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What is Tether (USDT)? | The Ultimate Beginner’s Guide

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What is Tether (USDT)

Tether is a cryptocurrency token pegged or “tethered” to the US dollar, so 1 Tether (USDT) is always equivalent to 1 US dollar (USD). To use an analogy, Tether is a bit like a casino chip. Casino chips represent money without being money. However, in theory, at the casino, you can always exchange the casino chip into cash. Tether works on a similar principle. The Tether token is like a proxy for cash. Since it’s pegged one-to-one to the US dollar, the cryptocurrency community sees Tether as a stable coin.

Source: CoinMarketCap

The Tether token can help merchants and traders reap the benefits of maintaining a stable price from fiat currencies while leveraging the operational advantages of a cryptocurrency. Tether can also be very useful for many cryptocurrency exchanges that have difficulty working with banks.  

In this article, we’ll explore Tether’s features and demonstrate how it maintains its pegged rate. We’ll also look at the advantages of using the Tether token as well as some of the controversies surrounding the coin, while covering the following topics:

Tether is a cryptocurrency token issued by Tether Limited. Tether Limited is incorporated in Hong Kong with offices in Switzerland. According to CoinMarketCap, the Tether token is currently ranked the 14th most popular cryptocurrency with a market capitalization of $2.3 billion USD as of April 9, 2018.

While the most popular cryptocurrency by Tether Limited is their Tether token backed by US dollars (USDT), they’ve also released another option to purchase Tether backed by the Euro (EURT).

Tether Limited believes that cryptocurrencies are a new technology that should be leveraged to transact, store, and account for assets. However, there are still many obstacles that prevent their widespread use. These include price volatility, lack of understanding by the general public, and slight difficulty for non-technical people. Tether Limited saw this problem as an opportunity to bridge and utilize the advantages of fiat currency and cryptocurrencies.

Source: Tether.to

Tether’s transactional ledger and Tether token existed on the Bitcoin blockchain using the Omni Protocol, an open-source software that allowed the company to design, create, and trade the Tether token. However, on September 2017, Tether announced that they are collaborating with Ethfinex to develop and launch the first Ethereum-based Tether.

The ERC20 Tether will have lower network transactions fees and faster confirmation times (15-30 seconds) compared to Tether on the previous Omni network. Tether Limited believes that this upgrade will facilitate more efficient exchange arbitrage.

There are five primary steps in the typical lifecycle of a Tether token.

  1. A user deposits fiat currency into Tether Limited’s bank account.
  2. Tether Limited credits the user’s Tether account while Tether tokens are issued to the user and enter circulation. (Tether Limited issued the user some Tethers equal to the amount of fiat currency they deposited. For example:1k USD deposited = 1k Tether USD issued)
  3. Users transact with the Tethers. The users can transfer, exchange, and store Tethers through a peer-to-peer open-source, pseudo-anonymous platform.
  4. The user then deposits Tethers with Tether Limited to redeem their fiat currency.
  5. Tether Limited destroys the Tethers and sends fiat currency to the user’s bank account.

Since users are entrusting Tether Limited with their tokens (that are redeemable in their fiat currency), Tether Limited needs to prove that they have enough currency reserves to back up all the tokens in circulation. Tether Limited’s currency reserve closely resembles the Federal Reserve before 1971, when they backed their USD with gold.

Tether Limited ensures that the corresponding total amount of USD and EUR held in their reserves is shown by publishing their bank balance and undergoing periodic audits. Users can access this information from the company’s website on their transparency page which is regularly updated and available 24/7. The image below is Tether Limited’s current balances as of April 6, 2018.

Source: Tether.to

According to the company’s balance sheet table, total Assets represents how many assets Tether currently holds. Their assets are balanced out with their Liabilities; how many tokens are in circulation. Shareholder Equity is the amount of money they would have remaining if their assets were liquidated and they repaid remaining debts.

Total Assets – Total Liabilities = Shareholder equity

Tether Limited also agreed to have regular audits to verify their reserves. Following through on this promise, however, has proven to be a point of controversy.

Public information on Tether’s “regular audit” can be found on their homepage, you can access a PDF from an audit performed by “Friedman LLP accountant and advisors,” for a “Memorandum regarding consulting services performed September 28, 2017.”

Source: Tether’s Funds Update

While Tether Limited claims to be transparent with their currency reserves, the company’s last audit was conducted over seven months ago. According to CoinMarketCap, Tether had a market capitalization of $40 million at that time, which is significantly smaller than their $2.29 billion market cap today.

On page 4 of the audit report, there are also a lot of blacked out sections most likely due to privacy concerns. However, this does not provide the public complete transparency into their currency reserves.

Source: Tether’s Funds Update

On Tether Limited’s website under transparency update, the company also mentions that “these consulting services do not constitute an audit or attestation engagement,” alluding to the change in Tethers in circulation today compared to what it was in September 2017.

Source: Tether’s Transparency Update

In an email to Coindesk on January 27, 2018, Tether Limited also mentioned that they are no longer working with Friedman LLP, their previous auditor.

“We confirm that the relationship with Friedman is dissolved. Given the excruciatingly detailed procedures Friedman was undertaking for the relatively simple balance sheet of Tether, it became clear that an audit would be unattainable in a reasonable time frame. As Tether is the first company in the space to undergo this process and pursue this level of transparency, there is no precedent set to guide the process nor any benchmark against which to measure its success.”

According to an interview with Cointelegraph, American accountant and auditor Abhishek Shah, who had reviewed the memorandum released by Friedman LLP said that the document demonstrated that Tether did have the US dollar required in their currency reserves during that time. Shah however found it concerning that Tether terminated the audit due to the timeframe provided.

“The reason given by Tether was certainly not clear and precise, neither acceptable.”

Tether has not released an announcement after dropping their auditor. There is also no information available on their website that indicates who the new auditors are or when new audits will occur. Having the last audit over 7 months ago is just one of the many controversies shrouding Tether. There have been further controversies about Tether’s founders and their connection to the Bitfinex exchange.

While the potential benefits of Tether are clear, the cryptocurrency community on Reddit and Twitter have raised numerous concerns surrounding Tether’s approach — many of which revolve around security, accountability, and centralization. There are a few aspects concerning Tether’s history that you should take into account:

  • Massive Growth: Tether experienced high levels of growth from a $7 million market cap to $2.2 billion today.  Since Tether claims to be backed by fiat reserves, there was a lot of questions as to where the additional funding came from.
  • Bitfinex Exchange: Bitfinex is deeply linked to Tether Limited. Giancarlo Devansini is a director of both Tether and Bitfinex while Phil Potter is a director of Tether and chief strategy officer at Bitfinex. Some have called this a liability.
  • Bitfinex and Tether were hacked within an 18 month period: In August 2016, 120,000 BTC was stolen from Bitfinex however, since the 2016 hack, Bitfinex has not published an official audit. While they mentioned following the hack that Bitfinex was “in the process of engaging Ledger Labs to perform an audit of our balance sheet,” they soon announced later in a blog post that Ledger Labs does not do audits. In addition to this hack, in November 2017, $31 million in Tether dollars was hacked from Bitfinex. Following the hack, the US Commodity Futures Trading Commission subpoenaed Bitfinex and Tether on December 6, 2017. The CFTC has, however, not taken any further action.
  • Problems with regulators and auditors: Bitfinex also has ongoing problems with international regulators and auditors. They’ve had challenges with their banks. Tether’s historic auditors are also no longer involved with the company

The Tether token can be extremely useful as an alternative to fiat currencies.

  • Low Fees: Tether has incredibly low fees when compared to alternative options. Once the Tether token is in a Tether.to wallet, there are no fees to transfer. These fees, however, may change if you are on an exchange.

Source: Tether’s Fees

  • Ethereum Blockchain: Tether exists on the Ethereum blockchain as an ERC20 token. The Ethereum Blockchain is a well developed and tested blockchain that is open sourced and decentralized.
  • Easy for non-technical users: Tether’s one-to-one backing makes it simple for non-technical users to understand.
  • Does not face significant price volatility: Tether’s currency reserves ensure that one Tether will always equal one USD
  • No pricing or liquidity constraints: Users can choose to buy or sell as many or as little Tether tokens at whichever pace they choose without liquidity concerns
  • Easy integration: The Tether token can be integrated with merchants, exchanges, and wallets like Bitcoin or any other cryptocurrency.
  • Strong industry supporters and partners: Tether has a group of industry supporters including Poloniex, ShapeShift, Kraken, Bittrex, and HitBTC.

Beyond these advantages, Tether has three key beneficiaries from their token. These include exchanges, individuals, and merchants.

For Exchanges:

With the Tether token, exchanges can begin accepting crypto-fiats as a deposit/withdrawal/storage method rather than using a traditional bank or payment provider, allowing users to move fiat in and out of exchanges more freely, quickly, and cheaply. Exchanges can then outsource fiat custodial risk to Tether Limited and add other Tethered fiat currencies as trading pairs to the platform. By using the Tether token, exchanges are exposed to less risk than continually holding fiat on exchanges.

For Individuals:

The Tether token can help individuals transact in fiat value, pseudo-anonymously without any intermediaries or middlemen. Users can cold store fiat value and avoid the risk of storing fiat currency on exchanges by moving cryptocurrency-fiat instead. Individuals can also avoid opening a fiat bank account to store fiat value.

For Merchants:

The Tether token can help merchants price goods in fiat currency rather than Bitcoin (so there are no moving conversion rates), prevent chargebacks, reduce fees, and gain greater privacy.

On Tether Limited’s Whitepaper, the company acknowledges many implementation weaknesses.

These include being bankrupt, banks that are currently backing Tether Limited freezing or confiscating Tether Limited Funds, the banks working with Tether Limited going insolvent, and Tether Limited absconding with their reserve assets. Tether Limited, however, mentions that cryptocurrency exchanges also face these problems as well.

Other disadvantages of the Tether token include:

  • Unclear Audits: Tether’s most recent audit was in September 2017. While the company has released many updates on their website, they have not mentioned anything concerning new auditors or when new audits will take place. Tether has always promised a full public audit but has never managed to produce one. There is also no full professional public audit of the currency reserve.
  • Deanonymization to purchase and sell Tether: While users can deposit and withdraw Tether anonymously, any purchasing and selling for fiat money on Tether website requires confirmation and verification of accounts.
  • Centralized, permissioned, and trust dependent: While Tether claims to be decentralized, Tether Limited and their currency reserves are completely centralized. The entire Tether system is dependent on Tether Limited’s capability and willingness to maintain the currency peg. 
  • Dependent on good financial relationships and legal authorities: Tether is heavily reliant on the banks that they work with as well as legal institutions.

Tether Limited’s latest general update was in September 2017. The company is unfortunately not very active on Twitter and other social media websites.

Banking

Tether is working with “other payment avenues and channels, including third-party payment processors and banking relationships in countries with friendlier correspondent banking connections.” The news comes after their primary banks in Taiwan were being blocked by US correspondent banks. They have also opened an escrow-based relationship with a US based company to service qualified corporate customers.

New Tether Currencies

Tether Limited is looking into offering additional currency options. They currently have Tether-backed USD (USDT) and Tether-backed EUR (EURT). Tether Limited is looking to issue a Tether-backed Japanese Yen JPY, and a Tether-backed Great Britain Pound GBP next.

Tether on Trezor

Tether Limited’s Omni Layer team was reported to be working with TREZOR, a cryptocurrency hardware wallet.

Tether on Lightning

Tether announced an “initial discovery and integration discussion” with the Lightning team for “low-cost, instant transactions of Tether currencies on the Lightning network.”

Auditors

Tether openly stated that they are “aware of online discussions about Tether’s lack of publicly available audits. They’ve released previous versions for the community from December 31 2016, January 31 2017, February 28 2017, and March 31 2017

Buying Tether (USDT) from your bank account often requires a 2-step process. The most common and recommended approach is to buy Bitcoin (BTC) or Ethereum (ETH) from an exchange that accepts deposits from a debit/credit card or bank account. Most exchanges like Coinbase allow you to buy BTC or ETH.

Afterwards, you need to transfer your recently purchased cryptocurrencies to a marketplace that sells Tether (USDT) in exchange for BTC or ETH. There are many supporting exchanges that support Tether (USDT). Examples include Binance, Bittrex, and Bitfinex.

Tether Digital Wallets

You can hold Tether in any hot wallet or cryptocurrency exchange that offers Tether (USDT) including Binance, Bittrex, Kraken, and Poloniex.

While Tether.to previously hosted a local wallet, as of December 19, 2017, the company has limited wallet services as they are in the process of developing and building a new platform.

As mentioned on their website update:

“We will be slowly phasing out and discontinuing the current wallet services and all old addresses. To prevent against possible loss of funds, users should not attempt to deposit any funds to their old wallet or deposit addresses. Additionally while the new system is being built, we will be disabling new signups on the platform.”

Tether’s $2.2 billion market capitalization shows that there is significant demand in the cryptocurrency market for fiat-backed solutions. A stablecoin like Tether has many potential benefits, but it’s important to consider whether Tether’s approach is feasible and realistic.

At this point, there is no clear evidence to support either case. As with many other cryptocurrency tokens, Tether is still in its early stages. It remains to be seen whether Tether Limited can realize the full potential of its product. For now, Tether offers the advantages of a cryptocurrency with the stability of a traditional fiat, but the Tether token also exposes you to the risks in both systems as well.

The post What is Tether (USDT)? | The Ultimate Beginner’s Guide appeared first on UNHASHED.

Source: https://unhashed.com/cryptocurrency-coin-guides/what-is-tether-usdt/

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Here’s Why Analysts Think Bitcoin Will Rally Towards $17,000 by EOY

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  • Bitcoin’s price has been caught within a consolidation phase around $13,000 ever since it was rejected at its recent highs of $13,200
  • This is around the price at which it has been trading throughout the past few days, with buyers and sellers being unable to take control of its near-term trend
  • Yesterday, bulls did attempt to set fresh yearly highs and kickoff a leg higher, but it resulted in a rejection
  • This shows that buyers don’t currently have enough support for another push higher
  • One analyst explained that a push towards $17,000 could be just months away, but it may first see some consolidation

Bitcoin and the aggregated crypto market are consolidating following Bitcoin’s recent rejection at its yearly highs.

The cryptocurrency has been unable to spark any sustained moves past $13,200, signaling that the selling pressure here is significant and may continue slowing its ascent.

Despite its short-term trend being somewhat unclear, there’s no questioning that Bitcoin’s macro trend is shaping up to be extremely bullish.

As such, one analyst is noting that a move to $17,000 could be just a couple of months away.

Bitcoin Consolidates Around $13,000 as Buyers and Sellers Reach an Impasse

At the time of writing, Bitcoin is trading down just over 1% at its current price of $13,000. This is around where it has been trading throughout the past few days.

Yesterday, bulls attempted to break this trend and propel it higher, but a move past $13,300 resulted in an influx of selling pressure that sent it reeling lower.

Its inability to see any sustained rally does indicate that the selling pressure it is facing above its current price level is quite significant.

Where it trends next should depend largely on whether or not it can push past the resistance laced throughout the lower-$13,000 region.

BTC Poised to See a Sharp Climb to $17,000, Claims Analyst

Despite this micro weakness, one analyst is noting that Bitcoin is positioned to see some major upside in the months ahead.

He is specifically pointing to $17,000 as a target that he expects to be reached by the end of the year.

“I think this is a likely scenario, not expecting a clear breaker above $14,000 yet. A retest of previous resistance zone to build momentum towards the next rally towards $17,000 beginning next year.”

Bitcoin

Image Courtesy of Crypto Michael. Source: BTCUSD on TradingView.

The coming few days should provide insights into whether or not the resistance Bitcoin is currently facing will be enough to spark any selloff.

Featured image from Unsplash.
Charts from TradingView.

Source: https://bitcoinist.com/heres-why-analysts-think-bitcoin-will-rally-towards-17000-by-eoy/?utm_source=rss&utm_medium=rss&utm_campaign=heres-why-analysts-think-bitcoin-will-rally-towards-17000-by-eoy

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InfinityDefi: A Flexible, Low-Risk Crypto Collateral Lending DeFi Platform

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The cryptocurrency industry has come a long way since its inception, as the underlying technology undergoes constant evolution. The latest advancement in such development is the concept of Decentralized Finance, popularly known as DeFi. As the DeFi movement rages on, a lot of new, innovative projects have entered the market, offering a great deal of flexible financial products to the community.

One such innovative project is InfinityDefi, a state-of-the-art composite cryptocurrency asset management platform that offers much-needed financial services to the community, helping them put their crypto assets to good use. Created by a team of experts in crypto, finance, technology and legal fields, InfinityDefi has positioned itself as the world’s first multi-collateral lending DeFi platform where users can deposit, lend and borrow cryptocurrencies at some of the industry’s best rates.

The entire InfinityDefi ecosystem comprises a series of derivative products including multi-stablecoin index, DEX, liquidity aggregation platform, safety reserve, options and convertible debt. These products together bridge the gap between unused crypto assets and demand for short term borrowing, thereby enabling everyone involved to make profits.

The InfinityDefi protocol is fuelled by the INFI ecosystem token and the PPT equity token. While INFI enables the token holders to participate in project management, control financial risk, and vote in the decision-making process, PPT act as reward tokens earned against transactions made on the platform. The PPT tokens can be exchanged with INFI.

Collateral Loans on InfinityDefi

InfinityDefi offers an aggregated product with crypto collateral lending and savings using a flexible pledge and redemption mechanism. On the platform, users can utilize their crypto holdings to earn interest or secure a short-term loan. Unlike other crypto lending DeFi solutions currently in the market, InfinityDefi supports secondary loans and multi-value-added loans, which helps users unlock more value and liquidity from their assets. Collateral financing on the platform can be secured from different creditors while maintaining an ultra-low pledge ratio of up to 10% less than other peers.

Users can use a wide range of cryptocurrencies including DAI, USDT, USDC, TUSD, BUSD, HUSD, ETH, HT, OKB, and more as collateral for lending and borrowing. The utilization of a unique polymerization pool in conjunction with an algorithmic interest rate model that dynamically adjusts interest rates to balance supply and demand. All deposits and disbursements are directly processed from the polymerization pool, which includes servicing of the secondary loan on top of existing loans, against the initial collateral and multi-value-added loans where users can pledge the value-added part of collateral to get additional loans.

By design, InfinityDefi has some of the lowest position coverage for collateral which is set at a maximum of 145% and a minimum of 125%, in case of secondary loans or a fall in the value of collateral. In addition, the platform also has an auto-liquidation feature in place that dissolves the collateral in case the value of collateralized assets falls below minimum position coverage and the borrower fails to deposit additional assets to cover for the shortfall. The liquidation of assets happens at the prevailing market price to recover the principal and outstanding interest, with any excess funds returned to the borrower. During liquidation, if the value of available collateral doesn’t cover the pool’s exposure, InfinityDefi protocol’s safety reserve will step in to cover the losses, thereby ensuring the interests of investors and borrowers are protected at all times.

These features also enable InfinityDefi to provide 5% lower loan rates, 20% higher loan limits and faster capital turnover than other DeFi platforms.

Advantages of InfinityDefi Collateral Loans

The InfinityDefi platform allows all the stakeholders to profit from their crypto assets to earn both active as well as passive income. For those looking for earning a passive income, holding crypto assets, and waiting for their value to appreciate is not the best option, as the volatile nature of markets creates a lot of uncertainties. Instead, they can deposit their assets on INFI DApp to earn interest on their holdings. The interest rate for such deposits are directly related to the Polymerization Pool interest rate, calculated using the formula:

*where ‘j’ is one of the deposited cryptocurrencies which is part of the polymerization pool

The deposited principal and accrued interest can be withdrawn by the user at any time. Based on the demand and supply, the interest earned on deposited assets over time can potentially turn out to be more than what the depositor would have gained by holding, more so, in case of a stablecoin.

Meanwhile, collateralized loans help those either in need of funds to meet their obligations or those looking for additional liquidity for trading. The reduced interest rates, along with options for secondary and multi-value added loans make it easy to secure necessary funds for trading needs, which could help increase the margins on profitable trades. It could also be used for arbitrage, leveraging the interest rate gap on different DeFi lending platforms to generate profits instead of directly using the price difference of underlying assets.

The PPT tokens earned performing each of these actions also adds to the profits. The amount of PPT earned depends on the collateral/loan amount and duration. These PPTs can be exchanged for INFI and traded on exchanges where the token is listed.

Overall, InfinityDefi provides a safe, profitable, transparent, and low-risk way for users to invest and manage their crypto assets.

Learn more about InfinityDefi at – https://www.infinitydefi.io/
Read InfinityDefi whitepaper at – https://www.infinitydefi.io/uploadfile/2020/0929/20200929061612368.pdf
Join InfinityDefi TG group at – https://t.me/infigroup

Source: https://www.newsbtc.com/sponsored/infinitydefi-a-flexible-low-risk-crypto-collateral-lending-defi-platform/

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DeFi Still Needs a Silk Road Moment

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Mainstream criminal adoption would prove that decentralized finance (DeFi) is building tools with real utility, because if there’s any one group that is both underserved in its access to sophisticated financial products and willing to pay huge premiums to acquire them, it’s criminals. 

The Silk Road was launched in February of 2011 and quickly became the first example of Bitcoin’s product-market fit. While some proponents of cryptocurrencies argue that today criminal activities are a small percentage of all cryptocurrency transactions, censorship resistance is one of the key features of all decentralized technologies and criminals have played a part in crypto’s wider adoption. 

Boaz Sobrado works in tech, bringing the opportunities of the internet to those who need them most.

Bitcoin’s ability to make payments “the man” doesn’t want you to make is what makes the cumbersome tech worth it. This can include criminal activity such as ransomware and darknet markets (DNMs), but also funding Sci-Hub (a rogue academic publisher) and opposition leaders in oppressive regimes.

Adoption by criminal enterprises is evidence of the product/market fit of censorship-resistant technologies and an indicator of whether innovation will see usage in the non-criminal world. It would have not been possible to create the Silk Road without a truly effective censorship resistant payments method. The fact that Silk Road and other criminal enterprises are able to use bitcoin effectively is evidence cryptocurrencies are a useful and censorship resistant tool. As of now criminal activity online is mostly based on bitcoin, although other cryptocurrencies, such as monero, also play a part.

The 2017 initial coin offering bubble and “games” like FOMO3D have shown that Ethereum is useful for a different sort of criminal activity: unregistered security sales and other elaborate Ponzi schemes. In a way, this is evidence of its effectiveness as a permissionless smart contract platform. But just because Ethereum has proven itself to be useful for Ponzi schemes and scams does not mean it is useful for more than that. Criminal adoption is a necessary, but not a sufficient, condition for the success of censorship-resistant technologies.

The latest hot new trend on Ethereum is decentralized finance (DeFi). According to Associate Professor Jeremy Eng-Tuck Cheah, DeFi is the ability to create and use “financial services using smart contracts, which are automated enforceable agreements that don’t need intermediaries like a bank or lawyer and use online blockchain technology instead.” 

I’ll believe DeFi has a product-market fit when drug smugglers can buy trust-minimized insurance for their shipments and retail speculators can gamble on the price of cocaine in Australia the same way they do with the price of oil in Texas.

These contracts are programmable and can be built into decentralized applications (dapps). We now have automated market makers, decentralized autonomous organizations (DAOs) that play an important role in funding allocation, protocols such as UMA and SNX for building synthetic assets that mimic the price action of off-chain assets, decentralized price oracles such as Chainlink to bring off-chain data onto smart contracts, and all sorts of other infrastructure that were not available in 2017.

Some would argue this is not new infrastructure, but these are just fishy toys designed to take money away from fools. Is there real utility to this new financial infrastructure? Or are most of the problems DeFi is solving problems the same problems DeFi caused in the first place, as Nic Carter believes? 

There are a few hints that financial infrastructure of criminals is being built. One of the largest DNMs, Hydra, considered doing an ICO late last year but eventually desisted. Given the extensive history of DNM exit scams, it is highly risky that a DNM would be tempted to take the funds they raised and run. The largest and most trusted DNM, Empire Market, recently exit scammed, reportedly taking $30 million in BTC of user’s funds. Given that governance tokens are all the rage these days, why not set up a market that can be owned and managed by both the users and the vendors in a trust-minimized way? Think Uniswap meets the Silk Road.

Another product DNM vendors would gladly purchase are insurance products that protect against market exit scams and other sources of systemic risk, such as continued DDOS attacks against DNM sites. Current DeFi analogs include Nexus Mutual.

Disputes over insurance claims and even over drug shipments could also be handled in a decentralized way. Dispute resolution is one of the most resource-consuming problems of DNMs, and dispute resolving admins are proven to be security holes as a trusted third party. Why not outsource dispute resolution to a decentralized platform such as Kleros?

See also: What Is DeFi?

The price information on the DNMs themselves can be used to create financial products. A price index can easily be assembled for a variety of products ranging from high-purity cocaine in Florida to amphetamines in Australia. In the same way the West Texas Intermediate (WTI) oil price is a reference price for oil markets, the South Florida Cocaine index could be a reference point for cocaine markets. Synthetic assets such as perpetual swaps could be built upon the price index using the Perpetual Protocol or SNX. Producers and smugglers would then be able to hedge their positions, in the same way airlines hedge their fuel costs for the year using WTI futures.

History doesn’t repeat itself, but it rhymes. If these projects truly are censorship resistant and create value, we will inevitably see them adopted by those who need them most: criminals. I’ll believe DeFi has a product-market fit when drug smugglers can buy trust-minimized insurance for their shipments and retail speculators can gamble on the price of cocaine in Australia the same way they do with the price of oil in Texas.

For the DeFi enthusiasts reading this, it may be worth thinking: Will we be seeing this sort of adoption? If not, what is stopping it from happening? Those reasons are the true obstacles to the growth of DeFi adoption.

Disclosure

Source: https://www.coindesk.com/defi-still-needs-a-silk-road-moment

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