Bitcoin-big con

slowchimera

msallen said:

I'm sure you understand by now clive0510, but you should completely ignore the above.

Why?
Premium bonds are basically a "no-loss lottery", where each £1 of investment is effectively a lottery ticket for prizes.  

This is basically the same thing but running through an ethereum smart contract, using the interest on the "tickets" bought to generate the prize money, with a single prize each week.  Odds are far better, but as I explained it does have dollar exposure and smart contract risk.

Malthusian

slowchimera said:

msallen said:

I'm sure you understand by now clive0510, but you should completely ignore the above.

Why?

Because the OP wants total of security of capital so even the risk of holding dollars by itself (forex gambling) doesn't meet what he wants.

On top of the dollar currency risk you have the risk of DAI. Below is a graph of allegedly "stable" DAI against the dollar. (It's a year old because I had one saved and couldn't be bothered to save another that would show the same thing.) On top of that you have the risk of the lottery. Even if there is no risk of loss of capital in the lottery, there is if either DAI or USD or both move against Sterling.

Remember you are relying on the continuing willingness of cryptospeculators to exchange DAI for something approaching one dollar, which is very different from relying on the US Government to continue accepting payment of US taxes in dollars and US courts recognising US dollars as a valid means of discharging debts.

I thought it was an interesting addition to the discussion but msallen is still right.

slowchimera

Yeah, fair enough - as I pointed out there is dollar risk, but although while DAI does fluctuate, it will tend to regress to $1.  The Maker protocol operates as a form of central bank adjusting the interest rate paid on newly minted DAI to return it too the peg, Its an imperfect mechanism, and its not unknown for it to go off the peg to +/-6%, but it does yoyo back there eventually.

I guess I was just trying to point out that there are things in next-gen finance that are pretty similar to trad finance mechanisms, so even if Bitcoin itself is much of a rollercoaster and you want something more stable, there are alternatives that are much more stable.

bowlhead99

slowchimera said:

I guess I was just trying to point out that there are things in next-gen finance that are pretty similar to trad finance mechanisms, so even if Bitcoin itself is much of a rollercoaster and you want something more stable, there are alternatives that are much more stable.

But presumably the ability to generate a 'pool of interest' with which to pay prizes is predicated on people wanting to borrow the coins and pay interest on them while the operator of the scheme lends them out, so comes with some default risk which means that your capital can't be guaranteed - unlike with a 'trad finance' mechanism such as premium bonds in which the prize pool and the investors' principal is backed by a government guarantee, or bank deposit account with FSCS protection.

As you say, it comes with dollar exposure and 'smart contract risk' (i.e. credit risk/counterparty default risk), and while the combination of DAI:dollar and dollar:GBP exposure might only result in a loss of 30% over the course of a few months, the 'contract risk' is pretty unquantifiable.  So while DAI may be more stable-priced than BTC, the contract itself (into which you enter when saying that you want to try and earn interest and have that interest feed a prize draw) is a bit of an unknown.

clive0510

as I've explained on here before, I don't do the lottery, the horses the dogs or friday night poker. I do however have several thousand pounds in p/b. and I also pay into it monthly via direct debit. I see it as my lottery, with out losing my capital.

slowchimera

bowlhead99 said:

slowchimera said:

I guess I was just trying to point out that there are things in next-gen finance that are pretty similar to trad finance mechanisms, so even if Bitcoin itself is much of a rollercoaster and you want something more stable, there are alternatives that are much more stable.

But presumably the ability to generate a 'pool of interest' with which to pay prizes is predicated on people wanting to borrow the coins and pay interest on them while the operator of the scheme lends them out, so comes with some default risk which means that your capital can't be guaranteed - unlike with a 'trad finance' mechanism such as premium bonds in which the prize pool and the investors' principal is backed by a government guarantee, or bank deposit account with FSCS protection.

As you say, it comes with dollar exposure and 'smart contract risk' (i.e. credit risk/counterparty default risk), and while the combination of DAI:dollar and dollar:GBP exposure might only result in a loss of 30% over the course of a few months, the 'contract risk' is pretty unquantifiable.  So while DAI may be more stable-priced than BTC, the contract itself (into which you enter when saying that you want to try and earn interest and have that interest feed a prize draw) is a bit of an unknown.

Well, Dai is much bigger than just pooltogether.  Thats a tiny tiny part of what dai is used for.  Most people obtain Dai by exchanging other cryptos for it rather than directly minting it through collateral deposit, but yes, its true, Dai is backed by maths rather than by governments (and I know which one of those I trust more).  The interest which pays the prizes on pool together is generated from Compound - again its true rates vary, so there is no guarentees there like there are with Premium bonds, the rate would have to go very low indeed for your winnings to be lower than the equivalent in premium bonds.

Smart contract risk is not the same as counterparty default risk. Smart contract risk is the risk of a bug being found in the smart contract which allows the smart contract to be exploited.  You can hedge against this risk by taking out insurance if so inclined, Nexus Mutual offers cover for most major smart contracts (including Dai to a max value of $3m  Compound to a max value of $4m and pooltogether to a max value of $1.2m)