No, DeFi Is Not a Repeat of the 2008 Crisis

carried a provocative headline this week: “Is Crypto Re-Creating the 2008 Financial Crisis?”

Allen is urging the U.S. government to step in to regulate the sector before it becomes more integrated into the mainstream financial system. She argues that decentralized applications should be licensed and their founders and developers subject to enforcement actions if they are non-compliant. It’s true the average person can’t hope to understand DeFi. Much like how Wall Street’s financial engineers exploited the black box of CDS and CDOs to the eventual detriment of bank customers, that complexity also gives DeFi project founders asymmetric advantages. It’s why “rug pulls” and other abuses of overly trusting investors are common.

It was a moral hazard problem that, in the 2000s, fueled a massive market distortion. Before the crisis, banks faced asymmetric risks. They could profit from successes while the mortgage market was hot but faced no consequences if and when it turned south. The result was a warped, distorted version of capitalism in which profits were privatized and losses socialized.

To achieve that, we don’t necessarily need to attain some utopian standard of total decentralization. Rather, we need a system that is sufficiently open to competition and innovation for a significantly wider set of participants than exists in the current system. That means certain elements should be decentralized and “permissionless,” while other parts will require the involvement of trusted parties to achieve appropriate efficiency.

This DeFi dynamism, if it can be sustained, will prevent the rigidities that Allen worries will breed the same kind of systemic risk that consumed the banking system in the 2000s. That’s because the market is constantly correcting the different winners’ and losers’ tokens. It’s all about the price signals.

ProfHilaryAllen mikejcasey

ProfHilaryAllen mikejcasey

ProfHilaryAllen mikejcasey Done 🤍 Can you help us on behalf of humanity? 😥Thank you, your little touch will change our lives. ♥️

United States Latest News, United States Headlines

Similar News:You can also read news stories similar to this one that we have collected from other news sources.

Interlay introduces new protocol for Bitcoin’s reciprocal relationship with DeFiThe XCC asset will only be available within curated DeFi applications, however, users have the freedom to transition to the interBTC service if they require greater flexibility.
Source: Cointelegraph - 🏆 562. / 51 Read more »

CLabs to Work With eCurrency to Integrate CBDCs With DeFiCLabs is collaborating with eCurrency to allow central banks launching or trailing CBDCs to use the Celo blockchain to enable end users to access DeFi products. LedesmaLyllah reports.
Source: CoinDesk - 🏆 291. / 63 Read more »

A Guide to Decentralized Finance | CoinMarketCapThis very special DeFriday comes with an entire guide to the decentralized finance industry — from noobies to degens 💫 Read more on CMCAlexandria 👇 CMCAlexandria 13 April have a big surprise in shiba inu 🚀 good opportunity to buy hold it tight CMCAlexandria BabyDogeCoin CMCAlexandria Earn 30% profit by holding CCN for one CCNnet
Source: CoinMarketCap - 🏆 290. / 63 Read more »

HBAR Foundation Commits $250M to Drawing Metaverse Apps to HederaAfter putting up $155 million in tokens last month for wooing DeFi projects, the HBAR_foundation is committing $250 million to a metaverse push. $HBAR elitanjourno reports HBAR_foundation elitanjourno Flappy Floki P2E🕹 Inspired by flappy bird NFTs have just been launched. 💎Only 1000 NFTs 💎P2E game 💎Rare, Legend & Unique NFT 💎Utility gives player special abilities ingame Join: HBAR_foundation elitanjourno Parait des news comme celle la en plien milieu du une correction 👌 HBAR_foundation elitanjourno thats it im selling, noone actually cares about the metaverse
Source: CoinDesk - 🏆 291. / 63 Read more »

The A’s say a new ballpark can stop their teardown culture. Should we believe them?The A’s say Howard Terminal will “end the cycle” of teardowns and rebuilds. But history tells us it’s not that simple. Nope.
Source: OakTribNews - 🏆 597. / 51 Read more »

Oakland A’s set Opening Day lineup vs. PhilliesThe A’s will start two players acquired in the Olson and Chapman trades. Let’s go Oakland drumtogether
Source: OakTribNews - 🏆 597. / 51 Read more »