I have yet to see a DeFi protocol that even recognised the possibliity of a run, let alone had any means of defending against it. The algos are built on the assumption that humans never panic and stampede for the exit, ignoring the overwhelming evidence that they do.
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The existing system has failsafes and supports in place to prevent runs or stop them quickly. Where are the failsafes and supports to prevent or stop runs in crypto? How would Compound defend against a run?
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Bank runs are self correcting because of the automatic increase of borrowing rates, and if the borrower lets the position go under, the liquidator liquidates the position. The worst that could happen is a temporary period of not being able to convert underlying assets .
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Raising interest rates does not stop bank runs.
You literally do not know anything about this, do you?
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Raising interest rates will cause borrow positions, if not repaid to go under the collateral threshold, and then a liquidator can liquidate it for 8% profit.
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If your idea of a bank run is an event where ctoken holders in mass try to redeem for underlying assets , a bank run will result in a temporary period of not being able to redeem, and through interest rates and liquidation incentives the system will self correct.
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Interest rate rises and liquidation incentives do not stop runs. They amplify them.
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You need to go and study the phenomenon known as "multiple equilibrium", when a system shifts from its steady-state self-correcting equilibrium to disorderly collapse. All the self-correction mechanisms fail in the equilibrium shift.
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Self-correction mechanisms that rely on financial incentives do not work when panicking humans are stampeding for the exit.
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I don’t debate the poor on Twitter, and sorry I don’t have any change on me for her at the moment.
lol
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😁
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It's below a penny now. $0.008
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Ever hear that saying "be nice to people on the way up, because you're likely to meet them on the way down"? You are no longer on the way up.
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