Some clarifications for all the people talking about how DeFi could fix the GME fiasco.

1) DeFi does not, should not, and cannot prevent >100% of outstanding shares to be sold short.

In fact, we have already violated this in DeFi with Compound recursive Dai farming.

The amount of borrowed Dai on Compound used to be much larger than total outstanding Dai (although this is no longer the case). Today, users are still free to supply / borrow in circles w/ Compound, Aave, etc. The risk to users here is a function of the credit quality of

the lending platform. We need quantitative risk metrics for how much leverage Compound can tolerate. Governance should be monitoring the wider ecosystem for distribution, float, etc.

2) Leveraged shorting (either greater or less than 100% of the supply) is not inherently bad or evil. There is value to society by stripping away fluff from hollow organizations. Most people don't short because it feels like you're betting against society (or whatever).

It's totally fine to feel that way. I personally don't short, but hard to say that it's evil. Shorting >100% is just a concentrated bet (not different than heavy margin longs).

2) Even if the lending protocols were to restrict the shorts with debt ceilings, it could easily be circumvented through synthetic derivatives. In practice this would create the exact same amount of contagion. People will always find a way to margin bet on stocks, long or short.

3) DeFi of course helps with instant settlement, which is awesome.

4) DeFi helps with the rules not being changed on a whim at the last minute due to special interests.

These are the two points we want to trump up. Not "shorting is bad" or "we need to limit shorting to <100%"