# Whats the deal with DeFi?



## Cool Dog (May 31, 2021)

Sorry if I'm being a fucking n00b about this but how the hell it gives such insane results? thing is completely unregulated, how can you even know if you're not putting your money on a ponzi? 

And what is crypto being borrowed for? day traders? speculative biz? methheads needing funds for a new lab?

How does the system controls the allocation of collateral in case of default? are the smart contracts involved audited? by who?

What prevents whoever starts a defi fund from just taking the money from the pool and run?


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## What has to be done (May 31, 2021)

I'm gonna kill you in Rust.


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## Ms. Cegination (May 31, 2021)

Cool Dog said:


> how the hell it gives such insane results?


It provides a shitload of useful functions to the crypto ecosystem so it's naturally going to be very big, and the wheels are thoroughly greased by greedy fools losing their money chasing after easy gains.


Cool Dog said:


> how can you even know if you're not putting your money on a ponzi?


The best way is to learn to read smart contracts. But even still, there's no way to be 100% certain. You just have to get a feel for if something is suspicious or sounds too good to be true, or make peace with the modest profits well established systems like Pancakeswap or Uniswap provide.


Cool Dog said:


> And what is crypto being borrowed for? day traders? speculative biz? methheads needing funds for a new lab?


All of the above, but mostly the former two. One of the most common strategies is to borrow a stablecoin using BTC as collateral then trade the stablecoin for something else. Doing that allows you to hold BTC in the event of a pump while simultaneously being able to buy into a different coin.


Cool Dog said:


> How does the system controls the allocation of collateral in case of default?


Typically, when you put money into a defi loan platform you're provided a tokenized representation of it. The contract is programmed so that when you're overborrowed, it can execute a function that takes some of the tokens from you and sells them to pay down your outstanding balance.


Cool Dog said:


> are the smart contracts involved audited? by who?


Not always, but usually. There are companies like Certik that have made a business out of charging a fee for performing audits.
Keep in mind that an audit isn't a golden shield that fixes shit code or makes scammers into honest people. There have been at least 3 dozen 'audited' projects that have gone to shit because the code review wasn't thorough enough, the developers made an update that wasn't safe, or a seemingly innocuous contract function was used to transfer all of the money out.


Cool Dog said:


> What prevents whoever starts a defi fund from just taking the money from the pool and run?


The contract, if it's properly written and exploit free. If it isn't? Absolutely nothing.


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## Cool Dog (May 31, 2021)

Ms. Cegination said:


> the wheels are thoroughly greased by greedy fools losing their money chasing after easy gains.


Typical


Ms. Cegination said:


> The best way is to learn to read smart contracts. But even still, there's no way to be 100% certain. You just have to get a feel for if something is suspicious or sounds too good to be true, or make peace with the modest profits well established systems like Pancakeswap or Uniswap provide.


Isnt pancake full of shitcoins and wallet scams? even that certik place only gives it a 89 'good' score in security

I would take modest profits over practically burning my money on a pit any day


Ms. Cegination said:


> All of the above, but mostly the former two. One of the most common strategies is to borrow a stablecoin using BTC as collateral then trade the stablecoin for something else. Doing that allows you to hold BTC in the event of a pump while simultaneously being able to buy into a different coin.


BTC as collateral for stablecoins? what if BTC plummets?


Ms. Cegination said:


> Typically, when you put money into a defi loan platform you're provided a tokenized representation of it. The contract is programmed so that when you're overborrowed, it can execute a function that takes some of the tokens from you and sells them to pay down your outstanding balance.


So it automatically sells part of the collateral? wont that affect the amount you (the one giving the loan) gets in case of default?


Ms. Cegination said:


> There have been at least 3 dozen 'audited' projects that have gone to shit because the code review wasn't thorough enough, the developers made an update that wasn't safe, or a seemingly innocuous contract function was used to transfer all of the money out.


Is there a list I can see?


Ms. Cegination said:


> The contract, if it's properly written and exploit free. If it isn't? Absolutely nothing.


Great...


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## cantankerous jackalope (May 31, 2021)

The smartest money in the space is investing HEAVILY into DeFI. I would name some blue chip protocols but that might doxx me. Seriously look into this sector. Not even kidding. It’s gonna explode


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## Cool Dog (May 31, 2021)

cantankerous jackalope said:


> The smartest money in the space is investing HEAVILY into DeFI. I would name some blue chip protocols but that might doxx me. Seriously look into this sector. Not even kidding. It’s gonna explode


Why would it doxx you?


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