After the skyrocketing DeFi, is it still worth paying attention to?
Editor's Note: This article comes fromChatting with Xiaozha (ID: xiaonazha88), reprinted by Odaily with authorization.
Editor's Note: This article comes from
Chatting with Xiaozha (ID: xiaonazha88)
Chatting with Xiaozha (ID: xiaonazha88)
, reprinted by Odaily with authorization.
Just finished writing, the leading manufacturer in the DeFi field has skyrocketed by 25%. Yesterday, the tokens in the DeFi field collectively ushered in a wave of rise, and suddenly DeFi became hot again.
So the question is, the tokens in the DeFi field have all risen, is it still worth paying attention to? I want to say that it is worthy of attention, because the story of DeFi is good, and it has just begun.
One of the reasons is that finance is easy to blow bubbles, and the short-term growth is very fast if the story is well told; while the application needs a process to generate value. Therefore, finance is good at telling stories and has a strong wealth effect.
But we must also know that finance serves production. Without the support of production for a long time, the bubble blown by finance can only burst.
It should be noted that DeFi encountered various crises at the beginning of this year, and now it has quickly emerged from the crisis, which shows its vitality.
Let me share the internal logic of the DeFi story and the path to making money.
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DeFi, Chinese translation: Decentralized finance, which solves the pain points in the traditional financial industry, is called DeFi and is the second breakthrough in the history of encryption.
What is DeFi? Generally refers to encrypted assets, financial smart contracts and agreements built on smart contract platforms, such as the MakerDAO protocol on ETH.
DeFi features: No permission required, anyone with encrypted assets can participate. For example, if a user owns USDT, ETH and other assets, he can deposit the encrypted assets in the DeFi project to obtain interest income. These are usually done through operations on the chain without third-party participation, and users have great freedom, convenience and speed of participation.
Since 2019, the DeFi ecosystem has been continuously developing, new protocols have been continuously produced, and competition is fierce, so how is the performance?
Three months ago, DeFi experienced a series of black swan incidents that led to liquidation and asset theft due to protocol loopholes.
The abscissa is the market value range, and the ordinate is the range of rise and fall from January to June
But unexpectedly, the fundamentals of DeFi have improved in just a few months, and the currency price has also slowly risen. The current total market value has exceeded 2.4 billion.
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The abscissa is the market value range, and the ordinate is the range of rise and fall from January to June
As can be seen from the above figure, most tokens in the DeFi field are in a state of increasing profitability. From the perspective of market value, the performance of the targets with a market value in the range of 10-30 million US dollars at the beginning of the year is more prominent.
So what is the rising logic of DeFi?
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3. ETH growth
1. Unlimited Quantitative Easing (QE) -> BTC/ETH
2. ETH growth<->ERC20 growth
3. ETH growth<->DeFi gets growth
4. DeFi gains growth<->DeFi Token Growth
5. DeFi tokens with large market capitalization<->DeFi gets growth
4. DeFi gains growth
DeFi Token Growth
Small Cap DeFi Tokens
Seeing this mode of capital flow, in simple terms, DeFi is nested on ETH to generate stable currency products such as DAI, and other DeFi is nested on DAI to generate new products, so that the layers are cycled, superimposed upwards , ETH rose, and DeFi boomed. Is it a bit like CDOs of CDOs, the protagonist of the US subprime mortgage crisis in 2008?
Speaking of this, we should not be too pessimistic. After all, the financial game has not changed, only the gameplay has changed.
So how to make money from it?
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What is the logic of making money from DeFi?
Concerned about DeFi, I think what most people think about in the end is how to profit from it.
If you want to make money on DeFi, there are 4 paths:
1. To become a token holder in the DeFi field, such as holding makerDao’s MKR token, you only need to hold the currency to wait for the price to rise. However, the risk lies in the improper operation of makerDao, liquidation auction errors, and additional issuance resulting in loss of interests.
2. Lend loans and collect rents on DeFi, and put the cryptocurrencies in your hands into DeFi to collect interest, but the risk is very high. There have been many security incidents in March this year. Risk, kinda not worth it.
3. Arbitrage back and forth between DeFi products requires a lot of energy to study the design of various DeFi protocols and arbitrage space, and there is still the risk of the project being hacked, which is not suitable for ordinary people to do.
4. Fork the relatively popular DeFi protocol, start a new stove, post stories, engage in marketing, raise money, etc., this is suitable for the team to do.
