Why is borrowing and lending in DeFi not a good story right now?
let's face it,DeFi does matter right now.
Although unexpected, it is true. Maybe, there's nothing likeThe total value locked in DeFi has soared from less than $700 million in January to over $7.8 billion at the time of writingThe facts better illustrate this point.
In short, DeFi has shown exponential growth, however, in any case, the sharpness of this growth has generally fueled the contradiction between the two. The same is true here, with many cynics calling for the need for restraint to prevent a bubble.
Compound Labs general counsel Jake Chervinsky is one of them, and Chervinsky recently wrote: “The DeFi space has begun to show signs of speculation, reminiscent of the initial coin offering (ICO) bubble of 2017.secondary title
Lending just a buzzword?
loan agreementloan agreement”。
As a concept, lending is something that almost everyone is familiar with, after all, it's actually a common saying. Now, consider the three key elements of a loan -Credit, Debt and Trusts. Now, juxtapose them with the many “borrowing” protocols that DeFi has to offer, and on the surface, everything seems to be fine, but on closer inspection, cracks appear to appear.
According to Chervinsky,Most people who use and participate in these protocols misunderstand the nature and usefulness of such projects."Borrowing" is just a buzzword, but it's being used incorrectly, possibly even dishonestly.
Credit, risk and trust, none of these aspects, nor the core principles of lending, nor any operability of these "loan" agreements.Consider that in none of these projects, due to the decentralized and permissionless nature of the networks they preserve, and the impossibility of identifying borrowers, the concept of trust does not play a role.
In fact, "The asset borrower of the interest rate agreement also has no obligation to repay the asset it borrowed”。
secondary title
semantic problem
The point is, labels matter, and so do semantics, consider the example cited by Chervinsky, the interest rate agreement and the loan agreement, the former provides an idea that it is too technical, which may be beyond the understanding of ordinary people; conversely, the latter is the basics, especially for those who are into it just for the money, even if it's not entirely accurate.
What does this reveal? Well, it tells us,The crypto community may finally understand the importance of semantics, however, there is a dangerous side to it. Inaccurate or even dishonest, adjectives that could well be applied to those who "in the name of investing back in 2017" they "Overpromising the potential of blockchain technology to solve all the world's problems”。
So many, like Chervinsky, should worry about another impending bubble, but it's not 2017 anymore, and in 2020, the key difference is visibility.Not only are users more aware of the risks associated with DeFi, but those behind such projects are also emphasizing it. In fact, only Compound’s Robert Leshnar described liquidity mining as “self-organizing unregulated.”
It’s too early to tell when the DeFi hype will stop, however, what is known is that the crypto community may be understanding this interesting game.
The original text comes from ambcrypto, compiled by the BluemountainLabs team, with deletions, the English copyright belongs to the original author, please contact the compiler for Chinese reprint.
