Crypto Currencies 149 items
Is DeFi Dead Already? (forbes.com)
DeFi (decentralized finance) is a revolution, but all uprisings can implode with the smallest of hitch or get crushed by the boot of the established order. They are also mostly brought down from within. Crypto is plagued by hitches.

How could it be otherwise? If you can’t make omelettes without breaking eggs, you can’t build a crypto future without breaking heads, wallets, smart contracts, laws, rules of established common sense, etc.

Ethereum, the blockchain on which the DeFi revolution is built, is meant to be a decentralized computing device that can be used to run programs that in turn speak to a Bitcoin-style blockchain. You can think of it as a virtual ATM if you like, if that is how you want to use Ethereum.

This is how the DeFi people want to program Ethereum and the programs are called “smart contracts.” There is no reason a smart contract could not obsolete all the tens of thousands of bank branches in the world that put even Bitcoin to shame for its colossal global energy footprint. In fact, computers are doing that slowly but surely anyway but in a centralized way the banks still own.

So far so good. Think of the glory of a financial world run by no one but enabled by disparate and diverse owners of a vast network of computers. All those government and corporate wonks would be obsolete, too and at last we would all be free of middlemen scamming, chiselling and slicing and dicing us out of our hard earned cash.

An explosion of tech genius will sweep away all the old disreputable gatekeepers. Hurrah!This breakthrough is why DeFi tokens are exploding in value. Their price charts look like 1999 (for stocks) and 2017 (for crypto) all over again. I myself am up to my ears in these tokens and have made amusing money from them so far. But there is a huge black cloud hanging over the whole arena.

Transaction fees.As DeFi exploded, so has Ethereum, and the cost of executing smart contracts for DeFi applications has gone ballistic. It is simply not viable to use these sites at the current costs unless you are swinging in big sums.You are talking of $10, $30, $100 in Ethereum to execute a single transaction on various of the significant platforms.

I won’t name and shame any particular one but when you go to pop $1,000 on deposit and earn 3% a year on a stablecoin, expect to be asked for $10, perhaps $20 or more to do so.

That’s a “nope” for lodging that money on the hope of earning $30 in a year. Sure, it makes sense if you are dropping $50,000 to $100,000 into one of these systems, but I for one don’t have that much trust to do that right now with all that might go wrong, and most simply don’t move money on that scale, period.

 I’m happy to play with a few thousand, but not when suddenly I’m $20 a click away for doing anything, including withdrawing it, with my money.Right now, at these costs, DeFi is a non-starter.

I’m not going to place a bet on Donald Trump losing the election if it costs me $80 in fees.

Is anyone? I don’t think so.These charges were meant to be cents not dollars, but the boom in DeFi has stuffed up the Ethereum network and the transaction costs have gone ballistic. So a cynic would say, “Well that was a quick bubble to get busted. DeFi is over already.”It could be.

But crypto has an amazing way of getting around its problems. Here is an off the cuff list of ways that will fix this issue:

1)     Ethereum is changing the way it operates from miners to “staking” nodes. This should crush transaction costs.

2)     Ethereum could tweak its current system to increase its computing power and make the network less congested some other way.

3)     DeFi platforms could shift to other Ethereum-a-like blockchains, which can cope with DeFi’s demands. (A good punt for speculators to play.)

4)     Platforms could re-engineer their (likely bloated) code to run faster and cheaper

.5)     Other technical solutions can be magicked up to decongest the current process like the sort of voodoo behind Bitcoin’s lightning network or some other nerd sorcery.

It’s easy to look at new tech and say, that is impractical, it doesn’t operate on current available technology fast enough to be viable, but that is always a mistake. I know I made it in computer games 35 years ago.

The winner in tech development always abuses computer resources and wins because those resources always balloon to catch up and the greedy code dominates the lean code with its juicy plumpitude.“It will never work” is famous last words in technology.

What is more, DeFi is a cat and it is out of the bag, and while the barn door might be jammed the horse has bolted. If you have tried DeFi, you will have had an epiphany moment, and even after later being dismayed at the current transaction costs, you still know this hitch is just a hiccup.

The key players now will form the core of this DeFi future and while some will wither through bad luck, hubris or incompetence, many crypto tokens in this segment, now worth hundreds of million, will in 10 years be worth hundreds of billions.

Once again, this is a buy and hold and buy the dips game where the smart investor will ride the oncoming roller coaster, winnowing away the losers from the winners.

So when you start hearing doomsters moaning about DeFi transactions invalidating the whole idea, you can rest easy that this will be the typical pothole in the technology road that all the titans of the Nasdaq had to jar through on their road to global dominance.

DeFi will be the same old bumpy track to glory.——-Clem Chambers is the CEO of private investors website ADVFN.com and author of 101 Ways to Pick Stock Market Winners and Trading Cryptocurrencies: A Beginner’s Guide.

Clambers won Journalist of the Year in the Business Market Commentary category in the State Street U.K. Institutional Press Awards in 2018.
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    Francisco Gimeno - BC Analyst DeFi is suffering from the same disease of ICOs. Greed! Everyone and their grandmas want to make easy money and brag they know more than anyone else. So when some DeFi schemes get hacked or cant be operated due to high transactions prices again everyone will say is fault of DeFi itself. It is not. DeFi can be regulated and grow in time, for those who know the game. Meanwhile, be careful with FOMO and DYOH.