In Conversation Talk with CZZ: Defi, Uniswap & Application Scenarios

Anndy: Do you think the word decentralised is overused?

Dr. Z: No, I don’t think it’s understood well enough. However, I would argue that the distributed ledger is incremental innovation.

Anndy: What is your definition of decentralised? Is there a need to redecentralise?

Dr Z: its significance is probably similar to things like Hadoop or Spark. but not revolutionary. The second facet is that it can be considered as a trust machine, this innovation is truly revolutionary. Prior to blockchain, the way people build trust when conducting business is through credibility and trust. For example, a sovereign state is deemed to be the most credible, followed by big corporations, followed by individuals with a good credit history. To borrow money would be asking the counterparty to put faith in your ability to pay it back. Therefore, when two individuals conduct a transaction, they will typically rely on multiple “trusted” third parties. This is centralization. Centralization is necessary (but not desirable) as individuals do not necessarily trust one another. What is significant about bitcoin is that it basically created the third dimension of trust, In cryptography we trust.

Anndy: Linking this back to Uniswap, DeFi (in general), the reason why it is so “hot” is that it is unregulated. We are so far away from understanding the future not to say decentralise + trust. Isn’t that the case? You really need to educate the Asia community on this Z.

Dr. Z: I’ll get to it. What the blockchain has really created is the ability for Alice to send some assets to Bob, without really having to trust any agency. This is decentralization. Now, the only problem with bitcoin. is that Satoshi didn’t have in place a pricing mechanism. To find out how much a bitcoin is worth, there must be a market where it’s actively traded. and exchanges today are predominately centralized. The downsides of a centralized exchange are obvious

CEX hold far too much power. Make or break of a project often depends on whether they can be listed on a major CEX’
Counterparty risk. Starting from Mt Gox, there are many instances where CEX’s have shut down with very little warning.
But perhaps the most important is this:

Printing coins. There’s a long-term rumour that CEX would over selling coins they don’t have by printing them in their own database.
This creates long-term downward pressure to the entire crypto sphere.

So I often hear people make predictions like bitcoin will hit $1 million USD, sometime this decade. I think it’s possible, but with a pre-condition, the vast majority of the transaction volume must happen on DEX as opposed to CEX.

DEX = decentralized exchange

CEX = centralized exchange

Because we can never be sure if CEX’s are printing extra BTC particularly when it’s price become very high, For the exact same reason, I’m more bullish on BTC than gold as a defence against inflation. most gold consumer investors buy today is merely electronic gold printed by some financial institution, it does not represent the finiteness of physical gold. So this is basically the ecosystem in the crypto market of 2019. Now let’s see how Uniswap would change the landscape.

Let’s say gold is now $2000, and some authority doesn’t like it, they can print a ton on their database and dump it on the exchange, and now gold is only $1800 say, and they slowly buy it back, their physical gold collateral is not hurt at all, but the fact they have this tool. means the gold price is never representative of the real value of gold

Jenny: this is also what exchanges are doing to our coins, I have one question, is my bitcoin in futures real bitcoin?

Dr: No but I think futures are fine because you know its fake when you buy them. If DEx becomes mainstream, I think there’s a real possibility that Bitcoin may hit historic highs.

Anndy: Honestly the same happened in Uniswap (which is decentralised) on the same situation where prices were pumped and dumped. They do not play the volume game

Dr Z: you can still pump and dump on Uniswap, but you at least you’re doing it with real Ether, So Uniswap is really the first DEX that looks like a serious competitor to CEX’s

So back to Uniswap, I think Uniswap is a significant development and it’s absolutely fantastic. I think Uniswap really stand out on transparency, All transactions are on-chain, Transparent relationship between price and liquidity pool, No listing fees/permission to list.

Like I said before, the ability to list on a major exchange used to be the make or break of many crypto projects. No longer the case on Uniswap! Moreover, I think Uniswap is creating an excellent token economic of the Ether.

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