Crypto only solves problems crypto itself created. DeFi is a perfect example of that.

The reason is that blockchain can only offer its trustless, decentralized and permissionless guarantees to things that are wholly representable on-chain. As soon as you try and sync it with the real world, the real world is the source of truth and the chain representation is meaningless.

Further, by boat anchoring solutions to the fundamental inefficiencies of blockchain, you leave your chain solutions at a material disadvantage to centralized, permissioned solutions anyways. This creates huge adverse selection bias, leaving only the criminals and scammers using it.

Concrete example: Sia has 800TB of storage - total! - in spite of an $800M market cap and millions spent on R&D. You could achieve the same result with a half of a 1U rack of hard drives and $40,000 - or a few bucks on AWS. Why? Because why on earth would anyone use it?

On the other hand, Chia has 1.5 exabytes of wasted hard drive capacity loaded up with bingo cards lol.

This is crypto.

DeFi is particularly fun, it's basically just decentralized 2008, a way to extend way too much leverage to people who simply should not have it, in exchange for fanciful 3-digit percentage APR to lenders.

It's all a damn mess.

I think it's easy to get lost in the weeds on this. What was the fundamental innovation of Bitcoin? It was a blockchain that functioned as a decentralized ledger that allowed un-trusted parties to verifiably exchange value without a trusted intermediary. Game theoretical mechanics were added to try to prevent collusion, resist censorship, and to make the network permissionless, to varying degrees of success. What is the cost of this? Obviously, massive inefficiency. Bitcoin's solution to the Byzantine Generals problem (which was previously unsolved) was to propose that everyone store a copy every single transaction that ever happened and have everyone verify that, and then to protect that network, to instigate a Red Queen's race incentivized by a self-reinforcing reward mechanism. Is this an optimal solution? No. Did design decisions lead to perverse consequences that the creator(s) didn't intend? Yes. Is this also extremely limited in functionality due to it's original design constraints (which have since ossified, perhaps intractably)? Sure. And do most things require the function that a blockchain (or decentralized ledger technology in general) provides? No. But, it does solve a very real problem, and all of this "waves hands" is part of the process of discovering where it's most appropriate.

I think what's being lost in this discussion, since almost no one posting here is either passingly familiar with the past decade of crypto-economic research, or with the current state of the art in "crypto" technology (almost none of which revolves around or even involves Bitcoin these days). Almost all of the promising new networks provide at least 1000X transaction throughput at 1000X+ transaction efficiency while retaining decent Nakamoto coefficients and allowing some level of computation ("smart contract") and composability. (Yes there is also plenty of useless stupid stuff that sadly is a huge waste of resources, but hey, we survived Dotcom Bubble. It's just part of the process.)

I don't begrudge anyone who doesn't see the potential there, just as I don't worry about anyone who might have said that the Internet's impact would be no greater than the fax machine (in fact, a single Nobel laureate chimed in early on to both of these sentiments) - whether this turns out to be true will depend largely on the people who choose to build their vision and prove people wrong... or not.

Also, there's no question it's all a damn mess, but much more broadly than crypto.

> No. But, it does solve a very real problem, and all of this "waves hands" is part of the process of discovering where it's most appropriate.

It solves a technical problem - the byzantine generals problem - but does it solve a problem people have? I don’t know anyone who’s had the Byzantine generals problem personally.

A major challenge is that there is an enormous disincentive to choose the best solutions, since advocates tend to own a lot of coins. If you’ve got a considerable portion of your wealth wrapped up in btc then something showing up and eating btc’s lunch is bad for you. This is very different than many other fields of innovation, where friction to move to better options is far far lower.

I've been trying to give this part of the world an open-minded go over the past couple weeks. I do think it's true that many of us got excited about Bitcoin, which is definitely a dead end, and when we realized that we closed our minds to the entire "industry". But the DeFi world is definitely different and if it's also a dead end, it isn't for the same reasons that Bitcoin was.

Having said all that, I still can't figure out what the hell to do in the DeFi world. It seems like all I can do is lend my assets to people who also have nothing to do besides speculate or themselves lend their assets to other speculators. I can't figure out anything to do that pushes out of the speculative bubble in any way. Maybe you can help me?

i'm glad at least one other person here has insight, i honestly don't understand why people here are so uninformed