[daveytea]

> There's no way to instantly convert the stablecoin back into the collateral asset, you have to find someone with a CDP who is willing to buy the stablecoin from you.

This is incorrect and actually doesn't make sense. An important part of DeFi are DEXes (decentralised exchanges) such as Uniswap and Kyber. There is a liquidity pool where you can instantly buy/sell assets. There is no 'waiting' to find someone (i.e. no problems with coincidence of wants). You definitely do not need to find someone with a CDP. You can hold DAI without opening a CDP. Contracts can hold DAI (as DEXes do).

> Similarly, there's no way to unlock your collateralized asset, you have to find someone who is willing to sell you the stablecoin in order to open up your vault and get your eth out.

Also incorrect. You need to pay back the debt of your CDP with DAI. You can do this easily by buying DAI on a DEX, paying back the debt, then releasing your collateral. Some services exist to do this in 1 transaction, so you don't need to actually 'buy' any other asset. You just send the transaction to a contract and they take care of the details.

The DeFi, specifically the Ethereum space, has moved very quickly in a short amount of time, so there are a lot of new concepts and instruments out there. I think a more traditional finance person will have trouble understanding it all as in some cases, there are no analogies to the traditional finance system (e.g. flashloans).

[wayoutthere]

> I think a more traditional finance person will have trouble understanding it all as in some cases, there are no analogies to the traditional finance system (e.g. flashloans).

All "cryptocurrencies" are, in effect, complex securities that are derivatives of greater market factors. The crisis of 2007 showed the risk of using complex investment vehicles that were poorly understood by investors -- and the CDOs that were sold in the mid 00s were far more transparent and predictable than cryptocurrency. Given that crypto will always be one asset class among many, if the traditional finance system (which already operates outside any single fiat currency) can't understand it, they won't use it for anything more than speculation.

Using crypto as an investment vehicle requires a reasonably accurate assessment of risk. In the case of fiat currencies, central banks manage that risk so that investors can rely on the liquidity of the overall system without wiping out deposits. DeFi has no such mechanism, and no central bank to absorb a big hit temporarily in the case of a black swan event.

I still feel that cryptocurrency is just the 21st century version of penny stocks and junk bonds. Fiat currency works because its power as currency is secured by a government able to mobilize military and industrial power to solve market problems. The most heavily traded currencies (RMB, USD, EUR) are those backed by large industrial and military powers because those countries have the scale and political power to manage market risk. Centralized governance is a feature, not a bug.

[Taek]

> You can hold DAI without opening a CDP

If you hold Dai without opening a CDP, the only way to convert that Dai back to Eth is to find someone who opened a CDP and is willing to buy from you.

Similarly, if you opened a CDP and then sold the Dai, the only way to get your Eth back out of the CDP is to find someone who is willing to sell you Dai. The Maker liquidity crisis yesterday happened because there were more people trying to scoop up Dai and get their Eth out of their CDPs than there were people selling Dai, which meant that a lot of people were stuck holding leveraged positions on Eth that they couldn't exit. Even worse, the auction system was malfunctioning, so it appeared as though those people may not even get a fair value for their Eth if they did get liquidated (not to mention, they'd also have to pay the 13% fee for being liquidated, even if they got a fair price in the auction).

> An important part of DeFi are DEXes (decentralised exchanges) such as Uniswap and Kyber. There is a liquidity pool where you can instantly buy/sell assets.

This only works if the total number of buyers and sellers are balanced. The way Maker is set up right now, its possible for a large percentage of your Eth pool (or Dai pool) to be completely unavailable because the holders have not listed the Dai on an exchange. Simply having a decentralized exchange does not automatically guarantee liquidity - people have to agree to sell their assets on that exchange.

> You can do this easily by buying DAI on a DEX

The entire problem yesterday is that all of the Dai was scooped up from all of the Dexes. There was a period yesterday where the Dai price was >$1.11, meaning that CDP holders were paying an 11% premium to exit their positions. The Maker system had no exit valve for people stuck in this position.

> The DeFi, specifically the Ethereum space, has moved very quickly in a short amount of time, so there are a lot of new concepts and instruments out there.

There are also a lot of old concepts and well understood financial relationships that are being ignored, and a lot of highly predictable failure modes that are being forecasted as "black swans". The best team is likely composed both of people who have a very solid background in cryptocurrency as well as people who have a very solid background in traditional finance.

[3solarmasses]

Sorry but please try to use something in an ecosystem before you bash it. Little of what you're saying is true in the least.

CDP owners the only buyers of DAI?! DAI is on every dex, with pairs for a ton of assets. Try out Uniswap...

[Sargos]

It's important to note that the vast majority of people who will own and use Dai have never and will never interact with the Maker protocol or CDP holders. You trade ETH to Dai on Uniswap and go about your day. You trade the Dai to ETH on Uniswap later. I'd expect most people just to go from fiat straight to Dai and back as well.

Maker itself is a system for the professionals and most users won't even know it exists and won't have to.