DeFi: the top spot in 2020 blockchain
At the beginning of 2020, the world economy has experienced unprecedented trauma and turmoil. However, in the great depression of a century, there are often hidden opportunities of a century! ETH2.0, Polkadot, Polkadot, Filecoin, DEX, DeFi and the continuation of halving, the conclusion of the CSW case... These are all expected catalysts, which undoubtedly make the value of the blockchain field shine in this chaotic world.
Among them, DeFi has sprung up suddenly, and has quickly become the most attractive sector in the entire blockchain industry! Favored by capital, platforms are pouring in, it seems that all projects are desperately chasing its hot spots!
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Parse:99% of people can't understand DeFi
The full name of DeFi is Decentralized Finance, that is, "decentralized finance", also known as "open finance". This is a big concept, how to understand it?
Simply put, it is trying to use blockchain technology to achieve disintermediation and eliminate rent-seeking middlemen, so as to improve the current financial system from all aspects and solve the natural shortcomings of traditional/centralized finance. Such as addressing the inequality of the financial system, the cumbersome review process, the lack of transparency and the potential transaction risk (the risk of non-fulfillment of contractual obligations, that is, bad debts), etc.
In the traditional financial system, financial services are mainly controlled and regulated by the central system, whether it is the most basic deposit and withdrawal transfer, or loans or derivatives transactions. To give a simple example, for the most widely used payment and transfer sectors, under the traditional financial system, to make cross-border payments and transfers, you generally need to notify the financial institution first, and then the financial institution contacts a foreign financial institution for transfer and settlement.
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(DeFi compares traditional industries and financial technology)
From the perspective of general public investment, DeFi can be simply understood as a new concept emerging, just like when a new concept comes out of a new sector when trading stocks, there must be many new concept stocks on it. For example, the dapp concept that suddenly became popular in 2018, but most of them were on various public chains at that time, and today’s DeFi is mainly on ETH.
A very interesting thing is that currently many people invest in BTC and ETH, which are decentralized assets, but the transactions have to be traded on a centralized platform, which is a big contradiction. In the DeFi ecosystem, transactions on decentralized exchanges can be directly realized.
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The Development and Evolution History of DeFiThe Development and Evolution History of DeFi
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2017, "The Year of the Rise of the DeFi Concept"
At this time, people need a more convenient and reliable way to meet more diverse financial services, especially those who have various encrypted assets in their hands, hoping to use these assets to achieve more financial functions and create greater benefits. Therefore, exploring decentralized exchanges and stablecoins in the decentralized world has become a new focus.
2018, "The Year of Defi Ecological Architecture"
With the entry of more traditional well-known venture capital funds, such as Andreessen Horowitz, which are sought after by the venture capital circle, those projects that focus on eliminating intermediaries in financial services have a new collective name and attribution system, DeFi. Since then, DeFi innovators have tried to move traditional financial products to the blockchain, forming a DeFi ecosystem centered on asset management, prediction markets, and trading markets. But at this time, the decentralization of currency issuance and storage only provides a point-to-point settlement solution, which is not enough to support rich financial services. Therefore, the decentralized lending protocol brings DeFi into the financial system that further opens up the blockchain world.
2019, "The Year of DeFi Financial Lending"
With the drastic changes in market hotspots, DeFi has also become more diversified in the classification of goods and services. Among them, Synthetix, Uniswap and Set Protocol have attracted attention in the derivatives trading market, decentralized exchanges and asset transactions respectively. In the second half of 2019, with the rise of synthetic assets, contracts and other financial derivatives such as commodities, stocks, and indices gradually settled in decentralized exchanges.
2020, "The Year of DeFi Experimentation and Innovation"
In the first half of the year, with the rapid development of capital and technology, DeFi exploded at an astonishing speed. The original projects were replaced by a new wave of experiments and innovations. Various new applications emerged one after another, and many unimaginable products were born. The total market value of popular tokens in the DeFi field has exceeded 6.2 billion US dollars. DeFi has undergone evolution, experimentation and integration, and some specific trends have emerged. It has become the most dazzling star in the blockchain market, but it is still on the way to establish the most attractive use cases. .
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unique:The characteristics and changes of DeFi
The purpose of decentralized finance is to use the key features and functions of the blockchain to provide financial services without barriers to entry, thereby creating a more free, open and transparent financial system, which includes decentralized financial markets, decentralized Centralized financial institutions, asset holders and users.
Therefore, the basic components of DeFi include stable coins, smart contracts, financial protocols, decentralized applications (DAPP), etc. These components are the underlying infrastructure of the underlying open finance. With the laying of these infrastructures, and through the composability, security, privacy, and transparency of each protocol, a very strong protocol network interconnection has been established, such as COMP mining, which has led to stablecoin swaps and lending. The liquidity and volume of arbitrage, DEX, etc. have reached record highs, which provides a new direction for the development of the entire blockchain.
The core advantages and characteristics of DeFi are not in decentralization itself, but in permissionless, anti-censorship and composability.
Specifically, in the DeFi system:
1) Anyone has access, no central control;
2) There is no need to trust any intermediary agency, and the new trust through smart contracts is rebuilt on machines and codes;
3) All protocols are open source, and anyone can cooperate to build new financial products on the protocol, and accelerate financial innovation under the network effect.
Various new features of DeFi have created an open source financial technology platform and brought many changes.
The three most important changes:
1) There are native assets on the blockchain, which can improve settlement efficiency across subjects and reconstruct governance trust.
2) Where there is a lack of centralization, a multi-agent coordination method is provided.
3) It represents a new way of thinking and form, which will bring huge impact and infinite possibilities to the existing industry.
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project:DeFi ignites the four fires of the bull market
DeFi is essentially a financial service mapped on the blockchain. Although most DeFi applications run on the Ethereum blockchain, the pioneer of DeFi is undoubtedly Bitcoin. Bitcoin opened the door to challenge the central bank's monopoly on the currency and financial system. It is the initial form of DeFi. Since then, the exploration of the project has really caused a big explosion in the DeFi world!
What is the first project to try DeFi? In fact, Bitshares (Chinese name BitShares BTS) was created by Daniel Larimer (BM), Charles Hoskinson and others. But the ideal is plump and the reality is skinny, BTS's exploration eventually aborted. Later, the emergence of MakerDAO really pushed DeFi to the world.
The first fire (asset class): MakerDao, which is generally considered to be "the project that started the DeFi movement."
Launched in December 2017, MakerDAO is a "decentralized bank" on Ethereum that issues the stable currency DAI and the management token MKR. Among them, DAI, as the cornerstone of the entire DeFi ecosystem, uses the feedback mechanism of automated over-collateralization + target interest rate, which once led the value growth of many projects locked in DeFi, and is the largest and most proven stablecoin mortgage on Ethereum solution.
The second fire (lending category): Compound, known as "the window into the DeFi field".
Founded in September 2018, Compound is currently the most important mortgage lending platform in the DeFi lending market. On June 2020, Compound launched the platform governance token COMP, and the price soared from $20 to $320. The borrowing-to-mining mechanism made Compound become popular overnight, and the traffic surged, creating another myth in the currency circle. At present, the market value of Compound has "overtaken" Maker, the former champion of DeFi, and has become the leader of DeFi.
The third fire (exchange category): DEX, a decentralized exchange, is undoubtedly "the cornerstone of driving the development of DeFi."
DEX is relative to the centralized cryptocurrency trading platform. DEX-based decentralized exchanges have exploded with amazing development momentum, such as popular Bancor, Kyber, dYdX, DDEX, Uniswap, etc. The total trading volume of DEX in the first six months of 2020 exceeded 3 billion US dollars, forming a rivalry with the EOS decentralized exchange ecology.
The fourth hot spot (synthetic assets): Synthetix, once regarded as "the brightest new star in the DeFi market".
In 2019, Synthetix, an up-and-coming synthetic asset platform, can not only synthesize digital assets by itself, but also purchase financial derivatives such as fiat currency, commodities, stocks, and indices through virtual currency. The token SNX issued by it has soared by nearly 800% in just half a year , SNX rose by 2872% in 2019.
application:
application:DeFi creates a new world of blockchain
2020 is a bright moment for DeFi. All kinds of DeFi projects are flourishing, more and more applications and the number of pledged tokens have exploded, and the number of users on DeFi has already exceeded 100,000.
1) Rich variety of application scenarios
At present, the application scenarios of DeFi are very rich, including asset management, lending, stable currency, DEX, infrastructure, oracle, analysis tools, financial derivatives and other fields. Among them, lending occupies a major position, followed by decentralized transactions, and derivatives transactions. Lending is mainly based on Maker, Compound, Aave, etc., while decentralized transactions are mainly based on Bancor, Kyber, Uniswap, Oasis, and derivatives are mainly based on Synthetix.
At the same time, the DeFi protocol on Ethereum has also been applied in various financial scenarios. Some liquidity companies at the bottom provide a variety of liquidity through decentralized exchanges. Leverage contracts can be added to lending, and asset management can initiate decentralized DeFi asset agreements for management; insurance can also be purchased Settings; securities can be digitized for trading and forecasting; real gold can also be digitized and managed through a semi-centralized trust, thereby creating corresponding currencies or certificates on the corresponding chain, and then on the blockchain Make transactions; assets can also be synthesized.
2) Composable open financial services
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risk:The crisis and dilemma of DeFi
On March 12, ETH plummeted by 40% overnight, which led to the liquidation of a large number of DeFi positions, while the Maker system changed from an initial surplus state to a debt of 4 million DAI in an instant, and once collapsed, the DeFi ecosystem also experienced A life and death test.
Therefore, as the financial system of the cryptocurrency market, although DeFi is in a blue ocean market of hundreds of billions or even trillions, it still faces many difficulties due to problems such as difficulty in interacting with the underlying public chain, single mortgageable assets, and cumbersome product operations. and crisis.
At present, the biggest resistance to DeFi is mainly two: The ease of operation of assets on the user chain and the security of smart contracts. On the one hand, users currently have low awareness of on-chain assets, and it is necessary for asset parties and DeFi to provide simple operation procedures and user education in order to understand how DeFi assets operate as soon as possible. On the other hand, the security and credibility of smart contracts is still the sword of Damocles of DeFi, and systemic risks may arise at any time.
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prospect:DeFi Restructures World Finance
According to the data of DeFi Pulse, the assets mortgaged by the entire DeFi ecosystem have exceeded 1 billion US dollars, and this figure is still continuously increasing. Although DeFi is still in the stage of exploring business models rather than improving technical efficiency, and related financial models and technical solutions have not yet experienced the test of a more complex market environment, it is clear that various new models such as DeFi financial management, asset management, and derivatives have already Becoming a new market growth driver, innovation is making DeFi a real-world use case.
DeFi has the potential to usher in a new era of productivity.With the maturity of DeFi and the iteration of blockchain technology, DeFi will play more and more important roles; as more and more people join in, it will connect people to complex networks for the first time in human history. Among the existing financial facilities and capital, it will bring about the redistribution of the industry structure, and even the financial system that will dominate the future "code world" is unknown.
The ambition of people in the DeFi world to rebuild the financial services industry is as much a dream as it is a dream of genius.Traditional finance is the earth, and DeFi is more like Pandora Odaily in another parallel universe. What it does is not to simply improve financial efficiency, but to reimagine money and restructure finance.
In any case, we are in the DeFi industry and we have to experience all the problems that may occur during its growth. This is also the only way for the DeFi market to go from niche to mainstream, from recklessness to maturity.
refer to:
refer to:Several data research tools for DeFi
2）DeFi Market Mortgage Asset Query
3）DeFi dynamics and product inquiries
