Data Insights of Mainstream DeFi Platforms
Editor's Note: This article comes fromCrypto Valley Live (ID: cryptovalley)Editor's Note: This article comes from
Crypto Valley Live (ID: cryptovalley)
Crypto Valley Live (ID: cryptovalley)
Let's give an accurate evaluation of the main projects and platforms in the DeFi field, we introduce the most important and relevant main DeFi platforms on the market. 2020 is really the year dominated by decentralized finance.
According to the DeFi Pulse website, the ecosystem of decentralized finance (abbreviated as DeFi in English) has experienced significant growth this 2020, with its market capitalization increasing to $11 billion, as are the funds locked in its smart contracts, and the locked Ether Square (ETH) exceeded 6.1 billion US dollars.
If we look back at 2019, we will find that in DeFi, 1 out of every 57 ETHs participated in the lockup; as of May this year, 1 out of every 42 ETHs participated in the lockup. 1 out of 25 ETH is locked.
Huge interest in the DeFi ecosystem
From the graph above you can see that there is a lot of interest in the ecosystem to create decentralized products. This is in line with the impressive number of projects appearing on a weekly basis and shows us a typical growth.
Despite the developments, within the ecosystem, it appears that operating the DeFi ecosystem, its platforms, and products remains complex. Therefore, in this article, the author will give a review and a basic description of the major decentralized platforms based on the CoinMaketCap report and their status.
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Protocol Network Audit
The company stated that there are problems between transaction data in the blockchain and external applications, so one of the main values highlighted is that it allows the connection of smart contracts to other resources, such as application programming interfaces (its English acronym is APIs).
Overall, this is a developer-focused solution, who have problems when they want to implement their smart contracts with other applications. The company has its own token, LINK, which at the time of writing ranks No. 1 on CoinMakertCap with a liquid market cap of about $3.3 billion.
While the company says its systems are highly secure and reliable, they have received some criticism, notably from alternative investment funds (Zeus Capital), who stated in an extensive report (published July 2020) that, The founders kept a significant reserve of their tokens (LINK) for the purpose of trading on the secondary market (OTC), apparently incurring manipulation, and, using 3 valuation methods: Absolute Valuation, Relative Valuation value and break-even point.
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The first model, MV=PQ (Fisher model), evaluates the cumulative economic value of the project and the capital cost of token holders, and finds that according to the assumptions of the model, the fair value of LINK is $0.155/LINK, which means Only 98% of the market price.
In the second approach, relative valuation, they took the price of a proof-of-stake (PoS) project currently on the market and compared it to the price ChainLink would need to justify its current valuation; that is, to produce a LINK, which is equivalent to about $10.1 per transaction, considering that one transaction is equivalent to $0.5, then the fair value of LINK will be stipulated at $0.07/LINK, which again shows that it is not in line with the market price. At the time of writing this note, The market price is about $13.24 (computational developments can be found in cited papers, p. 53).
They also show that ChainLink needs an additional 219 customers to meet its current valuation (which is 20 times higher than the company disclosed). Finally, for the third model, the break-even point, taking the operating cost of a node, which is $0.158 per day (at 120 W/h at a price of 0.055 kWh), it is estimated that a node operator earns $0.554 per day, and It was found that if a node gives 150 data retrievals per day and LINK costs $0.1667 per request, then the default price will be set at $0.044/LINK."secondary title"the secret is about to be revealed
Based on the valuation model used in the above study, and the high valuation assumptions they assigned, they concluded that LINK is overvalued and will become a relatively risky project in the short or medium term. On the other hand, they also accuse their solution of centralizing smart contracts and even attribute it to
, which would violate the decentralization and independence of the network.
In summary, they stated that the characteristics of their cryptocurrency (LINK), the lack of a decentralized ecosystem, and the policies of the US Securities Commission (SEC) may lead to huge risks for the company and investors, and they have no Do not hesitate to affirm that companies and investors may in the short term be accused of negotiating securities and even receive court orders and possible profit return disputes.
No wonder Russian roulette can work against investors. As of the date this article was researched, the price of Chainlink was around $19.26. From our perspective, this is a new bubble that could burst at any moment.
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Decentralized stable currency issuance method"Synths "Over time, they found that in the DeFi ecosystem, they could create other products, so they updated the concept of Havven to today's Synthetix.
Currently, it offers on its platform what are known as synthetic assets or
Tokens that provide exposure to other assets such as gold, bitcoin, and the U.S. dollar, and announced on their website, built TESLA and AAPL’s Synths on the Ethereum blockchain.
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new assets in the market
Additionally, they have their exchange platform that operates with their listed synths that can be swapped without a counterpart, and they have a decentralized application (dApp) for those with native tokens ( SNX) to provide services.
Uniswap
According to the company, those who acquire SNX will receive two types of returns: the first is obtained through supply and demand in the market, and the second is obtained through operations between synthesizers on the Synthetix exchange.
The risk with Synthetix is that there is volatility in the debt that investors pay to unlock the SNX they invest in; that is, the debt that SNX investors create is priced in sUSD and changes based on the profits or losses of other Synths holders . In addition to volatility, there are also network attacks. Don’t forget that in June 2019, the platform was attacked and about 37 million sETH was lost.
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Uniswap is an Ethereum-based token-centric platform that enables the exchange of ERC-20 or Ether. Uniswap stands out within the community as a decentralized platform that provides liquidity and automates market creation.
It's worth reviewing some perspectives and why you think about it that way.
Each token has a smart contract and eventually, it can have its trading pairs and provide liquidity.
Any token can be incorporated into Uniswap, it does not require the platform to allow its inclusion.
A tool for the community to trade tokens without platform fees and middlemen.
With Uniswap, you can add an ERC-20 token that is funded with Ethereum. Anyone with an ERC20 can do this, and at Uniswap, they issue a smart contract to create a liquidity pool. For example, if we were to enter 10 units of XYZ tokens on the platform, there would be a corresponding 10 ETH.
Overall, Uniswap is one of the most prominent DeFi products because of the solutions it offers for tokens developed in Ethereum. This is good for projects that are rejected by centralized exchanges (CEXs); however, it is also good for those trying to commit fraud and scams.
For example, in April of this year, hackers attacked one of the groups on the platform, stealing more than $300,000 in ETH. Finally, what’s worth noting about Uniswap is that since the company’s commitment to continue to expand, from June to July, its liquidity has increased from $37.5 million to $86.6 million, its locked volume from $6.2 million to $43.7 million, and perhaps most importantly The news is that they have received an investment of 11 million US dollars, and this round of investment is led by A16z.
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low cost loan application
dYdX is a decentralized Ethereum-based platform that allows users to apply for loans and also execute positions on the future price of the most popular cryptoassets."To start using the platform, one needs to own a certain amount of Ether (considered a requirement to start operating the platform's products, which must be stored in a compatible digital wallet, such as MetaMask."One of the goals of dYdX is to bring the tools of traditional financial markets to the cryptocurrency ecosystem. The dYdX proposal is not only focused on providing loans, but also attempts to develop derivative products that exist in traditional financial markets.
It allows for marginal transactions in a decentralized manner; that is, it is a form of negotiation that requires a certain amount of funds to conduct
bet
(Also known as financial leverage).
Digital assets are managed in the form of smart contracts.
Aave
One of the appeals of the platform is that it allows decentralized exchange contract trading with low risk, for example, a certain asset can be traded up to 5 times (5 times more than the asset that has been placed), compared to other platforms such as BitMex , can be considered low since BitMex allows leverage up to 100x.
Like other platforms, dXdY has shown significant growth, with transaction volumes in the region of $30 million in 2019, and by April, more than $500 million in ETH had been traded through the release of a $1 billion credit line. Still, they haven’t been immune to the fraud surrounding them, as last July it was reported that fake dYdX tokens were being created with the intention of selling them on Uniswap.
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Aave is a platform that provides credit and is the third largest credit platform by a long time. It was created in Switzerland in 2017 and launched an ICO, from which it raised $18 million.
Initially, Aave projects and services were known to provide credit and escrow for investors. It focuses on one type of product in particular.
It integrates Uniswap and Setmarket.
Flash loans require no collateral.
Delegated credit is a simple transaction where a depositor of the Aave protocol delegates a line of credit to someone they trust.
The commission for Flash Loans is 0.09% of the total credit line.
Funds are backed by smart contracts, not escrowed, and are on the Ethereum blockchain.
Regarding credit, it needs to be explained that any user who has tokens on the bill can grant credit by implementing bvv on the same platform.
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Provide users with unique features"Regarding security, which seems to be one of Aave's priorities, I recommend auditing and improving their protocols and updates on a regular basis."It should be emphasized that although the DeFi ecosystem has gained popularity this year, it must always be maintained
wide awake
, as reviewed in the previous research report, there may be cases of overvaluation.
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Conclusion: Be Smart
Regardless of the projects that come up in these last days, our biggest advice is to always put risk management first and never focus on just one project.
After three years of researching the market, we realized that the best strategy is to never stay invested in the same project, hoping to become a millionaire one day. Of course, there are exceptions, but those are very rare.
