Popular DeFi is between the reef and the shallows
Text︱Esens
Text︱Esens
"Feng Shui has taken turns, and DeFi has really become popular recently." DeFi protocol developer Elvin said that the DeFi ecosystem has performed well in the past three months, which has caused a lot of waves in the industry.
DeFi stands for Decentralized Finance (Decentralized Finance). The industry generally believes that DeFi originated in 2018, and the past 2019 was the first year of its development. At present, the DeFi ecological landscape continues to expand, and use cases in multiple fields such as lending platforms, DEX, stable coins, derivatives, prediction markets, and insurance have emerged.
"By comparison, BTC has gone up several times without success, and it is in a period of shocks and declines." Elvin believes that taking the opportunity of the DeFi boom, it is expected to open up a broader world. Opponents say that in this blue ocean market that people expect, we must be especially vigilant against hidden reefs and dangerous shoals.
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DeFi rally is "sultry"
After the public chain and DApp have been silent one after another, DeFi finally showed its "excellence". DeFiPulse data shows that as of December 31, 2019, the amount of DeFi ecology has reached nearly 670 million US dollars. "This makes people in the blockchain world feel the breath of spring in the cold winter." Elvin is quite proud of this.
Meanwhile, MakerDAO dominates. The data shows that the amount locked by Maker accounts for more than 50% of the DeFi sector for a long time. In addition, latecomers such as asset platform Synthetix, lending platform Compound, and InstaDApp also performed well.
In 2020, due to the impact of the new crown epidemic and the extreme market in March, the development of DeFi has twists and turns. On March 12th and 13th, during the plunge of Bitcoin, the price of ETH was halved, and the market value of collateral in the DeFi market plummeted from more than US$1 billion to around US$500 million. It can be seen that DeFi has not been spared and suffered heavy losses.
"However, what is gratifying is that the price of ETH has rebounded rapidly since then, and the DeFi market has quickly replenished blood." Elvin said that the value of collateral in the DeFi market once again stood at 1 billion US dollars, which has played a role in preparing for further interpretation of the market outlook.
It has to be said that in the past three months, the development of the DeFi market has been impressive.
In terms of the market value of DeFi tokens, data shows that on April 14, the total market value of the top 100 DeFi tokens was still US$1 billion, but by June 9, this figure had become US$2 billion. This means that in less than two months, the total market value of DeFi tokens has doubled.
"This speed of development is completely beyond my imagination." Analyst Lindon Wang was shocked by this.
According to DeFi MarketCap data, as of 6:00 on June 15, the total market value of the top 100 DeFi tokens has risen to 2.316 billion US dollars. Specifically, there are a total of 8 DeFi projects with a market value of more than 100 million US dollars. Among them, MakerDAO still ranks first, with a market value of about 500 million US dollars.
From the perspective of the total locked value of DeFi, according to the data on DAppTotal's DeFi special page, as of 6:00 on June 15, the total locked funds of 38 DeFi projects have reached 1.31 billion US dollars. Among them, Maker locked USD 510 million, accounting for 39.11%, ranking first; EOSREX locked USD 205 million, accounting for 15.76%, ranking second; Edgeware locked USD 131 million, accounting for 10.06%, ranking second Three; other DeFi applications locked up $457 million, accounting for 35.07%. At the same time, the total amount of ETH locked positions reached 3.266 million, accounting for 2.93% of its total circulation; the total amount of EOS locked positions reached 83.086 million, accounting for 8.14% of its total circulation.
Elvin believes that DeFi, as an open, transparent, and secure peer-to-peer financial system, is a new force in the financial derivative system of encrypted assets and is expected to soar again.
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"Black Swan" incidents occur one after another
Accompanied by rapid development are serious security incidents, especially the frequent theft of tokens, which has become an unbearable burden for DeFi.
Among the five users interviewed by Hecai APP, all expressed concerns about the security of DeFi projects. They joked that DeFi seems to have become a cash machine for hackers.
According to the data, there were two DeFi security incidents in May. On May 7, Loopring tweeted that it had discovered a serious front-end error and would stop the repeater service and put Loopring Exchange in maintenance mode. Affected by this, Loopring Exchange was shut down for half a day for maintenance and upgrade.
On May 18, tBTC project leader Matt Luongo announced on Twitter that two days after the tBTC protocol went live on the mainnet, the recharge function will be suspended for the next 10 days. Analysts believe that tBTC suspected of discovering a major contract loophole, so it urgently stopped the recharge service.
In addition, according to data from the PeckShield situational awareness platform, there were 5 DeFi security incidents in April, 2 in March, and 4 in February.
In view of this, PeckShield believes that as DeFi projects become more and more abundant, hidden security issues are gradually exposed. Due to the close connection between DeFi projects and user assets, the security situation they face is also very severe. At the same time, PeckShield suggested that before the DeFi project goes online, it should try its best to find a team with in-depth research on all aspects of DeFi product design to do a complete security audit.
According to the Tongtong Research Institute, the explosive growth of DeFi has caused its complexity to grow exponentially, surpassing its maturity. To this end, it is necessary to pay special attention to the risks introduced by the security of smart contract code, the operational risks introduced by the smart contract Admin Key, and the risks of the smart contract platform.
They also believe that strengthening DeFi risk management is the top priority of the current DeFi ecological construction. The security audit report is the first pass to avoid smart contract risks, and it is currently the only measure that can prevent smart contract risks in advance.
He further explained that the so-called incomplete infrastructure means that on the one hand, the infrastructure services of the market are not perfect, and on the other hand, the relevant legal and regulatory framework is not perfect.
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The invisible "ceiling" is hard to break
"Starting from Satoshi Nakamoto's crossroads, adhering to the direction of decentralization, and financializing encrypted assets, this is the evolution direction of encrypted assets." Director Zhou, a blockchain DApp developer, believes that blockchains are born to serve economic systems and DeFi is here to serve the financial system.
As DeFi once again stirs up the mood of the industry, it pushes everyone's expectations to a climax. For this reason, there has recently been a saying that DeFi will become the key to the bull market.
DeFi Pulse data shows that at 8:00 on May 11, the number of ETH locked in DeFi was 2.828 million, and by 6:00 on June 15, the number was 2.677 million. This shows that locked ETH is decreasing. At the same time, the amount of BTC locked in DeFi is on the rise. At 6:00 on June 15, the number of BTCs locked in DeFi was 4916, doubled compared to the beginning of May.
In this regard, Lindon Wang believes that theoretically speaking, if the BTC, ETH, etc. in circulation are reduced, it may push up demand and bring about upward price expectations, which is good news for BTC, ETH, and other cryptocurrencies. "However, we should not have too high expectations for DeFi. For now, DeFi's ability to boost currency prices is very limited." He said.
It is worth mentioning that, according to TokenInsight, there will be more and more Bitcoin-anchored products in the DeFi ecosystem in the future. The entry of Bitcoin will promote the maturity of the DeFi ecosystem, but whether it can shake the status of ETH's underlying assets remains to be tested.
In addition, the "ceiling" of the DeFi market is also very obvious. Veteran player Turner said that DeFi is not friendly to ordinary users. "DeFi projects are exactly the same as DApps, and both face problems such as poor user experience and high barriers to entry." He said.
If ranked by the number of users, DAppTotal data shows that as of 6:00 on June 15, Maker, which has the most users, has 5,100 seven-day users, and WBTC, which ranks 10th, has 362 seven-day users. It can be seen from this.
However, some people disagree with this.
Elvin said that DeFi is a decentralized economic system and value system, and encrypted assets flow between holders and users through the decentralized financial market. Therefore, only when people take the initiative to approach DeFi, can humans really start to conduct financial activities in the blockchain world.
