Finance

Anyone wanna explore the developing world of DIY finance? Post anything you feel is relevant, but I'll start by giving a 'short' & 'simplified' introduction to my favorite dApp (decentralized application). (NOTE: talking here about a pioneering software project that you can put your capital in, I wouldn't advice anyone to actually put in anything any more than you'd want to put all your important data into a shiny new bleeding edge distro!) There is currently in active development a kind of decentralized investment bank that currently offers a few products and services that are: -a dollar pegged cryptocurrency -margin trading on one cryptocurrency A big update is on the horizon which will add: -margin trading on more cryptocurrencies -locking up assets for interest -additional pegged cryptocurrencies This is in my opinion the most interesting open source project going on. The name of it is MakerDAO. What it is in practice is software (smart contracts) running in the Ethereum blockchain that anyone is allowed to vote on the specifics of via their governance token MKR. It's all still slowly developing but the first proposal vote will end soon: https://vote.makerdao.com Their main product is the DSS or Dai Stablecoin System, which is a cryptocurrency that has built in incentives for maintaining a price close to the dollar. In theory the system could be pegged to anything else like the euro or for example an index fund etc. You can check out its performance here: https://coinmarketcap.com/currencies/dai/ As you can see it mostly sticks to the price of a dollar as botters are incentivized to aim towards the price target, occasional flash spikes and crashes (~5-10% swings for some seconds/minutes) happened in the early days as botters were learning the game but constantly less and less. How the system works is very interesting and it's explained in detail here in the form of a Haskell program: https://makerdao.com/purple/ But on the practice side you can do a few things with it the main of which is to create CDPs (Collateralized Debt Positions), which are financial assets that hold collateral (currently only ETH but more ERC20 tokens will be implemented). Against this collateral that you lock into the CDP you can withdraw DAI loans with maximum value about 2/3rds of the collateral. It's kind of like putting your gold in a bank and then receiving easier to use paper from the bank, except that the bank is just software that nobody directly controls so in a way you maintain full control of the assets you lock up, as you can free up the collateral by paying back the debt associated with the CDP. The CDP itself is also fully transferable and you can store it in whatever wallet you want and trade it in the same way someone might sell an indebted company that then when the debt is paid all the company assets are freed. You can also ofc just buy DAI directly, so that when eg. you think the price of ETH is going to fall you can just transfer the value into DAI and survive that fall. Now the thing people have been using it a lot for is to lock up ETH, draw a loan of DAI, buy more ETH with that DAI and lock it up in a cycle that can be repeated three times IIRC, effectively opening a decentralized long position on ETH because if the value of the collateral goes up then the loan will eventually pay itself back, eg: Price of 1ETH = $200, lock it up and draw 100DAI and buy 0.5ETH with it. Then if the price of ETH rises to $400, you can buy 100DAI with 0.25ETH and use that DAI to pay back the debt and free up the locked 1ETH and then you have 1.25ETH which you could then buy 500DAI with and now even if the price of ETH crashes you still have $500 worth of stable capital. Of course the catch is that if instead of rising the value of the collateral crashes to a point where the CDP becomes too risky there are bots that are rewarded for finding too risky CDPs (risk parameters are currently handled by the Foundation building MakerDAO but eventually will be up to MKR holders to decide) and liquidating them that is confiscating the amount of collateral necessary for paying back the loan. It's going to get more interesting with the multicollateral update on the horizon. One of the expected first new collateral options to be added is DGX, which is the stablecoin product of another DAO (Decentralized Autonomous Organization) called DigixDAO. What DigixDAO is is a decentralized network of gold reserves which offers a token that is redeemable 1:1 for grams of gold. This means that instead of creating a risky CDP with a highly volatile asset like ETH you will be able to instead use actual gold as collateral. Another thing that will be added is an incentive to hold DAI by giving the ability to lock it up for gathering a set % of interest yearly, again you're locking it in a smart contract so every time you want to unlock it you can do it without any human interaction or middle men. Some people have been using the system to try to circumvent capital gains taxation because lets say you bought 1ETH at $1 and then it rose to $100 and so you got $99 capital gains that will be taxed for some % when you try to sell it. Instead you could lock it up in a CDP and withdraw DAI that you then sell still at the price of $1 making in theory no capital gain to be taxed. I'm not sure how the taxation agencies of the world will react to this, but it's an interesting issue. MakerDAO has also been criticized for offering unregulated unlicensed risky loans to netizens around the globe, time will tell how this will all play out but my bet is that it will make for top notch drama that you don't want to miss out on even if you don't feel like participating in it!

>>2273 Seems like you know some of your soykaf. I'm interested in this kind of thing but I'm a mega-noob at this. Do you have any books (or other) you recommend so I could understand more than 75% of your post?

>>2545 Not OP, but I was confused as well. I found this Medium link that runs through what the OP said a little more in depth. https://medium.com/cryptolinks/maker-for-dummies-a-plain-english-explanation-of-the-dai-stablecoin-e4481d79b90 It seems interesting enough to keep tabs on.

DAI is shortly explained also in this new Wired article: https://www.wired.co.uk/article/crypto-democracy-oligarchs

crypto nerds: these crypto currencies are great! There's no FTC to regulate us! <years pass> crypto nerds: oh wow, these are really volatile. What if we had some sort of regulatory committee, but instead of being made up of expert economists its made up of people who were rich enough to buy in? MakerDAO in a nutshell

>>2642 Some laws affected crypto from day one. Namely if you sell anything online for crypto you still are under the law of 2weeks time return policy and have to pay exactly back in crypto what you got regardless of market fluctuation. This can be of course exploited for safe crypto speculation - buy new goods and if crypto crashes sell goods to get money back, if it rises return goods for your crypo and enjoy gains. So now nobody sane can sell for crypto. If there really were zero regulations you wouldn't have half the issues. Same time not everyone benefits from a stable course. Volatility is necessary for making money on speculation. A stable course means zero potential profit.

>>2651 volatility is okay for commodities, but it is absolute horsesoykaf for currencies. Stop calling them cryptocurrencies if you're going to treat them like stock.

>>2653 forex? People treated established currencies like that before cryptos was even a name.

Continuing on the DIY finance topic I finally started playing around with decentralized futures trading. I made this market for anyone who wants to bet on whats gonna be AOTS this season: https://predictions.global/augur-markets/which-final-episode-of-anime-winter-2019-season-will-achieve-the-highest-viewer-rating-in-kanto-region-0x1edbaf541d1620954036e614ad947e5712ff3cbe

r8 mai idea

>>2654 Yeah but currencies are governed by central banks and monetary policies, and are not as volatile as bitcoin. Sure you have cases like Zimbabwe or Venezuela, but usually traditional currencies are rather stable, which makes them usable as means of exchange and storing value. Bitcoin is more like an asset thn currency. What's the point in using it as a currency if you know that one day you can buy a pizza for 1BTC and the other it's worth a brand new car.

>>2676

what is money? in this comment, money := a fungible liquid (in the economic sense of liquid: a thing that is easy to change into another form (e.g. it's easy to transform United States Dollars (USD) into other things by trading them for those other things)). in some periods in some regions, healthy cattle were used as money, because each person was willing to take on more cattle in exchange for giving up the good that they specialize in purveying (the difficulty with using cattle as money is that fractions of cattle are worth disproportionately less than whole cattle: cattle is a ''discrete'' currency). most contemporary currencies are also continuous, the money of continuous currencies can be split into smaller and smaller pieces, with the value of each piece being proportionate with it's size. fungibility of money may also be an unnecessary but beneficial aspect of contemporary currencies. well, the same goes for liquidity. really these things are just such nice features for money to have, we may as well, by default (meaning: with the possibility of exceptions to be dealt with later), accept such a definition of money. this of course is a social construct, but so is communication (i.e. don't categorically condemn social constructs). consider cryptographic currency backed by services (of whatever sort). think of the United States Postal Service forever stamp as a (non cryptographic) currency. theoretically you could use stamps as currency to buy things other than postal service supplied by the United States Postal Service, from people other than the United States Postal Service. with this specific example, there might not be so many willing to accept it as money, but think of other servers that sell services, imagine if they also sell service ''promises'', much like the United States Postal Service sells forever stamps. of course, a promise of service is worth less to the consumer than the service, this is due to the service being "cashed in" at a later time, the chance of the backer breaking the promise, and the service becoming valued lower for whatever reason (e.g. United States Postal Service forever stamps: the internet and electronic mail have reduced some people's use of what they pejoratively refer to as 'snail mail', which is one reason why United States Postal Service forever stamps might not be such a great currency). generally, a similar argument can be made about cryptographic currency backed by whatever you might buy, whether that be goods, services, or.. (is there anything else i'm missing?). >>2642 >crypto nerds: oh wow, these are really volatile. What if we had some sort of regulatory committee, but instead of being made up of expert economists its made up of people who were rich enough to buy in? libertarians: maybe instead of making a single regulator, whomever it's made up of, we'll make multiple options, and see which ones are better. of course, we'll first think through the possibilities logically to exclude the clearly bad options. >>2676 please provide a pointer to the source of the content of your picture.

>>2732 Because one day you'll want a pizza

Cryptocurrencies are not really worth "investing" (gambling is a more appropriate term) into because of their instability and arbitrary pricing. When you purchase equity in a company (stocks), you are becoming a part owner of some x% of the company. The price of your stock is based on the market's expectations of the future cash flows of the corporation, so there is some logical backing for the value of your asset. Because of this, it won't fluctuate too much under normal circumstances. Similarly, owning debt is a guaranteed cash inflow to you, and the value is once again protected since your debt corresponds directly to some kind of physical entity which can be sold to cover the remaining debt you are owed should the company go under. Cryptocurrencies on the other hand have none of these working for them. They correspond to nothing in real life and are based purely on speculation. The value of a cryptocurrency is...just what a bunch of random people think a cryptocurrency should be worth. There's no rationale; just hype.

>>2733 why would anyone do that when they could just buy drugs

bump

This 2020 election instead of following news I just watched a stock ticker of prediction market trading on the election results. You can look at this historical chart to see the election happening from 4th to 6th of November: https://cryptowat.ch/charts/FTX:TRUMP2020-USD-FUTURE-PREDICTION-05NOV20?period=30m Great expectation of a 2nd Trump term with the roof reached at 0.84 share price before all the votes started coming in and some up and downs but clearly trended downwards as the Biden victory became more clear. It's nice because it's like meta-news, people who invest money into prediction markets will be looking hard for all the info that will allow them to predict accurately and you don't have to go through all that effort and just look where they're putting their money to get a kind of feel on any issue. https://en.wikipedia.org/wiki/Futarchy

>>5582 Who decides what prediction outcomes are true in this virtual prediction market to redistribute the revenue to winners? A collective vote? What if the people who predicted the wrong outcome are in the majority and conspire to vote for winning? In meatspace betting practice there's usually some sort of central authority who redistributes the money. Last time I've heard about something like this, it was a simple bitcoin wallet and an Tor hidden service web page with ability to submit bounties for killing people such as Barack Obama or Ben Bernanke. Long story short, nobody was assassinated, and the owner of this project just took all the money himself.

>finance thread >everyone talking about cryptocurrency I'm not going to say that the crypto market isn't finance, but it's not the end all be all of finance. I think the rise of self service brokerages like robinhood is almost as big a deal as cryptocurrency. Unfortunately finance discussion online is always going to be hampered by the fact that anyone with a working strategy is going to keep it to themselves or sell it for cash. To do analytical work you need a good understanding of probability, statistics, and signal processing. The math is probably equally important to a "human perspective" on factors in the market.

>>5591 Investors into the system decide that is holders of REP token in the decentralized example of Augur. But what I linked was a ticker for a centralized prediction market ran by ftx.com The idea with Augur is that REP holders have money staked into the value of the REP token and obviously if they report fraudulently then the value of the REP token will collapse, and it's not like it's just one guy running the system. They also invalidate assassination markets among other things, which is just the current community consensus but there is no hardwired limit on creating assassination markets on Augur. >>5612 Well it doesn't get more DIY in finance other than cryptocurrency.

making money with Dil is a breeze! first you go to the paradise app, sign in with metabunk, send use your collateral from cDilbert, mint some fresh bungweed with gizmo, sell that on the chingbert exchange, refresh your cornwallace wallet, pay your gas ass fees, send that via milkbun to honeypot, convert that with hashdink and weezle to squirm, then you've got enough shram to buy dieseldoosey on the ele (which you are gonna need because dingbat doesn't take needlenose) but then connect smort to chesst and you've got dil!

Nice thread. I’m surprised by how little bandwidth this topic gets on Lainchan. DeFi is the cutting edge of the Wired. >>5633 You sound like someone who has never used any DeFi at all Some things like exploits and arbitrage can be pretty complicated, but yield farming or swapping tokens is about as hard as using coinbase >>3125 >The price of your stock is based on the market's expectations of the future cash flows of the corporation, so there is some logical backing for the value of your asset And those cash flows are denominated in what exactly? The “full faith and credit” of a fractious corrupt insolvent declining “hegemon” you say? With infinite supply and no proof of work? Pic rel. >>5612 DeFi is really the only interesting finance topic these days IMO, because it’s the only real free market. The tradfi business model is to asskiss your way closer to the money spigot. Insiders make risk-free money and outsiders lose value to inflation. Not really even a simplification or exaggeration, take for example how Robinhood meme stock traders got shafted. Google the Cantillion effect.

>>6846 >denominated in what It doesn't matter what they're denominated in. Their value exists outside of the currency used to reflect that value. It would be denominated in literally anything. Not to mention the USD is backed by the US economy. They theoretically could print "infinite" money, but in reality what they're doing is printing now to take from the wealth of later. They're betting that the economy is going to grow at a faster rate than they print. Not to say fiat is any "good", but crypto is no better. At least when you're dealing with securities you need to learn about how a business is properly run.

>>5612 >>6846 I would say that crypto has the spooky hitech new thing vibe going for it but the basics of good financial management and knowing how to increase your return on investments/decrease your discretionary spending without losing quality of life are still more important. I'm saving about 70% of my pay per month at the minute and have learned a ton relatively quickly about the basics of financial management and how to maximise productivity without burning out, got a few low pressure side hussles going etc. Gone from having almost nothing in the bank semi permanently on an average wage of 1.25k a month to having more than £10k in cash savings (half in a LISA, half in a cash account), increasing my average monthly earnings to 1.4-1.6k a month (was steady 1.6-1.7k for 3 months right after being unemployed but that gig ended) a much nicer, not actively trying to kill me car, and significantly better mental health over the course of about seven months the previous four months having been half on furlough and half unemployed Perhaps not very punk, but very much one very bad week away from homeless and less hideously depressed/suicidal everytime I think about the future

>>6964 *very much less I mean

>>6964 People need to completely divorce their understanding of value and currency from the current in-vogue medium (or potential future medium) of exchange. The accumulation and management of wealth is a skill that you should cultivate and be able to use regardless of how others, and yourself, choose to denominate that wealth. You begin to become wealthy by choosing to pay yourself first when you get money, but after that you keep that wealth by effectively managing it. Buy things with intrinsic value and learn how to generate income from already existing wealth.