The pure decentralized finance (DeFi) protocol is far superior to the more centralized cryptocurrency lenders in this bear market.This proves that computer code and transparent standards give “better results”, crypto essaysists and originals. BitMEX CEO Arthur Hayes writes.
Learn more about the collapse of crypto hedge funds Three Arrows Capital (3AC), and the problems faced by centralized lenders such as: Celsius (CEL), BlockFi, Babel Finance, When VoyagerHaze argued that the actual DeFi platform was relatively intact and escaped market turmoil.
Hayes writes that Compound (COMP), Aave (AAVE), and MakerDAO (MKR) were all DeFi protocols that played a role in the drama surrounding ThreeArrowsCapital. He added that in such a protocol, “there are no arbitrary decisions made by individual humans.”
This means that loans that do not maintain a sufficient collateral ratio will be automatically liquidated by the protocol regardless of who the borrowers are or how good their reputation is.
As an example, Hayes pointed out a recent proposal to change the collateral requirements of a compound. For compound protocols, he said, “3AC is just a balanced address.” “It is not a group of people of a particular lineage that can repay what they owe and should be trusted, even if they do not need collateral in advance.”
“If you remove trust from the equations and rely purely on transparent lending standards implemented by fair computer code, you’ll get better results. This is a lesson to learn,” he added.
In addition to the DeFi protocol mentioned above, Hayes also stated that the currently failing algorithm Stablecoin terraUSD (UST) is “functional” and “DeFi to the core”.
“The UST code was 100% executed as designed. It was possible; but investors didn’t mind understanding how it worked,” he wrote, breaking the UST peg. When he started, he added that it was the code itself that “cleaned up 100% of the value of the ecosystem.”
“This was purely math and was more or less unavoidable. The fact that many refused to read the white paper is not the fault of TerraUSD,” he said.
Finally, Hayes insisted: US Federal Reserve System Or another central bank could “certainly” bail out problematic crypto funds such as Three Arrows Capital and centralized lenders, but that’s not the case.
He concluded that:
“These entities are [too big to fail] Financial institutions, therefore, shall die of negligible death. But don’t shed too much tears. Through these challenges and hardships, I learned that the promises of a new decentralized financial system have overcome yet another challenge. “
The irony of the situation where DeFi is a winner over centralized finance, despite the big losses this year, was pointed out by some of Twitter.
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