HN user
I'm not sure you are replying in good faith.
But, you are still making the claim that a decentralized smart contract protocol would be better replaced with a centralized traditional database on a Raspberry Pi. We disagree.
Uniswap is a good application of smart contracts. Your comments explicitly suggest that Uniswap would be better run on something like sqlite, which needs a centralized owner, which is functionally the same as replacing a DEX with a CEX.
in every single case would be more efficient and better served by Visual Basic running on a single Raspberry Pi from a sqlite database
Your point is that centralized financial services on sqlite is good, decentralized protocols on a blockchain is bad? If that is your point, it's a funny one to make in a thread about a CEX collapsing.
Do you really feel that Uniswap is better run with sqlite on a Raspberry Pi? If so, you are advocating for putting your money into a CEX, because somebody has to own and control that database and physical device.
Uniswap, AAVE, MakerDAO traders will disagree with you.
I am one of these people: I had funds locked into a CEX, was lucky to pull them out some days before turmoil but others not so lucky. During that time my DeFi holdings were fine. I would now rather take on protocol risk of something established and proven like Uniswap, instead of risking with an unregulated CEX.
Depends where you look. Solend and Uniswap have different risks, to use comparison AAPL and some new hot unknown tech stock have different risks. Uniswap does not have code to pause withdrawals, does not have a DAO or governance structure to change the contract.
Risk profile in Uniswap and established DeFi protocol is more transparent than FTX. You cannot verify and audit a CEX, you have to trust they are doing things right, or trust the third parties who audit them. If you are skeptical of Binance or Tether audits then you understand the want for open source DeFi.
In that way, "DeFi" feels the same about the finance industry.
How? DeFi protocols are behaving predictably and not pausing user withdrawals or hiding billion dollar black holes in their balances.
A protocol is just code, code can have bugs. Another risk is around governance. Some protocols use proxy contracts, so a single developer or team can upgrade them. But they can accidentally push out a bug in a new version. Other protocols like Uniswap opt for non-upgradeable contracts, users have to opt-in to the new version.
Yes, a regulated centralized exchange is valuable for on and off ramp. All they would need to do is process user transactions, take a small fee, and not gamble with user funds. Regulators could do audits and keep consumers protected.
But regulators have failed to provide clear framework for exchanges in the US[1], so most CEXes are running off shore.
[1] https://www.cnbc.com/2022/11/11/op-ed-crypto-markets-need-re...
They are widely used and process billions per day.[1]
There are other problems with DeFi: protocol risk, transaction fees, speed, UX. They are newer and less known than CEXes and most users who buy and hold crypto on FTX or BlockFi do not know how to use the blockchain. Most of these problems can be overcome, like see L2 development, but it will take some time.
Here's a bigger list for you[1], the top 10 all have $1B+ TVL.
Yes, it's a risk. If a contract or protocol is several years old, processing billions per day, and the code is un-upgradeable, you might say the risk is lower.
I'd rather gamble with Uniswap protocol risk than FTX human fraud and greed risk.
Different category of risk.
CEX and DEX can both have hacks. An open source DEX can be verified, formally tested, and made immutable and un-upgradable on chain, like Uniswap.
Uniswap V2 contract is 2 years unchanged, $3.8B TVL and $1B daily volume, close to 10 year old Coinbase CEX. Not bad for being a joke.
A lot of crypto investors are day traders or naive hodlers who have no idea what blockchain and DeFi means. But DeFi protocols like Uniswap and Aave are holding up fine and are incapable of pausing user withdrawals.
A lot of day traders on FTX are learning first hand the value of DeFi and self custody.
A lot of the same things that these failing CEXes are doing. Custody of coins, trading, exchanging tokens, long and short positions, borrowing and lending. Most people on FTX are day traders or hodlers.
Another reason not to depend on CEXes. Real end game for crypto is DeFi and DEXes, not a shady company with a marketing team.
Beginning of the end for unregulated centralized exchanges. Possible beginning for DeFi and regulated CEXes. Or possible that regulators fail to distinguish them, and crypto stays flat for some years until a trad banking event revived interest in blockchain.
But really who cares? Smart contracts and stablecoins can continue to work the same no matter market volatility.
No one just sits on USDC dude
Plenty do, and plenty just use it as a stable coin instead of chasing yield.
because savings accounts are at 3% these days
Not everybody lives in the USA or want to do this.
USDC does not offer yield, but it is still useful.
Ethereum staking is actually a sustainable yield as long as there remains demand for block space.
The price can go very low and stable coins and DeFi protocols around those can still function exactly as they ever have. A well regulated stable coin will function like any other financial service the West is used to.
What exactly is going to happen? You can’t hide a multibillion $ black hole of debt in Uniswap.
But you can analyze funds and flows, this is how DeFi protocols works.
This happens all the time in crypto, look at DeFi which is very transparent and analyzable. If you build a custodial centralized unregulated exchange then yeah, this kind of auditing no longer works.
A lot of those affected by FTX are traders, investors. Taking bets on market. Or dumbly using FTX as a place to park their tokens, instead of self custody or multisig.
Reminder that this is not possible in a DEX or DeFi protocol. Can’t just hide the money when it’s all transparent on chain.
Crypto prices are tanking with this news but DeFi and the blockchain is doing fine. Uniswap and Aave still processing user funds securely.
Not on L2.
Yes. Uniswap and Aave user deposits are not affected by FTX meltdown and withdrawals cannot be paused by a single company.
People do use Uniswap. It handles similar volume per day as Coinbase.
Transaction fees are one reason. Speed and account UX is another. L2 development is on track to solve some of these problems.