After nearly a year of development, DeFi has gradually entered a state of steady development. It has been considered a strong opponent that challenges traditional financial logic more than once, and round after round of innovations are still evolving. For example, the current star DeFi protocol Compound And Aave are launching products for institutional users in full swing, which is why DeFi has withstood the test despite the overall slowdown of the market. The overall lock-up volume has exceeded 82 billion US dollars, and the market is showing an upward trend.
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What is DeFi? Rush to explore and beachhead
Position the time between June and July 2020, and click on the DeFi entry. The topic placed at the top of the search list focuses on what exactly is DeFi. At this moment, it can be found that people are eager to understand the popular science content about DeFi, and the Baidu search index for DeFi has risen sharply. At that time, the definition of DeFi was a financial business with the theme of digital currency in which the private key was mastered by oneself. But this definition is still a little thin. Through the phenomenon, peoples curiosity about DeFi does not lie in the content itself, because it is no longer a new topic, but what is the wealth code behind the skyrocketing. People are very eager to enter the market early in the boom to share the dividends.
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MaKerDAO and Compound lead the upsurge and DeFi leads the market
At the time, MakerDAO and Compound ignited the popularity of DeFi. MakerDAO, a decentralized automatic mortgage loan platform based on Ethereum, was born and launched its mainnet in 2017, which opened a precedent for DeFi. The logic at the time was that MakerDAO users could put their ETH into the Ethereum pool to obtain PETH, and then put PETH into the Maker smart contract CDP (Collateralized Debt Positions, Collateralized Debt Positions) to obtain DAI, and then DAI + system stability Fee maker enters Maker smart contract CDP to get back ETH.
Compound, another DeFi project, suddenly exploded in the currency circle, surpassing Maker for a while, becoming the project with the highest market value in DeFi. According to reports at the time, Compound officially launched the token COMP on June 15. It was popular in the market as soon as it was launched. Its issuance price was about 18.5 US dollars. By June 21, it had exceeded the 380 US dollar mark, an increase of more than 20 times. This bullish market made the exchanges at that time extremely excited, and they all expressed their desire to develop more secure and high-performance DeFi ecological services. Of course, the quickest response is the head of the exchange.
In addition to the above two, the more representative ones are Synthetix, Curve and Balancer. The Synthetix project utilizes traded synthetic assets, such as sBTC, sETH, sUSD, etc., and the Synthetix Foundation directs part of the SNX token inflation to the liquidity provider: the ETH Uniswap fund pool. The sETH/ETH pool grew to $24 million at one point, kicking off a wave of cold start incentives at the time. Curve helps users switch between different stablecoins and maximize their returns. In June, deposits nearly tripled, and the average daily transaction volume once reached a peak of $60 million, 30 times the previous average. Known as the biggest competitor that can surpass Uniswap, Balancer, its one-month liquidity has increased from US$19.9 million to US$130 million, an increase of more than 6 times, and its trading volume once climbed to the third place in DEX, second only to Uniswap and Curve. In short, DeFi at that time created waves of wealth-creating myths, and it had full gold-absorbing power.
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Be suspicious of liquidity mining
The DeFi craze originated from liquidity mining, a term that was still very exploratory at the time. In view of the fact that many mining methods have become a thing of the past, then the emergence of liquidity mining at that time was also burdened with a lot of skepticism. Regarding this emerging method, whether it has a better market fit and future The nature of liquidity mining has been widely discussed. At that time, liquidity mining could be described as breaking the ice. Using Compound as the engine to start the skyrocketing liquidity mining market, it drove the mining of Balancer, Curve, Bancor, Thorchain, mStable, bzx, Kava, etc. in the entire DeFi field. Mine spread rapidly. At that time, Uniswap had become the leader of DEX, but it was far less exposed than Bancor and Balancer. No one expected that the Swap system developed rapidly afterwards and has become the fastest growing system in the DeFi field.
In fact, at that time, many industry leaders underestimated the market potential of DeFi. The most representative one was V God. He said that many flashy things are very exciting, but this is short-term. In the long run, it is impossible for DeFi interest rate to be higher than that of traditional finance. The best rate is more than 1% higher. Perhaps V God did not expect that the explosion of DeFi has caused its network gas fees to soar, and competitors are eager to share the market. An unprecedented decentralized financial revolution is so unstoppable, spawning batches of new species and novel technologies. emerge.
After the turmoil of the summer, today’s DeFi is not what it was a year ago, but we should also objectively realize that the current DeFi is still immature, and the penetration and popularization of distributed financial concepts is still relatively small, squeezing the bubble It will take time, and the greater innovation and disruption of DeFi itself is far from coming. With the advancement of public chain performance, protocol updates, and innovative gameplay, the future of DeFi is bound to be far more exciting than the current unpredictable.
