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The core reason why Defi is not working

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Defi or decentralized finance is an alternative way to traditional finance. It sounds fancy, but it does not work in reality. Here is why:

Securitization

You cannot ignore the innovation of securitization that gives banks a further push on their asset management and expand their operation into more risky asset management in modern finance.

In the past, banks heavily relied on deposits from users, but with securitization, banks can turn illiquid assets into liquidated assets while raising more cash to make more loans.

In theory, a bigger pool with more loans can reduce default rates and make such financial instruments more secure.

In reality, it will trigger a chain reaction and melt down the entire finance in a second.

What makes security secure?

It is a way to make the default rate as accurate as possible, giving a higher security grade than the lower ones.

A lower grade of loan means a higher potential of default because there are not as straightforward as of default rate whoever originated can be calculated. 

There are many ways to calculate loan grading however, there are some factors, include:

  • The borrower’s credit history.
  • Quality of the collateral.
  • The likelihood of repayment of the principal and interest.
  • Cash flow of borrower that can sustain

Defi’s assumption

The loan grade is automatically low when you allow everyone to get loans from the smart contract without sharing financial background because there is no information about how likely the loan will be the default.

Also, the pool is open to all who can get in and out quickly, which makes it even harder to provide sustainable management of such loans.

Defi is very similar to subprime Morgage-backed securities.

The digital finance product is like a shell company with fake value stocks that attract investors to buy in with the high return rates and risk of defaulting at any time.

There is no innovation in preventing default rates but in speeding up cash flow transactions.

Defi only conveniences the money pooling process but has not improved the prevention of possible default and provided sustainable solutions for long-term gains. Instead, it just repackaged the bad loans and sold them for liquidity.

And even worse, Defi will have no mechanism to force investors to repay loans.

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Crypto Research

SBF is lying in front of the internet

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He is lying again in front of everyone.

SBF has no ethics…

Trying to play dump and not know anything wrong is the opposite of letting people know you are a total screw-up.

IF FTX US is solvent, why you filed bankruptcy in the first place?

All he tried to do was indirectly point questions to his achievement, which is to scam people and use their funds for his own purpose.

FTX US is insolvent and he has not authority to present himself into FTX US anymore.

Likely money from FTX US were removed to cover all other expenses…

I really wonder if SBF has any backup documents to prove himself.

He is a straight liar…

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Crypto Research

How did crypto go wrong this year

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As we approach the end of this year, everyone is still digesting the impact of the Internet-driven digital transformation in business and its associated headwinds. As a result, many businesses are looking ahead to the future with mixed feelings. On one hand, we have come a long way in building trust and self-awareness in our digital landscapes. On the other, we now have to acknowledge that some of these digital transformation efforts have been misguided or backward-looking. These are all good things—but they do not mean 2022 will be a great year for crypto. 

It’s hard to know what to take away from this year.

More crypto companies were bankrupted from Luna to 3AC to FTX and lost investors’ money. This is a classic ponzi scheme in which everyone misued users’ funds and steals to hedge their high risky bets, eventually leading to the collapse of everything. Crypto itself has nothing to do with all these business models of stealing people’s money, and it is a way they advertise and bring FOMO to people and lure their money into the space.

Everyone is working toward their own digital currency

While cryptocurrency is not done yet, countries have been tested their own CBDCs. It is a crypto-like digital currency without privacy. However, it can be a saver choice for many people to adopt.

Lesson Learned

What have we learned from this year? We need to go back to the fundamentals of crypto. Transparency, privacy, and permissionless are keys to making crypto unique. When crypto is suddenly worth ten folders, we abandon the fundamentals and chase money, making us vulnerable to scammers. We need to rethink why we joined and believe in crypto at the first place.

Conclusion

Crypto will be used in financial services. It will also likely find use in both the financial market and in the form of insurance eventually. In fact, insurance providers may be the first major players to embrace digital insurance—and this may include a blockchain-based platform. The ecosystem will vary from company to company, but most will have an online platform that facilitates the digital purchase, sale and management of coverage across multiple providers. However, to screen out bad actors before such adoption is a key to making crypto sustainable in the future.

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Crypto Research

How to crypto lending is dead

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Crypto lending is dead? What will replace it? How to get started with crypto lending? A recent FTX detailed the decline of crypto lending as a viable option in the wake of trust breaches. While crypto lending is still in infancy but its potential for misuse and potential conflicts of interest does not address the question why users funds kept being misused. We’ll explore why and how cryptocurrency lending has become such an toxic part of modern digital finance. We’ll also discuss some ways you can continue to use crypto and avoid crypto lending in all costs.

What is crypto lending?

Crypto Lending is a way for people to create money out of thin air! The technology is similar to borrowing money from other investors, but whoever runs a crypto lending business broke the trust and misused users’ funds to bet for high-risk venture capitals that lost all money that they can no longer pay off all funds they owed. The idea is that you, as the lender, create a “virtual” loan to someone else, usually with a small amount of collateral (fractional reserve). You then use the money to put into high risky investments from that person or pay for them with virtual dollars out of thin air. The “lender” loaned out of your money to help them potentially leverage high-risky bets and use your money to gain their profits. Lenders can even trade against your investments when you long the assets while they shorted the assets to double dip the profits.

Why does crypto lending no matter anymore?

There are no benefits to using a crypto lending option at all. Not all crypto lenders can provide transparency about their assets-backed reserves and are likely running fractional reserves with thin-air fake tokens to boost their own valuations. When they go bankrupt, their will file bankruptcy protection to protect their assets and liquidate all their crypto to defend themselves to go total losses. You are likely to receive a fraction of the money while they can preserve their assets that gained profits from your investments.

How to cryptocurrency lending is dead

This is the most common question we get: “How is crypto lending dead?” The short answer is that there are no longer viable financial solutions. 

2022 is the year large crypto lenders went bankrupt, from Celsius to FTX to BlockFi, all those companies are lied about their reserves and likely misused users’ funds for their own betting.

Damages from crypto lending

All bankruptcy gave one question about crypto: why did people lie about their businesses and violate their promises? The false assumption that crypto is always valuable is a problem and they use FUD and FOMO to lure investors into their questionable lending services and misguided users with their suspicious advertisements. Regulations are nothing to protect investors in crypto.

Conclusion

The future of financial products is uncertain. There is no one way to interpret the new year and get a clear perspective on what will happen. There are so many different scenarios and potential outcomes that it is difficult to predict. That being said, there are several scenarios that are very likely to come to pass. It is important to remain alert and participate in the ongoing financial market activity. If you are considering using a financial product, always research the product and make sure it is both legal and tax-effective. You also need to consider your personal financial situation and potential future expenses. That said, crypto is speculative, and crypto lending will not work.

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