How DeFi lost the chances
This is the story how 2007 led into 2008 and why this is similar to DeFi today
Let’s talk about the elephant in the room. Decentralized Finance has been all the rage for the past few months, and its tokens’ prices are a testament to the excitement. But while the objective of decentralized finance is a financial world which is without a centralized authority, one administered through efficient and seamless smart contracts and operated through digital currencies, in reality, it could fall well short of this lofty goal and end of like one of the worst financial experiments of the century – CDOs. CDOs are collateralized debt obligations or packaged debt securities, mostly from mortgages, which were issued by banks, invested by investment companies, and sold to investors. The basis for the entire CDO market was – the American housing market. When the housing market collapsed i.e. when homeowners failed to pay their dues, the pyramid fell, bringing down the whole system with it. According to estimates from the IMF, the U.S and European banks lost over $1 trillion for essentially betting on toxic assets and from bad loans between January 2007 to September 2009. What’s happening in the DeFi world is quite similar to what happened a decade ago with CDOs. Richard Red, Research and Strategy lead at Decrd speaking to AMBCrypto, stated that because DeFi has had a number of high profile exploits, there’s a massive amount of attention drawn to space. This attention is poking holes in many protocols’ smart contracts and highlighting that the system is not very reliable at all.
Finally, it is said and written by the same story of ICO in 2017. Today Futures crash the market and downsize the real value. DeFi is lending money and pretending stability with old economics models which already failed - pretending a new world. Who does not know what evolution means (Bitcoin) will be stuck to the past... The full article here: https://eng.ambcrypto.com/will-defi-crash-the-crypto-economy-the-same-way-cdos-did/