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DeFi: What is it?

Discussion in 'The Kruse Longevity Center' started by Jack Kruse, Jan 11, 2021.

  1. JanSz

    JanSz Gold

    When I want to get exposure to
    ETHEREUM 2.0
    What would I buy (while at Charles Schwab)?

    When would I do it?
    EDITED. 3/1/2021
    The answer is
    secondary comment, it does not make sense to buy anything other than BTC, in the case of the USA that can also be GBTC.

    Last edited: Mar 1, 2021
  2. Jack Kruse

    Jack Kruse Administrator

    If your health is quantum your money should be crypto. Have you got your Bitcoin card yet? My rewards are mounting. I hope everyone in my network realizes these card rewards are free hard money powered by BTC! Become decentralized and bank on yourself! https://blockfi.com/credit-card-waitlist/?r=21gNy
    Victoria B. likes this.
  3. Jack Kruse

    Jack Kruse Administrator

    This is How Wall Street Becomes Obsolete
    The internet of money is about to rule finance.

    We’re witnessing a turning point in finance. The time when young, online traders, were able to band together to achieve their own financial goals. We’re seeing what happens when those financial goals clash with large entities, who have been controlling the game until now. They cry time out and claim foul play, even though no rules were broken.

    This anti-establishment ethos is not new to cryptocurrency enthusiasts; it’s why peer-to-peer money was created. The limited trading on investment apps, the shutting down of social media forums resulting from this trading frenzy —it’s the product of dealing with the old guard and people are fed up. They’re angry. Luckily, a new system where individuals can be in control is being built. That’s why decentralized finance will win. It’s simply better. It is filled with more freedom.

    Can crypto learn anything from r/wallstreetbets’ unified execution of a short squeeze? The degree of social coordination involved is something the space as a whole aspires to, yet often falls short.

    A reddit post in r/cryptocurrency (which, like r/wallstreetsbets, boasts a million plus subscribers) entitled, “Honest question: why can’t the crypto community come together and act as one like the r/Wallstreetbets community did with GME to push Wall Street?” shows the frustration of the digital asset community.

    DeFi has a lot of factions. BTC DeFi vs ETH DeFi for example.

    I have enumerated the different factions of crypto in Clubhouse many time already, ranging from “shillers,” to “maximalists,” and “religious” types.

    In ETH 2.0 there are tensions between developers and traders, venture capital and developers, venture capital and traders, has also arisen, as have numerous conflicts, some arguably necessary, over technical specifications like the recent pushback EIP-1559 received from Ethereum miners.

    Superficial Similarities
    Digging deeper, it appears the similarities between the two “degenerate” communities don’t cut so deep. DeFi represents the efforts to build a new financial system. WSB wants to burn the old one down, or at the very least, beat it at its own game.

    In a simple game with an easily identifiable villain, unity is easy. It’s WSB versus Wall Street.

    But, DeFi, as an innovative industry, faces the more nebulous challenge of surmounting, in numerous technical and regulatory obstacles, as the space attempts to develop into something that a person following the WSB ethos could eventually embrace.

    DeFi is not a simple community of builders. If it were, perhaps it could achieve the unity of WS. But DeFi involves traders, venture capitalists, idealists, and perhaps most importantly, builders, from which much conflict stems.

    And that’s just this one niche. Challenges and villains are different for other sub communities within crypto: Bitcoiners, Ethereans, LINK marines, XRP army –– they all have different world views and goals.

    As the old saying goes, it’s easier to destroy than create.

    Maybe crypto Twitter could learn a lesson from the WSB community, but if traders in both worlds are ultimately looking for the best ecosystem to put money to work, then WSB should take a look at decentralized finance.

    DeFi is, at its core, open, non-custodial, transparent, and decentralized. Its exchanges cannot be shut down, and hence cannot be subjected to intermediation.

    And for all the ––most times justifiable–– complaints about confirmation times and gas costs, traditional finance can also break down under the weight of heightened activity.
    Robinhood was down for 2 hrs; TD Ameritrade has placed restrictions on GME trades; Trading 212 had disrupted service; Regulators suggested a 30-day GME halt. That is what centralized finance thought was wise........was it? Or did it anger several of the factions of silly talking monkeys.

    At its most meritocratic, DeFi turns everyone with an internet connection into a potential investor and opens up the same suite of financial products accessed by institutions to individuals. There is no privileged information; all the data is publicly available on the distributed ledgers where assets trade.

    With Discord’s banning of WSB’s channel, it may be time for the two groups of DeFi degenerates to talk.

    As the meme goes, silly talking monkeys get stronger when they work together.
    ND Hauf, Victoria B. and JanSz like this.
  4. Jack Kruse

    Jack Kruse Administrator

    DeFi is coming fast to BTC and it will likely overtake DeFi on ETHER

    Discreet Log Contracts (DLC) are a new type of smart contract which limit the information gained and influence of oracles, and can run on the very limited scripting system present in Bitcoin, without the need for more complex languages such as in Ethereum.

    DLC works by precomputing a wide range of potential outcomes for a given contract, and when the oracle announces an event, the event-dependent correct outcome can be published. There are a number of applications where this model applies, and the one that we’ll be starting with first is Bitcoin settled dollar futures. This use case introduces a useful tool to mitigate the volatility of Bitcoin.
  5. Jack Kruse

    Jack Kruse Administrator

    History lesson for the group:
    Just curious what the top 10 altcoins by market cap were 4 years ago. This is their performance vs. #BTC
    ETH -39%
    XRP -73%
    LTC -78%
    NEM -88%
    DASH -93%
    ETC -93%
    XMR -75%
    XLM -65%
    GLM -93%
    REP -92%
    Altcoin diversification is a waste of time when you consider the move of BTC over the last 4 years.
    Sean Waters, Victoria B. and GavinH like this.
  6. Sean Waters

    Sean Waters New Member

    John Schumacher likes this.
  7. ND Hauf

    ND Hauf Pleb

    I like the 8,000 shares of BTC. I used to be a fan of ETH back in 2016 but have since changed my tone and worry about the fundamentals of the overall project and structure of the business. All the original developers of ETH have left and started their own companies or left the space entirely. check out this link....

    John Schumacher and Sean Waters like this.
  8. Sean Waters

    Sean Waters New Member

    Me too mate.... I think, and wonder, if everything else outside of BTC is nothing but a distraction from the real ticket.

    I see so many of my friends (who were late to the BTC party, or so they think... $30-60k price range) and they prefer the coins that are $1-10 like ADA or XRP even though they are speculative bets at best. There is something about the lower price per coin (more supply) that invites them. However they all fail to look at the Market Ca (or the technology of the coin itself).

    It's become one big gambling "win big money" playground for idiots. They also seem to like Ethereum, I guess because it's still affordable to get 1 or 2 coins if you have some savings and makes them feel like they're in something more legitimate.

    They then ignore BTC and say things like "XRP to $1000 in 2021".... but if they looked at the market cap, they'd see that would require XRP to generate $45 Trllion. Which is 45x Bitcoins total cap. I mean.... *facepalm*

    I'm a BTC fanatic, on the other hand. Really gets my dick hard now I've learned about it. I think all of the struggle and division across humanity, all the conspiracies, all the bullshit, can end with a construction of a new world.... and fundamentally, as ugly as it is to some people (not to me), Bitcoin and "Money" or "value exchange/ Trade" is the Foundation of that House. There is no better Groundworker than Satoshi, and no better Foundation than Bitcoin.
    Last edited: Apr 16, 2021
  9. Jack Kruse

    Jack Kruse Administrator

  10. Sean Waters

    Sean Waters New Member

    Was a great podcast, them boys are funny. Think the average person can learn more from that podcast about Bitcoin / DeFi / ETH than watching 100s of different videos.
    ND Hauf likes this.
  11. Jack Kruse

    Jack Kruse Administrator

    ND Hauf likes this.
  12. Jack Kruse

    Jack Kruse Administrator

    First, I don’t trust the decentralization of the ETH protocol. In the past, ETH has been governed by the direction of a few key influencers. If you haven’t discovered yet, the essence of this entire movement is removing the authority of a few and putting that power into the hands of the many. This occurs through a system of consensus (not governance) and a core tenant of making sure it is feasible is if all interested parties can run the code. If I want to run a full node on Ethereum, it's not straightforward. As Vitalik says, “Like, I, for example, am definitely unhappy with the fact you know that Metamask for example is just a client that directly talks to Infura, but whatever.” Many people in the ETH crowd will tell you that a full node is a “spectrum,” of decentralization, but in November of 2020, Infura went down and so did the exchanges which had to stop allowing ETH withdrawals of their tokens. More concerning for me isn’t just the lack of decentralization today, but how about in 10 years from now if the size of the code base keeps expanding, what does that mean for anyone interested in running a "full node" (ETH 2.0 plans on having 4 different types of nodes)? The reason the whole 2017 BTC big block Vs small block fork wars happened is that people (on the winning side) understood how important it was to keep the blocks small so anyone could run the consensus rules and subsequent incentive structure which caps the supply at 21 million coins. What about ETH 2.0? Ok, IF this happens, they move to a proof-of-stake (PoS) system. And PoS is just like the existing fiat system. If you have a bunch of money, you stake those positions and then you have more influence over the incentives of the overall protocol (through the control of the hubs routing & confirming transactions). This is what we are trying to avoid in the first place – gatekeepers and kingmakers. How about all the awesome things you can do with the applications on ETH? Decentralized finance is happening on platforms outside of ETH. For example, Hodl-Hodl is a platform that enables P2P lending & borrowing and it doesn’t have a native token. In fact, even if someone tried to shut down the website and servers hosting the platform, the existing contracts between both P2P parties can
    still settle and complete the terms of their contracts on the Bitcoin blockchain. I could keep going, but at the end of the day, I share a very similar PoV on the topic as Lyn Alden

    https://www.lynalden.com/ethereum-analysis/ (article linked).

    She’s suggesting ETH has too much technical risk and doesn’t demonstrate good decentralization, and I couldn’t agree more. Finally, I suspect a lot of people will point to the price action and suggest that’s the proof of why one should own ETH. For this point, I would strongly encourage people to go back and look at what happened during the summer of 2017. This was analogous in the previous Bitcoin bull market to what we are seeing right now. Back then, the price of Bitcoin had surged from nearly $700 to $2,800 over the first 365 days.

    [​IMG]Here's the chart for this cycle going from 11 May (halving date) at $8600 to 55,000 today (365 days later).

    [​IMG]But, during this same consolidation period (the two months leading up to the 365 day mark), ETH aggressively outperformed BTC (see chart). But what followed, was quite interesting, ETH never achieved the same market cap (in BTC terms) ever again.

    [​IMG]Will it happen again, like last cycle? I have no clue. Here's what the chart looks like over the last 2 cycles (ETH measured in BTC). But, having lived that previous cycle as a BTC investor, it sure feels the same (alts pumping while BTC went sideways at the mid-cycle).

    [​IMG]At the end of the day, this is my point of view. Do I have a bias toward BTC? Yeap. I think it's a better technical solution solving the problem at hand: Sound, censorship-resistant money, w/ timeless decentralization. Does that mean the market won't need a decentralized protocol for NFTs, Defi, or whatever else becomes the hot topic? Well, I have no idea. All, I feel like I DO know is the money is broke. Like REALLY broken. I'm looking at 100 trillion + bond market that's already priced to collapse and a technically sound money protocol with an immutable monetary policy that's ripe to receive the massive flow of funds. Like so massive, people can't comprehend it. If you think the managers coming from these markets are going to seek refuge in a non-government protocol that can be controlled by tech gatekeeps, I think you're kidding yourself. Anyway, just my two cents. I highly encourage you to think for yourself and invest YOUR money the way YOU see fit. Happy investing.
    Finally, here's one of the greatest investors of all time talking about Bitcoin versus ETH (& any other altcoin). He comes w/ a macro lens in a conversation where he just announced his opinion that the dollar is going to lose reserve currency status.

    "It's going to be very hard to unseat bitcoin as a store of value asset," says Stanley Druckenmiller btc. "Yahoo invented the search engine ... We all know what happened with Google versus Yahoo."
  13. Tarun

    Tarun Silver

  14. Jack Kruse

    Jack Kruse Administrator

    Aave is a decentralized pool-based lending platform. Lenders provide liquidity by placing tokens in the pool, and borrowers can use these funds by placing collateral. Multiple currencies are held in the pool, with the total liquidity denominated in ETH. Loans are over-collateralized, meaning a borrower must provide more collateral than they are borrowing from the protocol. There is no repayment schedule, partial or full repayments can be made at any time, and the loan can have infinite duration. Each borrow position can have a variable or stable interest rate.

    Interest rates are decided algorithmically: - for borrowers, the interest rate is determined by the number of funds in the pool - for lenders, the interest rate corresponds to the earn rate, with a liquidity reserve ensuring withdrawals are available at any time.
    Interest is earned through the use of A tokens. Upon depositing collateral, you receive an ERC20 token 1:1 pegged to the underlying asset deposited. Aave Tokens receive interest in real-time from both regular loans and flash loans. Aave Tokens are burned when collateral is withdrawn.

    Liquidations occur when the value of the collateral drops below the liquidation threshold; the protocol then offers the collateral at a discount for liquidators to purchase. A maximum of 50% of the loan can be liquidated, bringing the loan's health factor back above the threshold.

    Another feature of Aave is flash loans. Flash loans allow borrowers to borrow funds from the pool uncollateralized, as long as the funds are returned to the pool within one transaction block, along with a fee.
    If the total borrow amount is not returned the transaction is 'reversed'. Flash loans can be used for arbitrage, debt-refinancing, and collateral swapping.

    The AAVE token serves multiple purposes within the ecosystem. Holders can participate in voting on governance proposals, and also stake their tokens to the protocol Safety Module. The Aave Safety Module is the primary mechanism for securing the Aave lending protocol.
    Tokens deposited to the module will be used as a mitigation tool in the event of a shortfall. Staking providers are rewarded for this risk by receiving AAVE tokens distributed amongst depositors.
  15. ND Hauf

    ND Hauf Pleb

    Rumor has it AAVE is participating in the Blue phase of the Alonzo testnet. IF this is true and works as presented in the road map the ERC 20 Converter could be a game changer/life raft in the air for the DeFi space that is currently a passenger on the plane being re-built midflight=life raft for the deck party.

    All speculation coming out of the folks at UW.....In the last month Caitlyn Long, Cynthia Lummis, Gov. Gordon, and Charles H. have all visited the lab.

    I'm trying to connect all the dots in a rapidly moving space.
    Sean Waters likes this.
  16. Jack Kruse

    Jack Kruse Administrator

    How is Aave different from Compound?

    Aave uses Chainlink oracles for price feeds. Compound relied on Coinbase as oracle for DAI and ended up in millions of liquidations when DAI went to $1.30 on Coinbase. I think they changed it since then but unable to find anything with a Google search.

    In Aave lenders are screwed if the collateral collapses in value too fast or if the value of the collateral is miscalculated
    John Schumacher likes this.
  17. Jack Kruse

    Jack Kruse Administrator

    "The average American worker enjoys amenities for which Croesus, Crassus, the Medici, and Louis XIV would have envied him." —Mises

    Why do you need to pay attn to things like Aave that may one day replace banks?

    You can buy a cell phone today for $50 that all of the world's richest people who lived before 1990 could not afford. Let that sink in.............
  18. Jack Kruse

    Jack Kruse Administrator

    Unregistered DeFi markets may be illegal in the U.S., @CFTCberkovitz said in a speech Tuesday June 8th 2021. https://trib.al/dNKuPrF

    Usually by the time commissioners are willing to say something publicly they’ve already done a lot of research and analysis privately.
    Sean Waters and caroline like this.
  19. Jack Kruse

    Jack Kruse Administrator

    @AlyseKilleen was the best speaker as she shut the door on ETH DeFi and Olaf. Olaf Carlson-Wee became a poster boy of the shitcoin ICO boom. He was the first employee of Coinbase. Now he shills for Polychain capital.
    caroline and ND Hauf like this.
  20. Tarun

    Tarun Silver

    Sean Waters likes this.

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