xuanling11Crypto Paycheck
Photo by Mario Gogh on UnsplashEmployees will receive their paycheck in the period as a reward for their work. However, the employer wants to pay less to employees so that they can have maximum profits. The tension between working and anti-working has increased ever since. TL;DR Nobody wants to work unless they can pay fairly. Fiat payment may not be sustainable to satisfy what workers can contribute if the employer continues paying less and gaining more from profits. Employees will want thei...
xuanling11Defi Review #4: AAVE The Defi Lending Services
AAVE is a decentralized finance lending service before decentralized finance even existed. It is an innovation lending service in crypto and one of the first kind. However, the lending service may only restrict to the crypto community and it may expand into the traditional financial field later. TL;DR AAVE is a crypto lending financial service which to provides lending services to the crypto community. They focus on security and smart contract lending may be the future of financial services. ...
xuanling11Stablecoin Crisis
Stablecoin is in the crisis mode. The most reputable stablecoin USDC is depegged. It is all triggered by the traditional bank collapse - Silicon Valley Bank or SVB collapse. Why traditional bank collapse impacts crypto stablecoin? Let's sort this out and reveal how stablecoin operates. First, why SVB collapse? The short answer is overleveraged. SVB is one of the 20 largest commercial banking in the United States. Some even estimate the bank owned half of startup assets. Bank operated in ...
xuanling11Crypto Paycheck
Photo by Mario Gogh on UnsplashEmployees will receive their paycheck in the period as a reward for their work. However, the employer wants to pay less to employees so that they can have maximum profits. The tension between working and anti-working has increased ever since. TL;DR Nobody wants to work unless they can pay fairly. Fiat payment may not be sustainable to satisfy what workers can contribute if the employer continues paying less and gaining more from profits. Employees will want thei...
xuanling11Defi Review #4: AAVE The Defi Lending Services
AAVE is a decentralized finance lending service before decentralized finance even existed. It is an innovation lending service in crypto and one of the first kind. However, the lending service may only restrict to the crypto community and it may expand into the traditional financial field later. TL;DR AAVE is a crypto lending financial service which to provides lending services to the crypto community. They focus on security and smart contract lending may be the future of financial services. ...
xuanling11Stablecoin Crisis
Stablecoin is in the crisis mode. The most reputable stablecoin USDC is depegged. It is all triggered by the traditional bank collapse - Silicon Valley Bank or SVB collapse. Why traditional bank collapse impacts crypto stablecoin? Let's sort this out and reveal how stablecoin operates. First, why SVB collapse? The short answer is overleveraged. SVB is one of the 20 largest commercial banking in the United States. Some even estimate the bank owned half of startup assets. Bank operated in ...
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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:
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.
https://twitter.com/Lempheter/status/1574746713738268672
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.
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
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.
Support writer here or join Medium here
Photo by Akinori UEMURA on Unsplash
Defi or decentralized finance is an alternative way to traditional finance. It sounds fancy, but it does not work in reality. Here is why:
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.
https://twitter.com/Lempheter/status/1574746713738268672
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.
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
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.
Support writer here or join Medium here
Photo by Akinori UEMURA on Unsplash
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