DeFi gets slammed as hacks and greed are the norm, Terra founder say’s sorry, and DeFi is not an “experiment”
We're supposed to build the Metaverse and Web 3 with this?
Today’s read is more visual than most with some thoughts on how the crypto crash is hitting DeFi markets.
DeFi is getting slammed following Terra’s collapse
Defi is taking it hard with ”total value locked” (TVL) plummeting 56% off its peak to $112bn.
Terra was $30bn of DeFi’s $230bn TVM until about a month before it crashed.
DeFi tokens are down 71% for the year exceeding the underlying Ethereum token decline of 43%, showing not all of the decline is attributable to crypto.
Defi is getting slammed due to persistent hacks, costing $1.6 bn.
$1.57 Bn in DeFi hacks are devastating
Hacks through May 4 from “banklesstimes.”
Exceeds all of 2021, $13 mn lost per day
Do you think regulation is required?
No push for change…greed rules
DeFi GREED never goes out of style!
The incentive for many DeFi protocols continues to be unrealistic returns
Anchor, part of Terra, promised 20% Hex beats them at 38%!
Why such big returns? Because they can.
Without regulation, people will continue to be tricked and robbed.
Losses are simply seen as collateral damage to financial innovation.
If it seems too good to be true it likely is! Anchor was tied to Terra which failed and Hex is a noted scam.
People were warned
Algorithmic stablecoins were well known to be risky. So it’s not as though no one told people that the Terra algorithmic stablecoin wasn’t risky.
Reasearch paper on Algorithmic stable coins. They were clearly known to have risk.
The paper’s conclusion is stunning:
”A strong regulatory framework, with risk disclosure and containment safeguards, is particularly needed for algorithmic stablecoins, which currently serve only speculative DeFi trading applications and have very little, if any, societal or financial inclusionary value.”
It would seem that there are plenty of warnings about the risks of DeFi’s high returns, still greed seems to trump all other concerns.
Terra founder Do Kuan says he's “heartbroken.”
$2.5 bn in Bitcoin lent out to prop up Terra!
Where is it?
Propping up dying coin was throwing money away!
Singapore police should prohibit his entire team from traveling until proper accounting for the reserves is issued.
While roughly $2.5 bn in Bitcoin is unaccounted for!
Accusations of ruined lives and suicides are juxtaposed against the obvious wealth of Terra founder Do Kuan.
Do Kuan’s hubris will bring him little sympathy.
Defi should not be allowed to conduct “human experiments.”
Experiment: “perform a scientific procedure, especially in a laboratory, to determine something.”
We do not immediately experiment with new drugs by giving them to people to see if they die!
DeFi should not be permitted to “experiment” by wiping out people’s savings.
This situation is immoral.
DeFi has great potential; that much is clear.
Callously writing off losses and robbery as the price of innovation is absurd!
Figuring things out should not be done with citizens’ savings. The casualness with which new innovations are proposed and then written off as failures should demand immediate regulation.
Impact on Web3 & Metaverse
Not a day goes by when I don’t read how DeFi will be wondrously used on Web3 and the Metaverse!
What we are seeing now does not instill faith.
First, regulate these services THEN and only THEN build them into Web3 and Metaverse.
How are we expected to build Web3 and the metaverse using DeFi systems that prey on people and are so fundamentally flawed. Has anyone ever addressed this? In my view this isn’t just an oversight, but a willing omission by industry pundits. This situation will not get better on its own.
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Rich Turrin is the international best-selling author of "Cashless - China's Digital Currency Revolution" and "Innovation Lab Excellence." He is an Onalytica Top 100 Fintech Influencer and an award-winning executive previously heading fintech teams at IBM following a twenty-year career in investment banking. Living in Shanghai for the last decade, Rich experienced China going cashless first-hand. Rich is an independent consultant whose views on China's astounding fintech developments are widely sought by international media and private clients.
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