My bank allows me to send money to my landlord, pay direct debits for my bills, receive my salary, and (via Mastercard) spend my money in shops.

How does "being your own bank" do these things? My understanding is that you would still need a "regular" banking layer for each of these activities, which seems like it defeats the point?

Autonomous software exchanging currencies without anybody being in control is cool. I find it hard to think otherwise.

You have a contract written in software, people pledging money to liquidity pools, and the rest is just magic. Sure you can go to a bank or someone and pay a currency exchange fee, but the fact that its possible P2P is quite neat.

It's basically Banks-as-software, collaboratively maintained like Wikipedia.

But that still doesn't solve any of those problems I mentioned?

Plus I can already do P2P currency exchange. I don't because it's inconvenient to find those to exchange with, so I happen to use a marketplace (TransferWise), and they take a cut because they're providing a useful service and now they're an exchange. Exactly the same will happen with DeFi currency exchange, so how is it better?

Not sure if you got what he said.

It’s better because instead of transfer wise controlling the money from point A to point B and taking a percentage as a fee (0.1% or whatever) you have 10 000 people who build a liquidity pool where the money gets transferred from point A to B. All those 10 000 people share the 0.1% fee. Maybe less, in an extremely competitive space.

Basically all the centralisation, the app takes a fee bullshit goes away, and instead you get 10 000 or 100k or 1mil people all sharing their money and receiving part of the fee.

The dev can also write into the smart contract that he gets paid a percentage as well. Boom, you have a transferwise competitor with 100 mil in liquidity within days with 0 server costs. You can do this right now with a few days/weeks work on a decentralised application. You don’t think that’s big? Any app that “takes a cut” in exchange for having written a few thousand lines of code and maintaining server infrastructure will be challenged by decentralised alternatives.

I think I understood it.

> you have 10 000 people who build a liquidity pool

> The dev can also write into the smart contract that he gets paid a percentage as well.

This is literally what TransferWise is. They convinced thousands of people to work together to build a liquidity pool – that's the hard part – and then they take a small cut.

Sure but - the hard part - transferwise had to build a pool of people - can be done in days in crypto now.

Being your own bank cuts out costly middle men. You can directly receive your salary from your employer rather than employer -> employer's bank -> your bank -> you, directly spend your money to a merchant instead of you -> your bank -> your credit card company -> their bank -> them, directly send to your landlord, etc etc. No banking layer is needed for any of the use cases you're talking about.

Banks aren't costly. They earn money on their deposits by using them as the reserve store for creating new money, and generally pay their users, not the other way around.

Granted, they're costly if you're poor, but I've yet to see a blockchain application that seems likely to be useful for poor people who may not even have consistent network access.

Payment processors, on other hand, certainly charge vendors and result in some level of markup to the sale price of goods and services. But blockchains as payment processors add cost as well. This just happens to be hidden right now by the fact miners can earn so much profit from the value of their holdings skyrocketing that they don't charge anything. Crypto values have to stabilize at some point to ever be usable for transactions, so this cannot continue forever, and users will eventually need to pay the cost of the transaction processing directly, just as they do with non-blockchain payment processors.

Decentralizing something doesn't make it costless. Some work is being done somewhere by some machine or person.

My jaw drops for you. Banks are indeed costly. They take your money, earn >5% interest on it and pay you 0.02% interest back. It doesn't even get close to beating inflation. They nickle and dime you on overdraft fees, minimum balance fees, other BS. You're paying them just as much as you're paying credit card companies, if not substantially more. You just don't know it.

> poor people who may not even have consistent network access.

There are plenty of poor unbanked people whoe have enough network access to use bitcoin, especially with the lightning network. You only need network access when paying (or receiving). You don't need consistent network access.

>This just happens to be hidden right now by the fact miners can earn so much profit from the value of their holdings skyrocketing that they don't charge anything

That's not true man. Miners are not empowered to charge anything. Miners can only accept transaction fees that users place on their own transactions. Its a market and miners choose the highest fee transactions. That's how it works. You're implying that coinbase rewards subsidize low fees, but you're very wrong about that. When the coinbase rewards go away, fees don't consequently go up - rather miner revenue goes down in such a case.

> Decentralizing something doesn't make it costless

But it can make it orders of magnitude cheaper. Paying someone on the bitcoin lightning network costs less than a tenth of a cent. Tell me that isn't cheaper than any other traditional payment mechanism.

> You can directly receive your salary from your employer... directly spend your money to a merchant... directly send to your landlord, etc etc

My point is that none of this is actually possible. My employer doesn't pay me in Bitcoin/etc, has no facility to right now, and would get into a lot of legal trouble if they didn't pay payroll taxes. I don't frequent any shops or online services that accept payment with cryptocurrencies. My landlord wants to be paid in GBP because that's what he's paying his mortgage in and he doesn't want the hassle and cost of conversion.

I get that these things are all possible when everyone has moved over to cryptocurrencies, but that's a huge chicken-and-egg problem, and I've yet to see a path from where we are now to this future world that is at all credible/accessible/legal/compliant/safe/cheap.

> My point is that none of this is actually possible

Except it is possible.. What you mean is that the people who pay you don't want to pay you in bitcoin, and the places you buy from aren't taking bitcoin. But they could if they wanted to. It is in fact possible today.

You asked "how does being your own bank do these things". I think its pretty clear how they do those things and how banks are not necessary for you to pay someone else (in bitcoin) today.

> would get into a lot of legal trouble if they didn't pay payroll taxes

Paying employees in bitcoin does not prevent them from paying payroll taxes...

> huge chicken-and-egg problem

Its really not tho. Individual merchants can (and do) accept bitcoin without all their customers willing or able to pay in bitcoin. Its just another option. Individual employers can offer the option of paying employees in bitcion (especially easy if they're a merchant that accepts bitcoin). Individual employees can opt into such an option. There is no chicken and egg problem, it can happen gradually one person at a time and one company at a time.

Getting a loan with a bank is hard. Takes days/weeks.

Getting a loan on DeFi takes minutes.

There are many loan providers who will pay out within a day, my bank will give me a loan via their app in 2 minutes and receive the money not long afterwards, and I don't need to understand what a wallet is or which ones are safe to use or how to use them safely, etc.

There's nothing about regular banking that prevents this, or anything about DeFi that is required to make it happen.

I think you're mistaking the fact that DeFi is a hub of great innovation for DeFi itself being the great innovation.

You are extrapolating your situation > global situation. Millions if not billions of people don't have access to the credit opportunities you describe. Certainly I don't, living in the country in europe I live in.

That is absolutely true, but the fact it is possible in some places does lead me to believe this is not a benefit of DeFi, but a benefit of well developed banking infrastructure.

DeFi might be able to provide this, but we don't need DeFi to get it.

Can you explain DeFi loans? I used a calculator, and to take out $500 worth in one coin, it costs $900usd in bitcoin collateral, I mean if I had $900 in bitcoin, why would I need $500 and not just use the bitcoin?

I honestly find the thing pretty confusing myself.

However the fact that it’s confusing doesn’t mean it doesn’t work. Cuban has rightfully said UX in the space is beyond awful - some of it is virtually unusable without deep instruction.

My assumption there would be that you lock that bitcoin away. And you get 150% of the value of the BTC in another coin - DAI or whatever.

So you might have had 1000 usd in BTC but by the end you have 1500usd in DAI ? Dunno

I didn’t say “real”, I said “real world value”

Just because DeFI exists, doesn’t mean it solves a problem that anyone actually has in a way that is measurably better than our existing systems.

I get that you’re passionate about this, but you’re simply not selling it. The least appealing thing in the world to me is to “be my own bank”. I hardly want to interact with a bank, let alone be one.