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DeFi is the world’s most antifragile financial system.
Why?
Building in the open 
antifragile code
Enabling predatory financial primitives antifragile markets
Encouraging platform competition antifragile incentive models
DeFi will eat CeFi. It's inevitable
Why?
Building in the open antifragile code Enabling predatory financial primitives antifragile markets Encouraging platform competition antifragile incentive modelsDeFi will eat CeFi. It's inevitable
First some background. Antifragile systems thrive as a result of shocks, volatility, attacks, or failures. The world's most powerful systems are antifragile
Life is an antifragile system via evolution.
Free markets are antifragile via competition.
Antifragility == A SUPERPOWER
Life is an antifragile system via evolution.
Free markets are antifragile via competition.
Antifragility == A SUPERPOWER
How does this relate to DeFi?
DeFi embraces the wisdom of antifragility by welcoming hacks, attacks & competition to an unprecedented degree.
This means more volatility & failures in the short term, but an incredibly strong ecosystem in the long term.
DeFi embraces the wisdom of antifragility by welcoming hacks, attacks & competition to an unprecedented degree.
This means more volatility & failures in the short term, but an incredibly strong ecosystem in the long term.
What about DeFi makes it antifragile?
Building in the open ENCOURAGES hacking. That’s right, hacks are healthy for DeFi.
As the cryptography community knows, there is no "security by obscurity”. In fact, the most secure protocols are the ones that are open source!
Building in the open ENCOURAGES hacking. That’s right, hacks are healthy for DeFi.As the cryptography community knows, there is no "security by obscurity”. In fact, the most secure protocols are the ones that are open source!
The longer a DeFi protocol is in the wild, the more opportunity hackers have had to break it, hence the more secure it must be.
When the next $1m+ hack happens, see it as a bug bounty or "early adopter tax” paid to strengthen the entire ecosystem
Open source == antifragile code
When the next $1m+ hack happens, see it as a bug bounty or "early adopter tax” paid to strengthen the entire ecosystem
Open source == antifragile code
New crypto-native financial primitives like flash loans enable economic hackingFlash loans give anyone with an internet connection access to huge pools of capital. Any arbitrage opportunities will be gobbled up by flash loan algorithms monitoring the system for imbalances
Similarly, lending protocols allow shorting almost of any asset for more efficient price discovery. More such primitives will come, each making the market more efficient and competitive
Predatory financial primitives == antifragile markets
Predatory financial primitives == antifragile markets
Finally, open competition between platforms leads to hacking at the game theory layerFor an example of this, look no further than @SushiSwap's recent liquidity vampire attack on @UniswapProtocol
In less than a week after launch, SushiSwap has sucked away over 80% of Uniswap’s liquidity 
You’d think that SushiSwap must have a better AMM design to spark such a migration, but no. SushiSwap is an *exact copy* of Uniswap but with a different incentive mechanism!
You’d think that SushiSwap must have a better AMM design to spark such a migration, but no. SushiSwap is an *exact copy* of Uniswap but with a different incentive mechanism!
The irony is that anyone can perform the same attack again on SushiSwap ( @kimchi_finance?). This will continue until we find a game theoretic equilibrium.
Love it or hate it, these attacks are here to stay & they help the ecosystem
Platform competition == antifragile incentives
Love it or hate it, these attacks are here to stay & they help the ecosystem
Platform competition == antifragile incentives
DeFi is a living experiment in financial antifragility.
Expect a bumpy ride combined with blindingly fast evolution.
Expect DeFi to eat CeFi. Slowly then all at once.
To quote @nntaleb, "If we do not decentralize ... it will happen by itself the hard way." /end
Expect a bumpy ride combined with blindingly fast evolution.
Expect DeFi to eat CeFi. Slowly then all at once.
To quote @nntaleb, "If we do not decentralize ... it will happen by itself the hard way." /end
