Tanks on the street. You’d be forgiven for thinking this was Ukraine. Armoured vehicles patrolling the thoroughfares of a city at war. But it’s not, it’s China. Henan province to be precise. And the tanks have been sent in to protect the local branch of a bank. One embroiled in a scandal as users were denied access to their bank accounts due to a ‘system upgrade.’ In May the Chinese authorities announced an investigation into several shareholders of Henan Xincaifu Group in which they discovered the group had taken control of five rural banks through “internal and external collusion” and “illegally” collected deposits. The acounts of ordinary citizens have now been frozen for four months. So they took to the streets in protest and the government sent in the tanks. These banks were promising higher than usual interest rates, diverting the funds they collected to invest in other financial products using online platforms. Almost all of the banks assets were diverted away leaving the banks on the verge of bankruptcy. And the point of this story is to illustrate that what happened the last few months in crypto isn’t unique to crypto. It’s not a story about web3’s reckless abandonment of financial principles. It’s a by-product of being the carbon-based, eat-excrete biological hot mess that you, me, all of us unfortunately are.
As we pick through the rotting corpse of the three arrows debacle proponents of DeFi have been quick to point out that decentralised financial entities performed exactly as they were supposed to. Yes, even LUNA and UST performed as they were supposed to. Catastrophically. As the centralized lenders collapse to their knees in a frenzy of painfully worded PR statements we’re now being told by the great and good ‘Bro, it was the squishy humans to blame, humans are bad, algorithms are good, code is law.’
But is it really that simple? In this episode we’ll look at what some are hailing as the triumphant return of DeFi and pose some of the arguments for and against. Were you in any doubt? This is the Defiant.