppy at the moment certainly, but if this was ever a serious risk there is a whole tool box out there.

I remember reading the Kleros whitepaper and thinking that they don't understand anything about international arbitration, and that many of their use cases would be impossible to implement, and possibly illegal.

Probably illegal, yeah, and....

We're just going round in circles on this point. In some cases the strength of smart contracts is in their immutability. In many other cases, particularly in complex fields, renegotiation is a normal part of contracting. Smart contracts are ill-equipped to deal with this business reality.

But they aren't trying to "deal with this business reality".
Thats the whole point of defi - what you percieve as "reality" is nothing of the kind, its all made up, and it can be made differently. There is no longer any need to "deal with this business reality" and "normal parts of contracting".

I think the rules are shit, and I'm not playing by those rules.
You say I must play by the rules, cos them's the rules
I give you different rules and your response is that it doesnt follow the rules.

Do you see the issue here.

Earlier I gave three examples of cases where traditional contracts allow people to exit painlessly from agreed deals: bankruptcy, court orders, and supervening illegality. You failed to explain how self-executing smart contracts can deal with those scenarios, and side-stepped the issue. So I'll ask again, how is it a strength if a contract is too inflexible to deal with relatively common legal issues?

The equivalent of bankrupcy in defi is liquidations (you get out of a deal by a liquidator taking your collateral). Unsecured lending is not generally a thing as yet.

Court orders - its hard to search cases on Kleros, but it has definitely dealt with incomplete smart contracts, where there was ambiguity. Interestingly there was a case with a dispute with Aragon over a grant that they considered unfulfilled, and they sued through the trad legal system to get their money back, a properly constructed smart contract would have eliminated the need for that.

Supervening illegality - I dont actually know what this is but I;m guessing that its that some law changes in the interim that renders the smart contract illegal. I guess this could happen, say when one SC relies on another which breaks, in which case all dependent SCs are broken. I cant think of any but I'm sure its happened. Will go down that rabbit hole another day.

I'm not sure if this is libertarian magical thinking or not to be honest. In any case, those DAOs that work with regulators will benefit and those that don't will remain niche products.

Well, thats a live debate right now on Uniswap, initial indications are to commit around $25m for a political defence fund. I cant say I think its a good thing, and I suspect it might get scuppered soon.

 

[littlebabyjesus]

I don't pretend to understand in detail what is being discussed above, but complex financial instruments that are sold as guaranteed (one might say AAA) returns?

We've been here before.

 

[Argonia]

Get the monarch off the notes and coins and create the Britcoin.

 

[BigTom]

I don't pretend to understand in detail what is being discussed above, but complex financial instruments that are sold as guaranteed (one might say AAA) returns?

We've been here before.

Consistent returns of 9%? hmmm..

Madoff's annual returns were "unusually consistent",[50] around 10%, and were a key factor in perpetuating the fraud.[51] Ponzi schemes typically pay returns of 20% or higher, and collapse quickly

Madoff investment scandal - Wikipedia"unusually,factor%20in%20perpetuating%20the%20fraud.&text=One%20Madoff%20fund%2C%20which%20described,during%20the%20previous%2017%20years.

But nah it's fine, just take out that self-repaying loan! IRL infinite money glitch!
I was going to ask how that worked but the conversation about has, I think, confirmed what I thought - those returns are predicated on an ever increasing price of BTC against fiat currencies. It'll work until it doesn't.

 

[kabbes]

After all, it’s not like we’ve entered any phases of time before in which Bitcoin has sharply declined in value against the dollar…

I’m still also bemused at the idea of loans that can only happen where somebody has significant collateral. Like nobody ever needs a loan without already having the money. Also, I am amused that the whole basis of this so-called loan is that you already have Bitcoin but this is actually useless so you use it to borrow the dollars that you really need. Again, I don’t think these use cases are making the argument that the Bitcoin believer is hoping. More, the opposite.

Bitcoin is ultimately antithetical to the whole idea of loans anyway. Loans are the real-world way that actual real money is created. A bank writes down that I have £100 but I also owe them £100 and suddenly there is an extra £100 in the world. Bitcoin proponents think that is the basis of the very inflation they are terrified of. We have just created money out of the air with no need to expend the energy of a medium-sized country to do so! This is against everything that the Bitcoiners believe in. Proper loans that people who aren’t already rich would recognise as loans are never going to exist based on Bitcoin.

 

[littlebabyjesus]

Also a disdain for the idea of backing up the money creation process with legal regulation puzzles me.

For all the current system's faults, that there is legal protection for the numbers in a bank balance is a good thing. Who would think differently? Crooks and tax evaders, perhaps, but who else?

 

[kabbes]

Also a disdain for the idea of backing up the money creation process with legal regulation puzzles me.

For all the current system's faults, that there is legal protection for the numbers in a bank balance is a good thing. Who would think differently? Crooks and tax evaders, perhaps, but who else?

It’s the ultra-anti-social libertarian wet dream. Nobody should have any faith in any social structures whatsoever.

 

[butchersapron]

I can't help thinking of the Walter Benjamin thing every time i see another breathless post from once red hot socialist qwerty on this thread:

Behind every fascism there is a failed revolution.

 

[Storm Fox]

I've been busy the last day and have just could up with this thread as I wanted to read it through and I still not sure I have it right.

For example if I wanted to buy a car with a loan, it not really a loan it a conversion to my local fiat currency, which I would need to payback if I want my bitcoin back, but I have a item worth what crytpo I checked out so even if I don't repay the load I've lost nothing apart from the future possible value of the crypto.

But if I came up with any idea to make a Widget or a company selling Widgets, traditionally I would go to the bank and state my case and they would lend me the money or not, and it would have set out rules on repayments of that loan.

Or if I wanted to buy a house the bank would work out whether I'm worth the risk or not and give me the money. If I fail then the bank takes the house.
What's the equivalent in the world of crypto? Who takes the secured asset and what laws are there to prevent either party reneging in the country I'm buying the house is?

 

[Colin Hunt]

Thanks for your response. I don't want to clog up the thread too much so I'll just respond to the key bits of your post.

Well, yeah, you could. But you'd have to find them first, remember that there is no guarantee that any wallet is controlled by one person, or even multiple people (bots are a thing remember!). Then work your way though things like delegated staking, delegated staking to smart contracts, hope that they never used a tumbler or a 2key contract, and that the protocol governance didnt use homographic encryption or zksnarks and thats before you start looking for their assets.

Things are sloppy at the moment certainly, but if this was ever a serious risk there is a whole tool box out there.

As I said, I was just speculating about what could be done to regulate such entities and my response was thought up in an hour or so. Any actual regulatory solution will be much more complex and will involve cooperation between regulators and actors in the field (who'd have an incentive to root out and punish bad actors).

Probably illegal, yeah, and....

Possibly illegal and therefore unlikely to become anything more than a niche product. Any distributed app would be very unwise to include borderline illegal arbitration code.

But they aren't trying to "deal with this business reality".
Thats the whole point of defi - what you percieve as "reality" is nothing of the kind, its all made up, and it can be made differently. There is no longer any need to "deal with this business reality" and "normal parts of contracting".

I think the rules are shit, and I'm not playing by those rules.
You say I must play by the rules, cos them's the rules
I give you different rules and your response is that it doesnt follow the rules.

Do you see the issue here.

You think the rules are shit so you're buying into a system which enthusiastically codes those rules into unchangeable self-executing contracts?

My point is that extra-legal methods of dispute resolution are much more common than legal methods, and mutual aid is a key part of human relations in all social fields, including business, in a way that the legal system does not, and is not designed to, account for. By coding immutable smart contracts, you're removing all opportunity for human understanding, negotiation, and mutual aid. This can be a good thing, such as when there's an imbalance of power between parties. However, in many other instances the lack of flexibility is a bad thing because it reduces the chance for parties to come to a mutually agreeable solution when something unexpected happens.

Well, thats a live debate right now on Uniswap, initial indications are to commit around $25m for a political defence fund. I cant say I think its a good thing, and I suspect it might get scuppered soon.

It looks like they've accepted that regulation is inevitable and have decided to work within the system.

 

[Yossarian]

Nobody wore masks at a massive Bitcoin conference in Florida and a lot of people caught COVID - got to wonder if there was a "using the blockchain for contact tracing" seminar at this thing.

Bitcoin conference attendees report testing positive for Covid after returning from Miami

Some of the 12,000 attendees who flew into Miami last weekend for the first big tech conference in more than a year have started testing positive for Covid.

www.cnbc.com

 

[Storm Fox]

Related to Crypto is NFTs (What are NFTs and why are some worth millions? )

Someone has paid $11.8M for an NFT linked to this piece of art.

Sotheby's is auctioning a rare CryptoPunk NFT in another digital trailblazing move for the broker

A rare NFT is going up for auction and advanced bidding suggests that, like many NFTs, it won't be cheap.

edition.cnn.com

Why would anyone pay that much for a token this: https://dynaimage.cdn.cnn.com/cnn/q...sothebys-auction-cryptopunk-nft-top-image.jpg

I'm genuinely totally at a loss to see any benefit of this.

 

[Yossarian]

Why would anyone pay that much for a token this: https://dynaimage.cdn.cnn.com/cnn/q_auto,w_1903,c_fill,g_auto,h_1070,ar_16:9/http://cdn.cnn.com/cnnnext/dam/assets/210604044726-sothebys-auction-cryptopunk-nft-top-image.jpg

I'm genuinely totally at a loss to see any benefit of this.

Because they think they'll probably be able to sell it to another sucker for more.

 

[Storm Fox]

Because they think they'll probably be able to sell it to another sucker for more.

I was hoping for a slightly more nuanced answer, but there probably isn't one and that's it.

 

[not-bono-ever]

Billionaire Bitcoin Investor Mark Cuban Calls For Crypto Regulation After Price Of Radical New Token Suddenly Crashes To Zero

Mark Cuban, the billionaire investor and owner of the Dallas Mavericks that has begun dabbling in bitcoin and crypto, has called for regulation of burgeoning decentalized finance (DeFi) space...

www.google.co.uk

Y see, speculation outside the watchful eye of the government is the best thing ever. Until it goes tits up, then it should have been regulated. The sour faced twat.

 

[stdP]

I dare say these upstanding citizens are merely emigrating to El Salvador and the relevant paperwork is in the post.

South African Brothers Vanish, and So Does $3.6 Billion in Bitcoin

A pair of South African brothers have vanished, along with Bitcoin worth $3.6 billion from their cryptocurrency investment platform.

www.bloomberg.com