Cold thinking under the upsurge of DeFi governance coins
Editor's Note: This article comes fromChain reference (ID: lianneican), Author: Internal Reference Jun, reprinted by Odaily with authorization.
Editor's Note: This article comes from
Chain reference (ID: lianneican)
Chain reference (ID: lianneican)
, Author: Internal Reference Jun, reprinted by Odaily with authorization.
In 2018, the ICO fire;"In 2019, IEO prevailed;
In 2020, DeFi governance coins will become popular.
It can be said that the flowers are similar every year, but the coins are different every year.
Governance coins are in the limelight, benefiting from the popularity of DeFi this year. The hottest of these is the Comp token launch
Borrowing is mining" Compound. Since Compound launched the governance token COMP on June 16, the total lock-up volume of Compound has surpassed MakerDAO, which had long been the top of the list, and the project token COMP has increased from 20 The multi-dollar price has risen to more than 320 U.S. dollars, more than 10 times. The popularity of Compound's COMP token also confirms the arrival of the new wave of DeFi "liquidity mining".
And Balancer, which is also expected by the market and known as the "universal version of uniswap", is no longer silent. On June 24, Balancer, a decentralized exchange protocol based on Ethereum, officially announced the deployment of its governance token BAL on Ethereum. The price of BAL rose from $7 to $22 in one day, while the price of its seed round was only $0.6. From US$0.6 to US$22, the intermediate increase was nearly 40 times, making it the second largest market value in the DeFi field.
Just in the past week, we've seen:
The DEX protocol Curve began to motivate the sBTC pool through multi-asset rewards; mStable launched MTA liquidity mining; Ampleforth released Geyser and so on.
In the coming months, UMA will launch a similar program to incentivize a range of operations across its synthetic asset protocol; Kyber will release its much-anticipated Katalyst upgrade, and KNC holders will Ability to vote on governance proposals and earn ETH; Nexus Mutual initiates a joint mortgage for its insurance replacement agreement... Aave and Uniswap are also planning their own liquidity mining plans.
More and more DeFi projects have joined the army of issuing governance coins, and it is inevitable that good and evil will be mixed. In fact, the governance currency of DeFi governance currency appeared as early as the beginning of the year, and the hidden dangers in it have already appeared.
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Behind the Governance Coin Conflagration
The emergence of DeFi governance coins has two main purposes: one is to stimulate liquidity, and the other is to raise funds.
This year, the Ethereum network has experienced unprecedented prosperity, and the price of ETH has also risen sharply. Therefore, the value of Ethereum and the value of tokenized assets on the network have skyrocketed, effectively providing the DeFi ecosystem with significantly higher economic bandwidth and more liquidity around it, but these are far from enough. DeFi governance coins are precisely It came into being under such a background. Dozens of DeFi protocols are now bringing more new users to the Ethereum network, stimulating its liquidity, and at the same time vying for it.
Compound is not a new project. Founded in 2018, Compound is a decentralized lending protocol built on the Ethereum network. It had already appeared in the open financial DeFi market at that time, and its performance has been mediocre since its listing. It was the recently launched "liquidity mining" currency production method that caught fire and made it well-known to everyone.
From the data, after the emergence of liquidity mining, a large number of users deposit digital assets into Compound to participate in mining. According to DappReivew, as of June 30, Compound had nearly 1,500 daily active users, and the number of daily active users ranked first among all DeFi protocols.
While the fire of DeFi governance coins has brought traffic to the Ethereum network, it cannot be denied that this has also become a means for some projects to issue coins and collect money.
In the past two years, the life of many altcoins has not been easy. The mainstream currencies have basically stepped out of the shadow of the bear market. But for most of the altcoins, they are still in a long bear market, and the rise of currency prices is weak. The funds raised in the early stage have been almost used up, and the follow-up financing cannot keep up. Many companies are on the verge of life and death.
The emergence of DeFi governance coins has ushered in a second spring for these companies. On the one hand, issuing coins can raise a large amount of funds, and on the other hand, issuing coins can also stimulate the rise of related currency prices, which can be said to kill two birds with one stone. But who is the real Li Kui and who is the fake Li Gui, investors must have a pair of discerning eyes, and don't misunderstand speculation as investment.
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hidden dangers
However, behind the popularity of DeFi governance coins, in addition to hidden hacking attacks and systemic risks in the cryptocurrency market that DeFi protocols have always been worried about, there are also questions about the centralization of its governance and the rationality of token distribution.
On June 29, a hacking incident sounded the alarm for users who are keen on "liquidity mining". Another DeFi protocol that uses this method to generate tokens, Balancer, suffered two consecutive attacks. The two fund pools of STA and STONK were attacked, and the total loss was about 600,000 US dollars. Currently, Balancer officially stated that they will compensate users for their lost assets.
Although Compound is currently safe, risks still exist. As early as September last year, Ameen Soleimani, CEO of SpankChain, expressed his concerns about the risks of Compound in a post on Medium. Citing Samczsun’s report, he states that the Compound protocol is designed in such a way that it can be upgraded in-place by a central administrator, “If the administrator key is compromised, all assets stored in the Compound protocol can be easily exhausted. "
The chief operating officer of Dharma, a digital asset lending platform, also pointed out on Twitter that there is still a risk of a run on Compound. When extreme market conditions occur in the cryptocurrency market, borrowers may face the risk of being liquidated before replenishing their mortgage assets.
The current application scenario of governance tokens is only used to vote when participating in community governance. Mining retail investors have a low desire to participate in community governance, and speculation is the purpose. When the price of COMP continues to fall, market selling and stampede cannot be ruled out.
On December 10 last year, an independent developer named Micah Zoltu wrote an article pointing out that MakerDAO may have a governance problem. If several "giant whales" join forces, they can attack the network and cause all ETH mortgaged in the system to be emptied. .
At the same time, MakerDAO has governance issues, so the attack is not groundless. MakerDAO has issued 1 million MKR tokens, and only a small part has been destroyed. Currently, the Maker Foundation holds the largest amount of tokens. Token holders use MKR tokens to make network proposals using smart contracts on the protocol to change parameters on the network.
In terms of governance, Micah Zoltu believes that MakerDAO may have some loopholes. For example, their current governance delay time parameter is "zero", that is to say, all changes to governance regulations that are voted through take effect immediately. As long as an attacker is in place, funds locked on MakerDAO are highly insecure under the current governance model (protocol changes take effect immediately).
Even more frightening is that Micah Zoltu claimed that as long as the attacker is a little smarter, plans the attack method well, and then quickly implements the attack, MakerDAO may get into trouble.
On March 16, due to the recent plunge in ETH prices, Gas prices rose rapidly, and the Maker protocol, the community, the Maker Foundation, and the entire Ethereum ecosystem were under tremendous pressure. A large number of loans fell below collateral thresholds, triggering liquidation proceedings. But as the market crashed, some liquidators won the auction for the Ethereum collateral liquidation program with $0 bids for Dai, which left MakerDAO with nearly $5 million in debt for outstanding loans.
On March 25, the official blog of the Maker Foundation stated that the transfer of control over MKR tokens to the Maker governance community has been completed, and the MKR token contract is now 100% controlled by MKR token holders.
Obviously, the serious problem of "centralization" of DeFi governance coins has always been a big hidden danger.
For another example, nearly 40% of COMP is in the hands of investment institutions and founding teams, and the top 10 voting weights are mainly Compound’s early investment institutions and founders. Under "centralized" governance, the risk of DeFi governance coins smashing or cashing out will always exist.
As a centralized token, conflicts of interest are inevitable. On June 8, according to the official website of Oikos, a TRON-based synthetic asset platform, Oikos Swap was launched. According to the official introduction, Oikos is a TRON-based synthetic asset platform that provides transactions on the blockchain for fiat currencies, commodities, stocks and indices. Synthetic assets (Synths) are collateralized by OKS as a guarantee for smart contracts. Oikos Swap is a swap platform specially designed for TRON. OKS is second only to COMP in the ranking of DEFI projects.
