The Problems With DeFi

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Intro: 00:00
The Traditional System: 01:50
DeFi Basics: 03:15
DeFi Adoption: 06:14
Inefficiency: 07:18
The Risks: 09:17
Replicating Problems: 11:35
DeFi has seen rapid growth in its adoption, but will this likely continue? Today, we cover the issues faced by the system that might inhibit wider adoption.
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DISCLAIMER:
This channel is for education purposes only and does not constitute financial advice - Richard is not responsible for investment actions taken by viewers. Please seek out a registered advisor if you require assistance (while Richard is a registered portfolio manager at WDS Investment Management, he does not provide advice through The Plain Bagel, which is not affiliated with his employer).

[@ThePlainBagel]

Happy Friday everyone! A big thank you to Morning Brew for the sponsorship, check out their KZbin channel and subscribe here: bit.ly/33qznPE

[@mattyt4082]

Ur a shitcoiner?!?!?!??

[@johnconnor2572]

Which is why God gifted Discord to the world. It'll take another generation before normies figure it out tho. Like boomers with legacy social media today

[@margaretmcdonald9394]

I just came out of a huge Defi mining scam which allowed them to wipe out my entire Trust Wallet using a liquidity pool and did it without a password or any verification. I call trust wallet...SCAM wallet. The liquidity pool once you join gives the user full access to your money and they can then steal it without any password. Not a good investment to me.

[@KingOfMadCows]

There are tons of problems with having middlemen when dealing with money but there are some advantages. If someone scams you or steals your credit card, there is someone at the bank you can call to cancel transactions. The banks will also call you if they detect suspicious transactions.

[@forceofinterest7053]

Very fair. But you never have full control over your funds. This isn't necessarily bad, as it really depends on the person and what types of risks & responsibilities they are okay with bearing. With crypto, you have the closest you can get to true autonomy and control over your funds, but you also have to bear the responsibility of being your own bank. There is no free lunch!

[@hackladdy9886]

That's why Visa's been looking into developing a Layer 2 network (Can't really explain it in detail here) That would allow for the interoperability of blockchains, with some of the advantages of a middleman. At that point it's personal choice of what system you want to use for your payments.

[@WheresMyPolenta]

@@forceofinterest7053 The difference is that there are so many more variables where the value of such crypto, shit coin or not is decoupled from productivity compared to the dollar. Making it much more risky, and more like gambling overall. Elaborate on the autonomy part because my crypto tax smacked me.. and ETH fees have been nonsense. Worse than any bank transaction fees which are normally free. What will happen if say BTC is in currency use ? The early adopters will benefit and others will have to keep paying more and more? Sounds like a ponzi and I have been Long BTC/blockchain for many years.

[@martinlutherkingjr.5582]

@@WheresMyPolenta One could argue real estate and most financial assets are a Ponzi

[@WheresMyPolenta]

Well one could argue whatever they please doesnt mean it stands much valid ground or isnt flawed and foolish. Comparing to crypto. With Housing as well similar to my previous comment there are many variables that are pushing the value of such asset like housing. A supply problem in populated areas, materials, low rates, low government investments, & etc. You could indeed have unrealistic projections of returns and buy money pits with real estate but the principle is much different than the future of Shiba or cumrocket.. With Housing you get a tangible asset; which I believe is the best investment. @@martinlutherkingjr.5582

[@internetshaquille]

i think the "de" bit of defi is less about total decentralization and more like "just decentralized enough to let me as an early adopter squeeze into the center of a new system" another fair and based take from the bagel

[@yoghurtkaas1651]

Pog it's shaq😲🥺🥵💯

[@chasecomfort3940]

This is probably just the parasocial nature of KZbin taking over my tired brain, but seeing netshaq also following The Plain Bagel is the biggest boost of credibility I can think of for this channel. Two kings of consistently excellent content.

[@samclark0310]

Keep on stumbling on internet shaq in all corners of the interwebs

[@juljk8397]

It’s decentralized lol

[@bluefootedpig]

I could argue that part of the defi is there isn't a central authority issuing the credit / loans and acting as a middleman. Profits of loans go to the people providing the supply. I got into early P2P lending with lending club and prosper, but defi is very nice. And the loans, while volatile, still average competitively to loans I can get around my area. And I can get a loan on defi in seconds, while it takes weeks at the bank.

[@monroerobbins7551]

This cleared up so much for me. Maybe it’s because I just don’t know tons about investing or finance, but when I first learned about crypto, and Defi, I just had a bad gut feeling, so I never got into it, but when I tried to learn, it felt so overwhelming to try and understand. But you broke it down, gave pros and cons, and it has helped me understand a lot better. While I do get not wanting a middleman, or not having a ton of trust in not-very transparent financial institutions, crypto is so much worse, and so unstable, that it wouldn’t thrive, it’s a pump and dump web that you can barely keep track of. Some of the initial ideas behind it? I agree. The rest, and how it’s executed, and the culture around crypto? Don’t agree, don’t like, 0 stars.

[@chivasowle286]

I love "Line Goes Up" so much. One of my all-time favorite KZbin videos.

[@forceofinterest7053]

The NFT portion of his video is great! However, a good chunk of his video is borderline misinformation, which is frustrating.

[@chivasowle286]

@@forceofinterest7053 which part?

[@forceofinterest7053]

​@@chivasowle286 The easiest one to see is at the end, when he talks about the DAO. He implies that Ethereum is centralized TODAY because of a hack in 2016 (The DAO hack). It is extremely disingenuous to do this, because Ethereum in 2016 vs Ethereum today is night and day. If what he was saying was actually true, then there would've been a lot more hard forks when people have lost money (hint: there hasn't!), especially when considering the fact that there have been much larger hacks (in terms of USD value of crypto stolen) since The DAO hack. Another one is towards the beginning when talking about Camila Russo. In her book, she talks about medical records/decentralized identity on the blockchain, which Dan points out. He makes it sound like all of these crypto bros are foaming at the mouth to get people's medical records on chain. It's a strawman, and meant to tap into your fear. There is no proof that this is likely to happen. Crypto's main appeal at this current time is DeFi, which is a very large reason why crypto blew up in 2020 (lot of groundbreaking projects were released this year). Those are just 2 off the top of my head that are not super technical and easy to write about. I could probably watch the video again and find 50 more, although it would be very time consuming.

[@WheresMyPolenta]

Same here; The line goes up is such a great name for it too

[@therapturedmichelle]

I'm SOOOOO thankful you make these videos!!! They're so educational and helpful!!!! THANK YOU!!!!

[@JackDuffley]

Imagine the amount of "I lost my password" folks who would have no centralized customer service to call

[@Lightningkuriboh]

LOOOOOL

[@id10t98]

There is a guy in England digging up a landfill because a laptop he owned years ago that got thrown out allegedly had enough bitcoin on it that is worth hundreds of millions of dollars today.

[@coubclub9419]

there are not many. sit down clown. you have your seed phrase to recover your password.

[@piZZa4everRulz]

@@coubclub9419 you live in a parallel world my dude. Go outside, take a walk in the park, touch some green fucking grass

[@coubclub9419]

@@piZZa4everRulz poor pleb from a third world country. Living totally clueless. Go and eat that green grass. 😂😂

[@kondor99999]

Line Goes Up really crystallized for me how insane this entire “system” is. It’s basically a bunch of techbro’s trying to reinvent the wheel for the sole purpose of their own greed and narcissism. Of which there is an almost unlimited supply. Seemingly.

[@tomwallen7271]

I also especially hate the vision of the future financialization of 'everything'. Everything is a token, everything is on a market, everything is up for sale. It sounds post-apocalyptic.

[@RustOnWheels]

Post-apocalyptic but also very peak neoliberal, so actually very belonging of the times where monopolies, fascism and authoritarianism culminate into a visionless race to the cliff (where something - water, energy, food, climate - will suddenly stop our complete civilization in an instance).

[@HamAndCheeze]

That’s not true, Defi does serve a purpose just because there’s Tech bros who advocate it doesn’t mean it’s bad. There’s a ton of bros in regular finance too. You can’t generalize based on a few bad apples

[@tomwallen7271]

@@HamAndCheeze It serves a conceptual purpose to remove the financial system from the digital exchange between a customer and a seller. The problem is that it can't do that yet. It's too slow, expensive, insecure. Maybe one day, but that isn't here.

[@HamAndCheeze]

@@tomwallen7271 Yes but to condemn it is premature.. Creating an entire new way of doing finance takes generations to mature. JP Morgan wasnt built in a day. DeFi is young and has many problems but that in no way means it cant improve.

[@ashiqurrahmanabir]

Core problem of DEFI is it can be exchanged with FIAT currency. For this in practice instead of using it as a currency people use it as a asset .

[@trapOrdoom]

What the shit are you talking about? Why would you do that, if there are any DeFi services that have a fiat conversion scheme? That’s counterintuitive, so either you don’t know what you’re doing, or you don’t know what you’re talking about.

[@ashiqurrahmanabir]

@@trapOrdoom1st: there are services that convert Bitcoin into Dollar. 2nd: I get the point mining Bitcoin don't give you dollar but people buy already mind Bitcoin using dollar for expectation of the price go up and letter sell it with higher profit . 'People usually don't buy anything with it ' this is important point. Have you ever tried to keep 1 dollar in your wallet for expectation of you can exchange it with 10 dollar after 1 year " I mean just 10 dollar not 10 dollar worth of goods " (don't take bank here because they invest money and create real value and give a part of it's profit with you i am saying keep the cash in your pocket wallet ) . the value of Bitcoin come from other people's expectancy of higher price not because you can do something valuable in real life.

[@sor3999]

12:40 This is why I can't understand "enthusiasts" who think they're "sticking it to the man" i.e. the banks and monied institutions. It's been co-opted by exactly those institutions they wish to stick it to except without restrictions! Joy! Whatever utopia they were hoping for, this isn't it.

[@anaestereo810]

This video will put you in hot water...

[@ThePlainBagel]

I expect so!

[@anaestereo810]

Smart ppl listen both sides of the argument. Good work.

[@ydderynnad]

Bagels are made with hot water. They're boiled before they're baked. Which means that Richard should go smoke a bowl after this video.

[@hamzzncheez354]

@@ydderynnad nice

[@dalay-lam2285]

Just want to say thanks for the great content from Vancouver BC!!

[@PowerboatTraining]

I needed to hear that, thank you.

[@JordanPriede]

If I take a loan on my car, the lender need to know they can take the car back if I don't pay. This necessarily requires a central entity to act. If I take a "defi" loan on my car, a decentralized non-entity can't take my car if I don't pay. The only thing defi seems to allow is leveraged trading. Yay

[@rocketleague2136]

You have no idea what you re talking

[@romulloqueiroz]

In order to take a "defi" loan on your car, you'd need to leave your car with the decentralized entity first, before taking the loan. If you don't pay, your car is already with them to begin with. But when talking about defi loans, we're not talking about physical objects but assets controlled by immutable code (contracts). The code guarantees that your asset will be back to you in case you do pay what you've borrowed.

[@201950201950]

Thank goodness that I thought about Difi not being insured. I wondered what would happen in the next crash so I avoided Difi.

[@CryptoWorldJosh]

Another quality video, Richard! I definitely agree with some of your points such as the hype around NFT's getting out of hand, and that centralised finance will stick around, but there's a few important points that you either missed or were incorrect about DeFi: 7:28 Measuring Ethereum's (or any Crypto's) energy consumption in "energy per transaction" is incorrect. The energy is used to secure the network, not to process each transaction (energy consumption does not equal transaction count). 11:23 Things on the blockchain CAN be updated through softforks and hardforks. Over the years, Bitcoin and Ethereum have had many updates/improvements to their blockchains through decentralised consensus. It's mainly the transactions that cannot be altered. And with the coming Ethereum update (Ethereum 2.0), it's blockchain will move from Proof of Work to Proof of Stake which means energy consumption and gas fees will plummet as the network will be secured by stakers rather than miners. Just like any new technology (computers, phones, the internet, etc) it starts out clunky, then becomes more streamlined.

[@laine3396]

Another point to make is that some Stablecoins aren't backed by treasuries or dollars but are algorithmic stablecoins that don't rely on fiat currencies at all.

[@theondono]

Saying “it’s incorrect” means nothing. The system has an energy consumption and a certain capacity for transactions. How do you think they computed the Visa cost per transaction? They grabbed how much energy Visas servers use and divided by the number of transactions performed. Energy consumption is a feature, not a bug. In essence PoW uses energy as the limited resource that backstops the whole system. The question here is if we are willing to burn an ever expanding amount of it just to provide that service. Softforks and hardforks *are a bug*. These can only happen because the blockchain isn’t (and has never really been) truly decentralized. Buterin himself admitted that he is in a telegram channel were 6 people essentially control most of the Eth chain, and how this has been super useful for fixing bugs and issues in short time. In essence a hardfork is a majority of the chains miners joining for a 51% attack. There’s also the obvious massive problem that so far, all hardforks have splitted projects, and a lot of resources and value have been lost on those splits. Finally, we’ve been hearing about 2.0 and PoS for years at this point, and I have very little faith in that happening any time soon. It’s not a technical issue, other coins already have PoS, the problem is *social*. Switching to PoS would alter the balance of power of the chain, because the top miners have been selling their stakes to finance the purchase of equipment. PoW gets them a seat on the table, switching to PoS would banish them and remove their bargaining power. The thing is, those same top miners are the ones who need to “push the button”, so to speak. There are ways to solve this, but require *such* a modification to the status quo that I find it very unlikely.

[@NavaracVolare]

Thank you for some sensible discussion

[@r.k.vignesh7832]

"The merge" won't do anything to reduce the gas fees, though.

[@CapitalWorksPro]

Okay, you said Richard was wrong about energy consumption and transaction count. You did not correct him. If you know the correct way to think about it, you should maybe include that. If you don't, you can't say Richard is incorrect. His point was it takes a significant amount of energy to process x number of transactions, and by comparison, the same amount can be used to process MANY more transactions, under old systems. The energy is used to validate transactions on the blockchain, thus securing the network. So tell me why it would be wrong, if x number of transactions can go on a given block, and it takes x energy to secure that block of transactions, why you wouldn't think about it, the way Richard presented?

[@KaiSosceles]

Gas Fees - Yes, there are fees in DeFi just like there are fees in TradFi. The difference is that anyone is allowed to participate in getting those fees by either mining or validating. Not everyone gets to walk into their country's central bank and start asking for fees. This makes DeFi more accessible, not only to people within a country, but globally as well, as people from anywhere in the world have access to any crypto mining/validating process rather than being restricted by their nation's borders. Overcollateralized Loans - Overcollateralized Loans are not a biproduct of volatile (see: free market) interest rates. They’re a security mechanism to allow lenders to be repaid in case borrowers default. It’s not all that different than take out a loan for a house or a car. Both of which require the collateral to be worth more than the loan (see: down payment required). The difference is that crypto markets are 24/7 and liquid enough to instantly liquidate a borrower's position to repay a lender vs. traditional markets where repossessing someone’s house in order to cover the loan is a pain in the ass. As far as use cases, Overcollateralized Loans in the crypto space allow for unlocking of liquidity similarly to how one might unlock the liquidity of their home by taking out a HELOC. It’s like saying HELOC loans aren’t useful because you have to put your house up for collateral. They’re still useful… Recourse for lost funds - This is the cost of self-sovereignty. If a stranger on the street robs cash from your wallet-you don’t get that cash back. You can shift over a bank card, but then you lose sovereignty over your money. Go try getting Rubles out of your local bank in Russia right now-good luck, I have friends stuck in the country because they can’t access their finances. If they had cash, they could-but people have moved away from cash for the “safety” of banking systems. A case where Decentralization and Sovereignty don’t matter…until they matter. And the moment they matter is life changing for people who get screwed by relying on centralized, non-sovereign systems. Buggy smart contracts - At least we can /see/ and audit the code, unlike blackbox banking systems where when things fail behind the scenes-we just don’t know they’ve failed until it’s too late and we have 2008, Enron, and ponzis like Madoff. Power Distribution - There’s some kind of false narrative that people have been sold here about crypto economics being some kind of futuristic egalitarian utopia that just isn’t true and was never intended to be true. Early adopters get more power in systems because they TAKE ON MORE RISK and in free market economics, risk is rewarded. Not every person in the world is meant to have 1 bitcoin-that’s why there’s only 21 million. There is no perfect adoption curve that allows equal distribution in any of these systems. If you want more power-you take on more risk and responsibility that comes with that risk (re: governance votes, running nodes, etc). There's no free lunch in crypto just like any other market.

[@stevenglowacki8576]

Everyone can start a bank. No one talks about fees that central banks charge, because they don't interact with consumers. The paying of fees is done to your average non-governmental bank that anyone with capital can start, in the same way that anyone with capital can start on the blockchain. If there are returns on becoming miners, then big businesses will apply their capital to do so until it's not profitable enough any more, so there's very little sense in which a small guy can meaningfully be part of the system. That's why the GPUs used for mining have become so expense and hard to come by - large concerns have put tons of capital to it. They are the new central banks, except they aren't in any way answerable to the people. HELOCs are useful because they are a way to access cash when you have an illiquid asset. Overcollateralized loans do not allow you to access cash you'd otherwise have, because you can just sell your coins since as you said, the market is liquid. The one use that they do have is the ability to borrow against assets that have appreciated in value and not have to sell the assets and take the tax hit. There's not exactly a large market segment of people holding such assets though, and they don't get you a mortgage on your house. Re: Power distribution - Here you get back to the Folding Ideas argument: "You should have bought in on the ground floor" "But I was only 5 years old then!" Systems that aggregate power are bad for wealth inequality because there are always new generations of people being born, and some of them will start off much better simply by virtue or who they were born to. That's the underlying problem with the capitalist system from what I can tell among socialist-leaning people. Changing who has all the money doesn't change the fact that there is generational wealth inequality.

[@themsuicjunkies]

@@stevenglowacki8576 It seems to me that most whales are extremely early adopters, billionares and hedge funds. I wouldn't call that sticking it to the man. Specially in a system that its so suceptible to manipulation.

[@franwex]

Good points.

[@prathyushareddy9404]

How do you have control over your funds if an exchange can steal all of it

[@me-myself-i787]

​@@prathyushareddy9404That can only happen if you don't transfer your funds out of the exchange wallet. If you transfer your funds into a private wallet, no-one else can access them.

[@alwaysapirateroninace443]

This was informative. I enjoyed it.

[@Graceful_G]

This video highlights some of the potential drawbacks and challenges associated with DeFi, bringing attention to important issues that need to be addressed within the decentralized finance ecosystem. It's a valuable resource for anyone looking to gain a balanced understanding of the opportunities and risks associated with DeFi.

[@Antenox]

Thank you for this coverage! I've been wanting to know the opinions of you and other "traditional" finance guys on DeFi. I'm one of those who sees a lot of promise in DeFi, but I'm also a layperson in this space.

[@juljk8397]

Half of what he said isn’t true, find my comment on here lol

[@Parkerspuffin]

I think the idea is interesting I wish you'd pull the deal and invest some

[@aequitas775]

As a fan of crypto and defi, I really appreciated hearing a fair, measured critique of the space by someone who actually took the time to research and understand it well enough to come up with an informed opinion about it. I'm still bullish on it, to the point where I think that the Defi replacing our traditional banking system is basically inevitable, in the long term (i.e., I'd be shocked if this hasn't happened 30-40 years from now, but I'm not some hype investor who's naive enough to expect Defi to completely collapse the current banking system next month). As you correctly pointed out, it's still a very new area of technology, and has a lot of challenges to overcome. With time, I think that these challenges WILL be overcome, and the defi ecosystem will eventually be better for its end-user than the current banking system is. The only thing from the video that I would strongly disagree with is the comparison between the electricity usage of 1 Ethereum transaction vs 100,000 Visa transactions. I wouldn't dispute the accuracy of this at all, I just think that it's a bit of a false equivalency and doesn't tell the whole story. If you compare the electricity use of Ethereum transactions to the cost of all credit card transactions + the electricity used by running every bank, mortgage lender, etc on the planet (which, in theory, would no longer be needed if the world's financial landscape was dominated by defi), I think that would give you a more accurate comparison. On top of that, there are already other blockchain projects that use less electricity and have lower gas fees than Ethereum, and this is a brand new technology that's only going to continue improving. The first computers ever created took up the space of an entire room: now, decades later, you have a computer in your pocket with a level of processing power that people couldn't even dream of at the time the first computers were created. So while I agree that it's premature to hype up defi as if it's going to be the norm by 2023, I also think that it has an excellent chance to be successful long-term. Anyway, thanks for the great video! Would love to see you dig into more crypto topics in the future.

[@cloutcobain123]

This is quite the hopium after defi shat the bed couple of weeks ago

[@user-lk7zr5hm9y]

@@cloutcobain123 How many times has are current system shat the bed ?

[@aikanaro236]

Great video. Very informative

[@butterfacemcgillicutty]

"Stablecoins" is a reeeeeal fun topic 2 months since this video came out!

[@smallpotatoe9487]

Great content! Just 1 question, why is the bagel plain?

[@Fionntan993]

He's done a video on this!

[@legobasemaker]

Hi Richard, I love your videos and I am currently writing my dissertation on how social media can influence financial literacy and investor behavior, and I would really appreciate if you could spare 20-30 mins for an interview for this project. Thanks in advance and keep up the good work, Adorján

[@michaelfenell3602]

Got to love that C.D.O. joke. Ended just about the same way too. Makes it even funnier.

[@sujaljethwani6084]

Loved this video

[@midimusicforever]

Great take!

[@badboje6040]

A fan of Defi myself, and it's fascinating to interact with a financial system run entirely off code, but you make many fair points! Good vid Richard

[@ZackZeysto]

Today my girlfriend made a traditionell transaction to a foreign country and it costed her huge fees ($60). I think Crypto has huge potential.

[@nichodgkinson7163]

@@ZackZeysto transferwise is one of many ways to cut down on transfer fees..

[@EricTangOfficial]

Love the discussion, Richard! Really liked how you presented a very objective, rational critique of Decentralized Finance, and I was honestly surprised by how much you researched about the DeFi space. While I appreciate people like Graham or Andrei for hyping these financial instruments, you provide a much needed level headed perspective. Very bold move against crypto enthusiasts 😆. Wondering if you knew about Anchor Protocol and would love to know your thoughts on those being seen as "very safe" (by some people) with 20% interest yields .

[@DirtyBob154]

Andrei and Graham have never talked about DeFi

[@EricTangOfficial]

@@DirtyBob154 For example, Graham Stephan's "Passive Income: How To Make $100 Per Day With Cryptocurrency" talks about Liquidity Pools and Lending Platforms (e.g. Aave). These are DeFi instruments and protocols. It's also public knowledge that many CeFi companies (e.g. BlockFi, Celsius, and Genesis) use DeFi protocols to help generate their advertised yields. You could argue that even using these interest bearing accounts provides indirect exposure to DeFi.

[@DirtyBob154]

@@EricTangOfficial that’s a good point

[@wallpello_1534]

@@EricTangOfficial that is a stretch, using a central exchange that might use some defi makes it centralized in my books.

[@EricTangOfficial]

@@wallpello_1534 I agree. By definition, a company like Celsius is still centralized finance. My only point is that these companies are still heavily affected by what happens in the DeFi sphere. A protocol hack can create significant losses for a company (e.g. BadgerDAO), which then often has to decide between raising more funding or reducing rates to compensate for the revenue loss. Of course, if DeFi takes off (as it did a few months ago), then the yield on these CeFi platforms increases based on supply and demand. Again, I completely agree with you that these exchanges are still considered CeFi. I'm just saying that using these companies still means you are exposed to some of the effects of the DeFi ecosystem.

[@reuvensg]

thank you.

[@sor3999]

7:42 "stringing together multiple small programs" is basically the "microservices" architecture a lot of software engineers / big tech talk about. It's treated as the absolute best way to do things, for those more naive, but it has it's trade offs. As you said... it's more difficult or "clunky" as you say. But not an entirely unheard of idea is what I'm saying.

[@juljk8397]

Exactly, I see it just like the internet

[@makgreaterthenyou]

ehhh, no. A microservice is a mostly self-contained program that does one thing and can be fit into a program like a lego block (well that's the idea anyway). Dapps have to be split up because each "block" on the chain can only be so large. it's like a chapter of a book vs. a string of Twitter posts.

[@merlingeikie]

Very good work. Cheers 🕯️🇦🇺🔥

[@willardSpirit]

Peer-to-peer? So is defi platforms the Napster or Limewire of the financial world? What could go wrong?

[@NICO-Z-TRADER]

Super interesting. And thanks for pointing out to the masterpiece of Dan Olson. This is amazing ! Really..

[@kallsin4617]

Good video!

[@luistiago5121]

Right...and problems of the centralized financial system?

[@jacksebbenunicyclist]

I personally love the idea of defi and I’m deeply into it. I think it is risky but could have a lot of upside in the future as the space and technology progresses. But this was a really good criticism of Defi with some really well explained faults with the whole Defi system. Makes me rethink my current beliefs. Really appreciate you Plain Bagel ✌️

[@juljk8397]

Half of what he said wasn’t true, find my comment here lol

[@eatpoorpeople]

huge respect to Mr. Bagel for your neutral presentation

[@JT__Media]

You’re criticism of DEFI is actually just a criticism of Ethereum. Check out Algorand. It was built by Turing and Nobel prize winners, MIT professors/scientists and so forth. DEFI is seamless, cheap, and carbon negative

[@sublyme2157]

Reminds of the gold rush. While everyone was focused on getting rich quickly, the ones who got rich were those selling picks, shovels, and denim. In this new rush, it's those selling computer components.

[@samsonsoturian6013]

Even those guys lost money as the cost of moving those goods hundreds of miles outweighed the inflated prices they charged.

[@sylr1104]

I have a problem in my defi account as I going to withdraw my funds however they said I have to pay taxes before I be able to withdraw, if I don’t pay it up to date I will be charge daily fee. Is that what they usually require? Can anyone please tell me?

[@KrikitKaos]

A very many number of details, you say.

[@kamsebong3473]

DeFi has a lot of possibilities the good outweighs the bad depending on what and how you use it. with a project like Unilend finance where you can enjoy Isolated Dual Asset Pool for lending and borrowing of all ERC20 tokens, flash loans and so many other services. this cannot be compared to any traditional finance platform.

[@spyrex3988]

i think having a middle man is better than getting scamed

[@thomaskn1012]

Could you do an episode on the disaster that happened to Terra Luna cryptocurrency? It is denoted as a "stable coin" but it was actually anything but. What was the mechanism that made it pegged to the dollar? Any guesses as to why the CEO of it (Do Kwon) was so certain that Luna's failure would never happen?

[@WheresMyPolenta]

Highly recommend The Line Goes Up. I’m long crypto/Blockchain and it’s easy to overlook the faults it can/does create especially when there is sooooo much shilling. “Shib to $1” with no fundamental reason or the know how to get to such evaluations.. “Did you buy Tesla coin” “What about Eloncoin or babyshiba doge coin or cum rocket coin” So much nonsense it’s tiring…

[@nuclearwanderer8815]

If you want to know why NFTs are nonsense, great video. But his takes on crypto are largely nonsense... kzbin.info/www/bejne/e6rSfn-IarJ2b9E

[@MAtukulis]

Thank for finally covering crypto topic!

[@alexxx4434]

Efficiency is what you sacrifice for decentralization.

[@TheFluffyFix]

Terra anchor was an amazing idea

[@KFGustavo]

One of the issues you brought - the one about price instability - would theoretically disappear with mass adoption due to way higher liquidity, or am I missing something? If I am correct, then I wouldn't consider it a valid con argument, as it is kind of "don't use it because nobody uses it" The points about fees and slow transactions are also being worked on in other chains, so the criticism seems a little ETH-based. And one point I think wasn't properly mentioned in the "pros" for defi is that the *international* banking system is really bad. As an international student living in another country, anything involving banks from different countries, or making payments using a bank from a different country, is hellish. But yeah other than that I pretty much agree with the video.

[@TheeMistermono]

You mentioned overcolateralized loans on defi. Is there a current equivalent that someone could invest into in the retail space?

[@jujimufi472]

This is literally the Smith maneuver, where you take out a loan against your mortgage (an appreciating asset).

[@jzoo763]

What do you think about the interest rate hikes done done by the canadian govt. And its impact on the real estate market. Can we have an 08 collapse in the future ?

[@johndoe1646]

Well said, much less biased than "line goes up". Like you said it's good to have competition. May the best dapp win.

[@brincX]

The Defi 2.0 project on Ethereum layer 2

[@jb_makesgames2264]

New subscriber - good video - one excellent crypto analysis from a very smart guy is Ben Cowen for The cryptoverse

[@syfodias-jedimaster]

I like to see others perspectives. Great VIdeo nonetheless

[@severihirvaskoski4542]

i mean im in defi and there was lots of things that simply werent true. for example on loans the loans are not that volatile. and if u feel like they are u can get set interest loans that are 0 volatile

[@haowli1371]

Hey sir，how do we cooperate for a video advertisement on your side?

[@SynThenergy]

Great video! Eth is planning on upgrading into a proof of stake blockchain which will make it more efficient.

[@LordDennings]

Nice Ukraine support with the lighting :)

[@BassLiberators]

I'm glad you pointed out that Defi gives even more power to the rich.

[@juljk8397]

That’s not true, you could have easily got in when ETH was under a dollar. That’s the true freedom of decentralization - that it’s all fair for everyone. Just because you didn’t get in when prices were low doesn’t mean you should cry about it

[@mazkas1476]

@@juljk8397 what a awful argument

[@juljk8397]

@@mazkas1476 An* , and this is true for bitcoin and any other decentralized protocols. It's not an argument, its facts

[@mazkas1476]

@@juljk8397 Yes. And that’s why Defi sucks. If you want mass adoption, the system needs to treat everyone (relatively) fairly. But as you said, people could have “easily” got on earlier (which they probably couldn’t, and shouldn’t, due to the unregulated nature of the space and the massive amounts of rug pulls and hacks). There is a learning curve, and crypto isn’t for everyone. Saying they deserve to have less power in the system will not encourage adoption from the public.

[@juljk8397]

@@mazkas1476 You realize The Plain Bagel was talking about DAOs in this sense, right?

[@krembo1077]

Can you explain how DEFI loans works and use-cases? Why would I take a loan if I need to over-collateral?

[@wallpello_1534]

Using it for loans areas where traditional finance isn't serving like the third world or loans across boarders

[@krembo1077]

@@wallpello_1534 I'm sorry, can you elaborate? If I need a loan for X eth but have to put 1.2X eth as collateral. Why not just just my original X eth? I'm understanding something incorrectly...

[@wallpello_1534]

@@krembo1077 yeah that isn't how it works at all

[@ThePlainBagel]

The only real use case seems to be keeping exposure to one crypto while using another (so you deposit ETH and use DAI). It doesn't really provide the type of loan we're used to in traditional finance.

[@wallpello_1534]

@@ThePlainBagel you going to ignore all the people without access to traditional finance?

[@timberwolfe1645]

The REAL QUESTION IS:....WHY would you want to hide the money from the government outside of taxes on it?

[@randyfordyce4494]

drip network the best defi project

[@chancerobinson5112]

DEFI =. “Shortly after the invention of club, technology and crime got married”. - Frank Abagnale (Subject of the film: “Catch Me If You Can)

[@MrMiiichael]

As an early Ethereum user and big believer, this was well-researched criticism, something that is rare. 1. Energy usage problem. The move to PoS will reduce it by ~99.98% and is expected to happen this year. Granted, time plan for this has been pushed back a lot but we are close and most people believe it will happen this year (which is the official plan). You can bet on it not happening if you don't agree and make a lot of money since the odds are high. 2. Mortgages will likely never happen on Ethereum. You need a system in place to take your house if you are not able to pay. Same reason Defi works with borrowing, if you don't pay back you don't get your collateral back. 3. You are arguing as if crypto will make current financial systems obsolete and replace everything. This is a common misunderstanding. Obviously Bitcoin/Ethereum Defi has not replaced currency or the financial system but it has still grown by exponential amounts and the people that thought they would, have made substantial returns. I thought Defi would 8x in 2021 and it ended up basically 1000x. I expect Ethereum to keep growing rapidly and it be reflected in the ETH price in the coming years.

[@JHEVR]

If PoS happens… for now transferring Ethereum is only for the rich

[@MrMiiichael]

@@JHEVR Transferring costs 3 USD on mainnet and virtually nothing on L2s. Some smart contract TXs are expensive, simple sends are not. PoS will do literally nothing for throughput on Ethereum. Scaling happens through sharding + L2s. Low knowledge investors lose in any market.

[@rhythmandacoustics]

Someone explain how exactly swift works.

[@skateata1]

😤 we are already stuck tipping everyone in the U.S. I'm not tipping a dang machine too.

[@davidpatton7298]

Nice job, Bagel. Did you forget to reference your videos on the fractional reserve banking system? The objective economic realities of imperfect trade-offs living in a world inhabited by corrupt human beings? How about the contrast of fiat inflation against a fixed number of Bitcoin?

[@AbdulKawser]

DeFi to me is "Democratised Finance." Instead of banks, anyone now has the technology to create their own financial system. Just like how the everyday person now has a camera in their pocket rather than just corporations.

[@JosephDickson]

I expect "the Blockchain" will see its real value outside of crypto and financial products. As deeds, certifications, transcripts, and proof of "something."

[@ydderynnad]

I kinda hope so. I have a not-insignificant portion of my portfolio invested in blockchain infrastructure. Picks-and-shovels and all.

[@carrtoonist]

Not everyone has access to centralized finance.

[@samsonsoturian6013]

I got a yield farming scam ad before this....

[@milkismurder]

This was a much more well informed and balanced examination and criticism than I expected after your recent appearance on another finance youtuber’s podcast, well done and thumbs up

[@franklikesTanks]

Which podcast are you referring to?

[@seenbelow]

There is a very good video on the subject by Folding Ideas where he explains some shortcomings of the blockchain itself. Like for example, how you can't just roll back a transaction if it was made in error.

[@Jameleo]

hi plain bagle

[@fostroggalf]

Great video with a lot of good point and you really seem to help facilitate good discussions. I think one of the things that wasn't mentioned in this video is the fact that the vast majority of dApps are opensource, unlike basically any software used in the traditional finance space. The most reputable dApps go through audits to attempt to verify there aren't glaring weaknesses that can be exploited and the opensource nature of the code allows anyone to take part in that process. Bugs still make it through the audit process, but it's important to keep in mind just how new this space truly is, especially compared to traditional finance. Linux didn't become the dominant server OS overnight, but the opensource nature of the code played no small part in its rise. Early adopters are taking on increased risks with the hope that they'll be rewarded with increased gains, the same way early investors in the FAANG companies did. I completely agree that centralized finance isn't going anywhere anytime soon, but there are innovations taking place within the crypto space that have the potential for serious positive impacts upon society, Zero Knowledge Proofs being a good example.

[@nothing12392]

this video aged well. lol

[@marcl3928]

Great video in total, but there are slight inaccuracies in some of the information. Hopefully next time you can collaborate with an actual DeFi expert(not influencers) so we can keep the information at the highest level. Keep up the good work!

[@mr.wonderful4737]

I’m all in on crypto and tesla

[@JustJanitor]

I hate that every ad i get is for a get rich quick scheme

[@OPPOSMITE]

This system is still better then the current one, correct?

[@mc4105]

This is why my Crypto portfolio is so boring and just consists of BTC, ETH and SOL I also have QNT and KDA as more speculative tech invesments. I'm not a fan of this whole defi node rubbish. Luna has proven why I've always been cautious.

[@Aivern]

Having dipped my toes into cryptos, this video perfectly articulates the entire industry. Love the work you do man. Thanks for this!

[@tymon234]

I was low-key worried that you were pro-crypto and that we were getting a stupid crypto vid. I'm glad you're as amazing and knowledgeable as I expected, and sorry for having my doubts

[@ashiqurrahmanabir]

Whatever i can do with it at the end of the day I can't buy any real thing with defi

[@thorchristensen7849]

can you make a video on which crypto course is the best to buy?? please

[@justyouraveragejoe7500]

None lol. Crypto isn't a good investment

[@thorchristensen7849]

@@justyouraveragejoe7500 🤣🤣🤣

[@tintedglass]

Pretty sure this is the third or fourth time I've watched this...

[@hl3641]

“Ur reputation is ur life “ , plain bagel is indeed a good example not to BS ard and tell truth ..

[@filcap]

Great video! You were able to explain things clearly. Understandably, the DeFi ecosystem can seem dispersive or chaotic from the outside, but there’s not such confusion if you are informed. There are a lot of blockchains but the most used can be counted in an hand. Out of those, just Ethereum has prohibitive gas fees, all of the others are extremely cheap. As for smart contract risks, all of the platforms are open-source and most of them are audited by third party companies.

[@earthling_parth]

All valid points 👏

[@hackladdy9886]

Great video! I've got a few rebuttals to some of your claims that I believe could have used a little more info: 1. Ethereum Energy Consumption. Ethereum is transitioning to Proof of Stake in ~3 months, which will reduce energy consumption by 99.95%. 2. Interest Rate volatility & Risk Assessment Platforms like Maple finance allow more traditional non-collateralized lending models, albeit for companies with reputations, and not individuals, *yet.* And if you don't want rate volatility, there are various fixed-rate lending markets out there as well. 3. Line Goes Up That video was filled with a lot of hate, insults, and overall biased views on NFTs. Some were correct, some were wrong, or misrepresented the community and its values. The Defiant has made some great videos trying to get to the bottom of why people don't like NFTs, and also talking about Line Goes Up. (Also keep in mind that NFTs were never even meant to be used for JPEGs specifically, I also don't endorse buying expensive crappy art.) We are definitely not perfect. We have a long ways to go towards mass adoption, and accepting the current state of the space, owning up to it, and working to make it better, is what will truly help us get there. Thank you for making a video not just filled with blind insults and hate, and thank you for outlining current issues in the space. (Sidenote: There are loads of really cool dApps out there that you might want to take a look at the economics of. One of my favorites that I'd recommend you check out is Alchemix, the self repaying loan platform!) Cheers!

[@stevenglowacki8576]

Line Goes Up was mostly targeted at what the NFT space has become, not what it was meant to be. When I first heard of them, I thought they were fairly interesting, but they've really haven't been used in the ways that I imagined they might, and instead are used for absolute garbage. There is a lot that's potentially possible in the blockchain space; the problem is that most of what actually goes on is scams.

[@hackladdy9886]

​@@stevenglowacki8576 ​I won't even try and deny that the NFT space is a sh*tshow right now. People are getting their act together, but it's taking quite a while. But most of what goes on in the blockchain space is actually totally legitimate activity. Just look at the TVL of Aave, Compound, Uniswap, Anchor, and all the other dApps out there. Look at all the people leaving traditional tech and finance to work in the space. There's a lot that goes on, and just focusing on the headline breaking news will *always* miss smaller, less headline-worthy legitimate developments.

[@lrdxgm]

Your argument is that a single Ether transaction will be, in 3 months, using 60% more energy than just 50 VISA transactions, instead of 100 000 VISA transactions? OK...

[@hackladdy9886]

@@lrdxgm With ZkRollups & StarkNet we'll actually see faster and more secure transactions, with lower fees than VISA, with less electricity.

[@TheFluffyFix]

Luna to the MOON

[@lc285]

It is curious how bitcoin designed to be peer to peer has been hijacked by regulated exchanges.

[@lc285]

@Les Gauloiseries - Yes. But for a retailer you have to onboard through a regulated exchange, no?

[@stephenchurch1784]

It hasn't been hijacked by regulated exchanges. People just use regulated exchanges because almost every unregulated exchange has turned out to be an exit scam

[@jacksebbenunicyclist]

I’ve personally used unregulated exchanges with no KYC and have had an alright time doing it. I will say I do find it funny how people talk about decentralized finance while using centralized exchanges with big government and bank regulation influencing them 😅 I will say though, the decentralized part is more about the currency itself I think, it can’t be inflated or manipulated by centralized authorities (talking about governments and banks). The defi stuff is still in its early days for sure.

[@aidanwarren4980]

@Les Gauloiseries I mean, isn’t that functionally true about dollars too? Who’s gonna stop me from exchanging cash? Meanwhile all the more complex functions, the things you’d actually want to use to replace banks, are performed by centralized institutions. It seems like the only decentralized part of DeFi is the data storage.

[@jujimufi472]

@@aidanwarren4980 That is correct, but you are physically limited in using dollars (have to move cash physically to transact with it), plus you can't escape out of country with suitcases full of cash (but memorizing a 12 word seed phrase means you can).

[@rjw6487]

Under the current volatility, who would take a crypto currency based morgage and buy a house? Right. Car payments? Rent? I thought so.

[@justyouraveragejoe7500]

Exactly! There is literally not a single real use case for crypto.

[@AlkQubit]

Here’s an example, I can’t and don’t want to buy real estate but I can do it with Lofty AI and for a super low entry point.

[@ThePlainBagel]

What about a REIT?

[@naddarr1]

Blockchain technology is amazing but I don't think the technology is being used to it's full potential yet. I feel.like it would be a huge boon to the medical field and other such areas where record keeping is absolutely paramount.

[@amarminhas202]

What is the advantage of having medical records not be centralized? What's the value added?

[@naddarr1]

@@amarminhas202 The benefit comes from the security and immutable blockchain provides. Given the importance of privacy and strict record keeping needed in the medical field physical paper and faxing is still widely used.

[@amarminhas202]

@@naddarr1 so I go to a doctor and I update my medical records. How would that happen?

[@EventHoriXZ0n]

Kinda interesting to see still adamant crypto people insisting all this stuff is gonna take us to the future, even though the crypto scene is actively collapsing.

[@DavidLopez-dd1hx]

Bitcoin and Ethereum is quite successful. I don't think you know what you're talking about

[@EventHoriXZ0n]

@@DavidLopez-dd1hx cope

[@spoonbred]

The legacy system is $30T deep in unaudited debt that contributes to the entirely over leveraged value of markets...That's just the US alone.