Dialogue with Cao Yin: Ethereum 2.0 is approaching, and with DeFi blessing, can it act as a "bull market catalyst" again?

Ethereum 2.0 is progressing smoothly, and the beacon chain was first launched in July this year. Can Ethereum, which is entering a new era of public chain, give birth to a super bull market like in 2017 again? DeFi projects are booming, and a large amount of BTC is pouring into the pledge platform. Why is DeFi so favored by capital? How should investors grasp the trend of the times? On the evening of May 21st, Cao Yin, an Ethereum ecology expert and managing director of the Digital Renaissance Foundation, visited the OKEx Intelligence Bureau to share the ecological development of Ethereum 2.0+Defi and look forward to the future market. The following is the main content of this interview.

Key excerpts:

Key excerpts:

1. After the launch of Ethereum phase 0, it is expected that there may be several million ETH locked in the staking nodes, which will have a relatively large restrictive impact on the liquidity supply of ETH in the market, thereby driving the price of ETH to rise.

2. Within two or three years, the prices of DeFi and ETH on Ethereum will be positively promoted.

3. Stablecoins have been out of the circle and become the "killer" application of blockchain technology; DeFi on Ethereum can become the "killer" application of Ethereum through stablecoins and enter the circle of non-digital currency investors.

4. The current performance problems of Ethereum not only make the DeFi of Ethereum have a development ceiling, but may even lead to the sudden death of DeFi on Ethereum.

5. Ethereum is the earliest smart contract project, and this advantage will also become a disadvantage, because updating on a mature public chain is equivalent to changing the wheels of a fast-moving high-speed rail, and the difficulty can be imagined.

6. The infrastructure related to value and privacy of the public chain, it is impossible for Ethereum to dominate. Just like the operating system has Windows, Linux, and MAC systems.

7. Traditional VCs are more willing to explore earlier projects, but now there are no projects to invest in except Defi in the blockchain world, and traditional capital sees the possibility of Defi going out of the circle, which is the fundamental reason why many domestic and foreign capitals favor Defi projects.

The following is the full text of the conversation:

The following is the full text of the conversation:

OKEx Intelligence Bureau: Hello Mr. Cao, let me say hello to everyone first, and by the way, I can briefly introduce the current development of the Digital Renaissance Foundation.

Cao Yin: Hello everyone, I am very glad to be invited by OKEX to share with you DeFi and the relationship between the new Ethereum ecosystem and DeFi. Let me briefly introduce myself first. Our Digital Renaissance Foundation was established not long ago. It was just established in 2017. The original intention of the establishment is actually to conduct in-depth incubation and investment cooperation for innovative companies in Estonia’s digital citizen ecosystem.

The founding members of the foundation include Estonia's largest local accounting firm, Finland and Estonia's digital financial companies. At the end of each year, we hold the largest hackathon in Europe (we are responsible for the blockchain sector) in Helsinki (the capital of Finland). In November last year, the cumulative number of participants exceeded 3,500.

I am personally an angel investor and consultant for the earliest DeFi project in China. At that time, there was no such thing as DeFi, and we started to incubate investment. Now we are also continuing to incubate the most cutting-edge DeFi projects, including the core DeFi project Acala network in the Polkadot ecosystem, and the DeFi payment project in Polkadot called Dipole.

OKEx Intelligence Bureau: Let’s move on to our Q&A session today. First of all, the first question, do you think phase 0 of Ethereum 2.0 can go online smoothly this year? What are the more significant impacts of this upgraded version on the Ethereum ecosystem?

Cao Yin: There should be no problem with the launch of Phase 0 of Ethereum within this year. According to the news from our side, it may be launched in July and August. For the ecology of Ethereum, there is no particularly big impact at present. Because Ethereum 2.0 is divided into 4 phases, phase0 mainly provides Beacon chain (beacon chain), so that everyone can be a PoS node, which is equivalent to laying the foundation for Ethereum to switch from PoW to PoS, but the most important Smart contracts and fragmentation will not appear until Phase1 and Phase2.

But with Staking, it will have a greater impact on the price of Ethereum. Because we all know that staking is a big direction now, we have seen some projects that have done relatively large staking in the early stage, such as Tezos, and its currency price has already performed relatively well. Tezos has risen many times last year. Its staking lock-up mechanism has indeed had a relatively large impact on the price of tokens, and the circulation in the market has dropped a lot.

After the launch of ETH 2.0 phase 0, more tokens will participate in various ways in the early stage, either by directly setting up a Beacon chain node, or participating in staking through some clients. We estimate that there may be millions of ETH locked in various staking nodes, which will have a relatively large restrictive impact on the liquidity supply of Ethereum in the market. From the simplest supply economics point of view, supply is decreasing and demand is increasing, so the price of Ethereum should rise.

OKEx Intelligence Bureau: In 2017, Ethereum was outstanding with its ICO. After Bitcoin was halved, many people think that Ethereum 2.0 will once again play the role of "bull market catalyst", or even "engine". What do you think of Ethereum? Can Fangfang still play the role of a bull market catalyst similar to that in 2017?

Cao Yin: I think this is very possible. From the first half of this year to the present, the amount of stablecoins issued on Ethereum has actually exceeded 8 billion US dollars. This is a very scary number, because you look at the market value of Ethereum.

We have always said that there is no rigid demand for blockchain technology, and there is no killer application, but in fact, the stable currency has already been out of the circle and has become a killer application. Because we often communicate with some financial institutions and people doing business abroad, I found that places with less advanced financial facilities, such as Southeast Asia and South America, have begun to use stable coins to replace similar financial institutions like local banks or other financial institutions. Institutions pay for this service to transfer money between businesses and remit money across borders. Although its scale cannot be compared with the scale of transactions between financial institutions, the growth rate is very fast. Therefore, stable coins and various DeFi based on stable coins will become Ethereum's "killer" applications. There is no doubt about it.

How will this affect the price of Ethereum? First of all, when a large number of stablecoins run on Ethereum and various DeFi applications, gas will form a rigid demand. In the past two days on Ethereum, you will find that the gas price has actually risen quite a bit. This year, the gas used to pay for various DeFi applications has accounted for a relatively large proportion of the total gas demand on Ethereum. From this point, it can be seen that the demand for Ethereum has been directly promoted.

The second point, like now, for example, like Compound, including some lending applications like lendf in China, which we call lending and saving, also play the role of locking coins. Not only the Ethereum itself is locked, but also some other mainstream ERC tokens. In addition to saving applications, there are also stablecoin applications like MakerDao, which also lock more ETH. These DeFi applications also lock a part of the ETH liquidity by locking coins, or by staking, which reduces the supply in the Ethereum market, and this trend has just begun.

For example, like the 312 digital currency market plummeted this year, the amount of ETH locked in DeFi applications on Ethereum also declined to a certain extent, but quickly recovered to a high point. Now that more DeFi applications are being launched, there will be a new boost to the amount of locked ETH. This will also play a role in restricting supply and liquidity, and will promote the future rise of the price of Ethereum.

This forms a positive cycle: when everyone starts staking, whether it is doing Ethereum phase 0 staking, or staking with ETH in various DeFi applications and then borrowing or generating stable coins, it itself They are all reducing the liquidity of ETH, making the price of ETH higher; when the price of ETH is higher, it can create more stable coins through the leverage effect in the pledge, or borrow more stable coins. Currency assets, and then invest in ETH, which is equivalent to adding leverage to ETH, which in turn drives up the price of ETH.

Of course, this will actually have a reverse effect, that is, when the price rises, Ethereum’s DeFi will push up the price of ETH, but if it enters a reverse cycle, it may cause a death spiral. But looking at it now, the entire market is relatively optimistic about the price of digital currency in the second half of the year or in the next few years, so for now, there is no need to worry about the price plummeting and causing Ethereum to enter a death cycle. And from the facts of this 312 plunge, the robustness of Ethereum DeFi is still very surprising. Even after the second largest single-day price plunge of ETH in history, it quickly returned to normal levels.

From the perspective of global bulk assets, including digital currency, stocks, gold, oil, etc., digital currency is actually the first bulk asset to return to the price level before the epidemic plummeted. This has actually proved investors' confidence in digital currencies, so I think that within two or three years, it will actually have a positive effect on the price of DeFi and ETH on Ethereum in the short term. After two or three years, Ethereum DeFi is likely to be out of the circle, and I am even more optimistic about this time point. Maybe next year, Ethereum’s DeFi will be able to enter the circle of non-digital currency investors through stablecoins. , to serve a variety of international bulk remittances, cross-border trade these payment clearing and settlement functions. In this way, the influence of digital currency prices on DeFi can be separated, and the demand for ETH and digital assets on Ethereum will be greater, thereby avoiding the occurrence of a death spiral.

OKEx Intelligence Bureau: I read your recent article "The gift of halving is not just a bull market, but also the spring of DeFi", which was reposted by many people in your circle of friends. You predicted in the article that the halving of Bitcoin will bring a large number of BTC pledges to the DeFi lending platform. After that, the number of pledges of Bitcoin has indeed increased by more than 40%, but the number of ETH pledges is currently declining. Why do you Will this phenomenon be accurately predicted? What does this phenomenon mean for Ethereum, Bitcoin, and DeFi?

Cao Yin: Before I wrote this article, I had already discussed the future trend with some domestic CeFi teams of Bitcoin, and some overseas project parties who want to do ERC Bitcoin DeFi. The result of the discussion is that everyone actually agrees that Bitcoin will be staked more in Ethereum and participate in the DeFi ecology, and then I wrote this article. So this is actually collective wisdom, and everyone has seen that there are already signs, and some people have already begun to prepare to use Bitcoin to obtain stable coins after halving, or to use Bitcoin as a pledge to borrow money, and then put them into the mine. Production.

And in fact, the halving this time is not particularly friendly to many of these small mining machines or small miners, because big miners have capital, cheap electricity, and professional operations, and can obtain better marginal effects after the halving. But for small miners, they may not have the money to buy new mining machines, so they need to pledge their previously hoarded bitcoins, and then exchange them for stablecoin assets to buy new mining machines, otherwise they will be eliminated.

So this trend is due to key changes in the ecological environment of Bitcoin itself after the halving. In fact, the DeFi ecology of Bitcoin itself is underdeveloped, and Ethereum provides such a better DeFi ecology that serves Bitcoin, so it is possible to absorb Bitcoin traffic and value into the Ethereum network, which is considered to be mutual help.

Moreover, this trend has just begun. We see more and more Bitcoins entering the Ethereum DeFi ecosystem through various DeFi projects. There are mBTC in China and more overseas, such as wBTC and tBTC. All kinds of BTC empower Bitcoin through various ways of playing, and then enter the DeFi ecosystem. Bitcoin assets are almost hundreds of billions of dollars. Even if only 1/10 enters DeFi, it can double the asset stock of the current Ethereum DeFi ecosystem several times.

However, a large part of these value deposits will still be captured by ETH. This is actually a place where some people criticize Ethereum-the smart contracts on Ethereum can only use ETH as gas, and other project tokens are " Second-class citizens”, so now some people have to propose a new ERP protocol, so that those project party tokens can also be used as the gas of the smart contract itself. But at present, the community does not particularly approve of such a proposal, so in the end, the value will be deposited in Ethereum’s ETH itself.

Moreover, there is a theory in the community that if the scale of assets on DeFi (including USDT, a variety of BTC assets) exceeds the market value of Ethereum itself, the assets on the network may be in danger. So in this theoretical situation, when a large number of assets come in, the Ethereum community itself will also promote the value of Ethereum, providing greater security redundancy for the entire network, and making the market value of Ethereum tokens always higher than The total market value of various DeFi assets, so that the safety of the above assets can be guaranteed, which actually makes sense logically. So I personally think that both aspects will push the investors of Ethereum and the participants of the Ethereum community to push the price of ETH to a new level.

OKEx Intelligence Bureau: The Ethereum network is congested due to various popular DApps or projects, including CryptoKitties, FoMo3D, USDT, etc. Bitcoin is also often congested. How do you view the congestion of blockchain projects? In which stage of Ethereum 2.0 can the congestion problem be solved?

Cao Yin: Now, what really limits the development of Ethereum DeFi is the performance of Ethereum. We saw that during the 312 crash, a large number of people needed to submit collateral in various places like MakerDao and Compound because of the sharp drop in the price of Ethereum, so that he would not be liquidated. But everyone had to submit mortgages that day, but the insufficient performance of the Ethereum network caused some assets to be liquidated, which also led to MakerDao’s 312 black swan 0-loan auction.

So now that the performance of Ethereum is so weak, it has not only made the development ceiling of DeFi on Ethereum, but more importantly, it may lead to the sudden death of DeFi on Ethereum. If this happens again, and the global macro-political and economic environment in the next few years is not clear, this kind of slump similar to 312 may happen at any time. Of course, the entire DeFi project or the DeFi ecosystem will not die, but the users on it may be out of luck.

Therefore, there is an urgent need to solve performance problems in various ways, but this is not easy to solve. Because Ethereum 2.0 is divided into four stages, it may take two or three years before the smart contracts can actually be run on the 2.0 shards. But there is a problem here, how do the DeFi assets on Ethereum go to the new shard after the shard? Can the communication between shards and cross-shards allow assets to run smoothly in the DeFi protocol on different shards? In fact, Ethereum did not give a good answer to this point, and this is a well-known and tacit question that everyone is developing DeFi on Ethereum now.

Although we are all optimistic about DeFi, what we are optimistic about is the direction of the big DeFi from the perspective of 10 years. However, there are indeed many technical problems to be solved in this process. Now we have seen some projects that have not yet landed on Ethereum 2.0. before addressing performance issues. For example, the Chinese team is called "Loopring". They provide very high scalability on Ethereum 1.0 through zero-knowledge scalability to solve the current congestion problem of Ethereum. So I am personally cautiously optimistic about Ethereum performance scaling.

It is also worth noting that although DeFi is very popular, it is actually not the mainstream game in the digital currency circle. For example, two days ago, a data scientist analyzed the behavior of the top 10,000 addresses in Ethereum accounts, and only 6% of the “whales” were using DeFi applications. Therefore, with the increase in the number of DeFi users, if it doubles, the performance of Ethereum will definitely not be able to support it, so it will face a serious bottleneck problem by then. At that time, dDOS for various protocols will become possible, and some people may even conduct "front-running transactions" (if you know the terms or transaction volume of other people's orders, you can get them in Ethereum congestion. Time to preemptively use various methods in advance, for example, MakerDao’s zero-loan auction is another form of preemptive), this will cause some serious problems in DeFi on Ethereum.

So to solve this problem, either we need to launch 2.0 quickly, or we can build on a new high-performance public chain through various layer 2 solutions under the current 1.0 conditions, or through cross-chain DeFi to solve the current problems.

OKEx Intelligence Bureau: Do you think at present, during the development and upgrading process of Ethereum 2.0, is it possible for another fork to occur again, similar to the community split like Ethereum Classic (ETC), which will lead to another fork of Ethereum?

Cao Yin: It is very possible. Because the conversion of Ethereum to PoS is not recognized by everyone, there are indeed many people in the community who believe that the consensus of PoW is stronger than that of PoS, and the PoS of Ethereum has not yet been launched, let alone after phase 0 is launched. There are also different stages of phase1 and phase2. Any problems in this process may cause the firm believers in PoW (mainly Ethereum miners) to remain in the PoW chain and hard fork Ethereum. This is very important. possible things. And as far as I know, there are indeed people in this community who are going to do it.

So from the perspective of 2.0 landing, it is indeed full of various challenges, which is very dangerous. After all, the Ethereum community is big, and after DeFi on Ethereum becomes popular, it involves conflicts between economic interests. It is inevitable that some people want to fork Ethereum because of conflicts of interest.

OKEx Intelligence Bureau: We have seen that many star public chain projects have emerged in the past two years, including Tezos, EOS, Polkadot, Cosmos, Alground, etc. What do you think are the advantages of each of these public chain projects? At present, do they have a chance to overtake Ethereum in a corner?

Cao Yin: This is very possible. Although some people now firmly believe that "Ethereum cannot be surpassed", in fact, we have not seen the history of Ethereum for a long time, and when Ethereum was in 18 years, many people thought that Ethereum would be finished. At that time, the entire digital currency community fell into a trough. Everyone should remember that when Ethereum fell to 80 yuan at its lowest point, many people sold ETH at that time.

Then why do you think that Ethereum cannot be surpassed now? In fact, it is entirely human psychology that is at work. Let's see what can't be surpassed in Ethereum? What everyone thinks cannot be surpassed. First, they think that the ecology of Ethereum is very large. Second, they think that the market value of Ethereum tokens is very large. Third, they think that Ethereum is relatively centralized. I think these three points are not enough to hinder the real development of the next generation. The high-performance public chain surpasses Ethereum.

First, the developer ecology of Ethereum is very large. In fact, we can see that there are not many Ethereum developers. There are only two to three thousand Ethereum developers in the world, and among these two thousand to three thousand people, they are full-time There are not many people doing development. We have seen some star projects, such as MakerDao, whose developers are actually only 20 to 30 people, which is less than the number of developers of ordinary Internet finance companies, so the ecology is not as everyone said. Insurmountable, in fact, according to my point of view, they are actually relatively small.

Then it is said that the market value of tokens is large, mainly because there is no public chain that can challenge Ethereum, so the market value of ETH seems to be the only one, but in the process of a large number of next-generation public chains challenging Ethereum one after another, we cannot Guaranteed that no one will ever surpass Ethereum, I mean there must be someone who is ecologically close to Ethereum, and then its market value can also surpass Ethereum.

Finally, let’s talk about the decentralization of Ethereum. This matter has both good and bad. Fortunately, after a strong consensus is formed inside, everyone can develop relatively strong without being affected by the centralized team; but there are also disadvantages, especially for the early stage. For blockchain projects, if it is over-decentralized, it will appear that the machine team is relatively scattered. For example, why the freezing of the Ethereum 2.0 phase0 phase plan has been delayed, which we call "skipping tickets". One of the big reasons is that Because the Ethereum Foundation is going to coordinate Ethereum developers, it is too difficult and too scattered.

There are many teams involved in Ethereum 2.0. To reach a consensus among each team, it actually needs to meet again and again to coordinate, and even decide the development direction of the technical route through various internal quarrels. Moreover, each development team has its own small interests in it, which actually forms different technical directions among different teams, without a backbone.

So for these next-generation celebrity public chain projects, I am actually particularly optimistic about Polkadot. It has been moving forward step by step since its development in 2017, and it has also brought some surprises like parallel threads. At the same time, Polkadot does not It is not mutually exclusive with Ethereum, but can allow assets on Ethereum to interoperate with protocols on Ethereum and Polkadot through cross-chain, and assets can also cross-chain; Tezos is also worthy of attention, especially in DeFi field, where CeFi and DeFi combine. Because Tezos pays special attention to PoS governance and compliance, it can attract a group of centralized financial institutions to use Tezos as a public chain for development.

EOS is not particularly optimistic, because the EOS team is not particularly reliable, and the BM has bad intentions. Now they have created a voice, regardless of the development of EOS. Now the super nodes in the community have also been kidnapped by several large accounts; Cosmos It also fell apart, a good team split into 4 teams, and they scolded each other; Tezos is also worthy of attention, especially in the field of DeFi, the combination of CeFi and DeFi. Because Tezos pays special attention to PoS governance, and maintains a relatively good relationship with compliant financial institutions.

OKEx Intelligence Bureau: According to the Ethereum roadmap, Ethereum 2.0 will be completely perfected in a few years, and its performance will also be greatly improved. Does this mean that the public chain competition is over, and Ethereum will be the dominant area in the future? Blockchain 3.0 Era?

Cao Yin: First of all, it will take a long time for Ethereum 2.0 to land. It may take two or three years before everyone can develop smart contracts on Ethereum 2.0 and migrate the current smart contracts on Ethereum 1.0 to 2.0. And at present, there are still many problems that have not been solved. Regarding the homogeneity of cross-shards after Ethereum sharding, it is very likely that all Defi applications are concentrated on one shard, and then some other application, a certain The application of the industry is concentrated on another shard, and then communicates across shards. How can assets be traded across shards? In fact, the difficulty of asset cross-shard transactions is similar to that of asset cross-chain transactions, such as Polkadot of

Cross-chain of parallel chains. So I personally think that the vision of Ethereum 2.0 is very good, but there are also problems. First, it takes a long time. Second, there are many uncertainties. Third, technical solutions make many current agreements unsatisfactory. To sum up, it is far from the end of the competition.

Ethereum is the earliest smart contract, and the earliest smart contract means that it has a first-mover advantage, but this may also become a first-mover disadvantage. Because it is very troublesome for you to update a running public chain, which is equivalent to changing the wheels of a fast-moving high-speed rail. The difficulty can be imagined.

Why do projects like Polkadot take three years to hone their swords? First of all, Gavin Wood, the founder of Polkadot and former CTO of Ethereum, wrote the most important yellow paper of Ethereum. He wrote the most important code of Ethereum. The Ethereum architecture was designed for him. Therefore, Polkadot is a further development project standing on the shoulders of Ethereum, and it may be more suitable for such a development environment that will carry a large number of high-performance applications in the future.

OKEx Intelligence Bureau: What is the current state of our industry in China? Compared with foreign project parties, what are the relatively large gaps or differences?

Cao Yin: At present, we have actually seen the first round of public chain explosion in China, including investors and developers who have also stepped on many pitfalls, so we will not mention specific projects, so many people hold China's public chain. A disappointed attitude, but I don't think it's necessary. The first is that the Ethereum competition is not over. At the same time, the development of public chains is actually ecological. Developers will give priority to developing on which public chains they have a good relationship with. For example, if the team of Conflux is from Tsinghua University, they can cooperate with some official Chinese corporate teams.

I personally think that the public chain is like a language. It is impossible for a public chain to unify the world. Even if it is an operating system, the mobile terminal is divided into two major operating systems, Android and Apple, and the PC terminal also has Windows, Linux, and Apple operating systems. You can see There are so many sets of operating systems alone, not to mention infrastructure related to value and privacy like public chains. Therefore, there are opportunities for the Chinese public chain, but we must find the right entry point and play the Chinese card well.

OKEx Intelligence Bureau: Since the outbreak of the epidemic, the global financial market has been hit hard, and the currency circle has encountered the 312 black swan event. However, the financing of start-up projects in the DeFi field has not only not declined, but has also risen against the trend. Why is DeFi so so? Favored by capital?

Cao Yin: It is true that in the recent period, the scale of financing for DeFi has been getting bigger and bigger, and it can often be several million dollars in financing, and you have to know that these teams are actually very small, with more than a dozen full-time developers. , there are few people, and there are some teams. Their daily working hours are actually three or four hours, which is completely incomparable with China's 996, but the valuation is tens of millions of dollars at every turn. This actually proves that now Global venture capital is not only the traditional currency circle capital, but also some traditional venture capital, such as Andreessen Horowitz, who is also very optimistic about the direction of Defi.

I also communicated with these traditional venture capitals on this issue, and learned why they are particularly interested in relatively early things, and the answers I got are also quite interesting, so I can share them with you.

First, they feel that the blockchain is definitely the direction of the future. They want to get involved in the blockchain, but they are unwilling to buy some supply chain secondary market tokens, such as selling Ethereum. They think this is meaningless and does not mean Their investment level, so they are willing to explore earlier projects. Now there is nothing in the blockchain world, except for Defi, there are no projects to invest in, unlike the original ICO era full of projects, this is one reason.

Second, they have seen the vitality behind Defi, especially now that a large number of stable coins have appeared, they have seen the possibility of Defi going out of the circle, and they have seen the emergence of the real killer application of the blockchain. For example, USDT is now used in many countries as an alternative to traditional bank accounts for cross-border transfers and trade payments. For example, many merchants in Southeast Asia are using it, and some gray products are also using it. So for VC, he sees the vitality of Defi and the vitality of stablecoins, so they are willing to invest, and some of the original applications on the blockchain, whether it is chain games, blockchain art or For other applications, VC can't see the continuous logic behind them, so he dare not invest, but the logic of Defi is very easy to explain.

OKEx Intelligence Bureau: The "black swan" incident in March led to the first MKR auction in history to pay off debts, and then the two decentralized financial projects Uniswap and dForce were stolen. The recent consecutive negative events mean that the Defi model itself Have a question?

Cao Yin: Indeed, there are very serious problems in the current Defi model. Although I am optimistic about Defi, I have to say it realistically. The first is to overemphasize decentralization, but we must know that the core of Defi is financial services, not go centralized. The insistence on the fundamentalism of decentralization has affected the exit of the Defi industry and the current customer experience of the Defi industry.

Complete decentralization is actually impossible, and it will inevitably damage the interests of a small number of people. For example, when Ethereum forked ETC in the early days, it was because a small number of people wanted to fork, and most people were unwilling to fork. So there is a serious problem with absolute decentralization.

When Defi was first proposed in early 2018, it was actually a joke. The pronunciation of Defi in English is exactly the same as Defy, and Defy actually means rebellion and rebellion. They want to use this particularly radical method to arouse the attention of others and flaunt their own ideology for their own actions or a decentralized financial movement like themselves.

But I don't think this is necessary. The core of finance is service, and the core of finance is to satisfy users. I think the series of things that are happening now, in the final analysis, the developers of Defi did not realize that they are responsible for the assets of the users they serve, and these problems occur.

There has always been a saying in the financial industry that compliance is the lifeline. For example, in the financial industry, the most important position is compliance, and risk control is the most important, but there is actually no one in the Defi team dedicated to risk control, so it will cause serious problems in the future. Everyone has realized this through events such as dForce and MKR, especially the Chinese Defi team. I personally think this is a good sign.

The current problems of Defi are, in the final analysis, a problem of too fast development. After its rapid iteration, the scale of asset expansion is too large, and then it is targeted by hackers. Small industry hackers are not interested. This just proves that Defi is dynamic. . Therefore, as long as developers realize this problem, decentralization is not the goal, and serving users is the fundamental goal, then they will truly enter a serious Defi era.

OKEx Intelligence Bureau: In your article "DeFi Review Issue 8 - What attracts top capital to invest in DeFi against the trend? "The end reads, "If these DeFi projects can survive, someone will definitely grow into Alibaba and Tesla in the new era." People will ask, isn’t Defi just decentralized lending, why does it have such a huge potential?

Cao Yin: "Defi is just a decentralized lending" is actually a big mistake. In addition to decentralized lending, Defi also has stable coins and decentralized exchanges. In fact, Bitcoin itself is also a kind of Defi, why do you say that? The Bitcoin white paper "A Peer-to-Peer Electronic Cash Payment System", although Bitcoin is not a peer-to-peer payment system, it acts as a store of value similar to gold. Therefore, in terms of its depth and breadth, Defi far exceeds everyone's general perception. In fact, Defi is just a prototype now.

Why am I particularly optimistic about Defi? The important reason is that I see the possibility of Defi going out of the circle, and the possibility of Defi as a financial underlying service. First, it may be like Alibaba Cloud in the future, serving a wide variety of decentralized or centralized finance, whether it is fiat currency finance or digital currency finance, Defi will become a global decentralized It can be replaced by a standardized settlement layer. Now it is similar to functions such as Visa and Swift. It is very likely that it will replace the value unit function of credit currency, and some Defi projects will even replace centralized exchanges.

In the new era of globalization, various globalized financial solutions are no longer feasible. Defi, as a financial solution, institutional arrangement, system construction, and value unit that is not affected by national sovereignty, is likely to become the next generation of large financial institutions.

So in a word, the Defi we see now is not the complete problem of Defi, it is just a prototype of Defi, the skeleton, and the greater imagination of Defi lies in going out of the circle, or in becoming a large number of financial institutions. bottom layer.

OKEx Intelligence Bureau: Why is the Lightning Network also part of the Defi ecosystem?

Cao Yin: Yes, I agree with this point. In fact, Bitcoin itself is a kind of Defi, whether it is Satoshi Nakamoto’s original idea of ​​Bitcoin’s peer-to-peer cash payment network, or the current Bitcoin Similar to the role of digital gold, it is actually a type of Defi. In fact, Bitcoin has become the asset base of a very important DeFi in the future, and it will become an even more important asset base in the future.

The Lightning Network builds layer 2 on Bitcoin, so that everyone can pay Bitcoin more conveniently, at a lower cost, and more efficiently. There is no reason why it is not Defi. What's more, the Lightning Network needs to pledge a small amount of Bitcoin in the state channel, so it is also a function similar to the pledge of Ethereum. Although its amount is not as large as that of Ethereum, it is actually the lowest level of service finance. A basic function - the payment function.

At the same time, the Lightning Network is a decentralized project integrated with multiple nodes. Therefore, whether it is the function of the Lightning Network or its form of expression, it is DeFi.

The following is the content of interactive Q&A:

Question 1: How does Mr. Cao see the future trend of the encryption market?

Cao Yin: I personally am very optimistic about the market outlook for several reasons. The first is that the halving of Bitcoin will bring about a bull market. It is very certain because the supply has decreased. It used to be 1,800 Bitcoins per day, but now it has become 900 Bitcoins per day. Bitcoin output. Miners have a nickname called Mimaiti, what does it mean? It means digging, withdrawing and selling coins. Originally, 1800 coins were mined, sold and withdrawn every day, but now the supply of 900 coins has been reduced.

And now the right to speak about the price of Bitcoin is no longer on China's side. This right to speak is in these compliant financial institutions in the United States, such as Grayscale. Recently, basically since April, the Bitcoin holdings have been massively increased. In the first two days of May, the net purchase of Bitcoin was almost one or two thousand Bitcoins per day. This amount is very large. There are also statistics on the exchanges. Many large Western stablecoins rushed in, and then bought bitcoins and put them out and hoarded them.

Question 2: A few days ago, V God tweeted that the biggest regret of Ethereum is its premature launch. You just mentioned that the Polkadot project has absorbed a lot of experience in the development of Ethereum. At present, whether Polkadot can avoid it? Opened all the pits of Ethereum? Does V God's Twitter remarks mean that he recognizes the mistakes he made in the first place?

Cao Yin: The first is the performance problem of Ethereum. This is because of the PoW consensus problem of Ethereum. However, when Ethereum started in 2014, it was dominated by PoW of Bitcoin. God can't jump out of that era, but once you choose PoW and then switch to PoS, it will be very troublesome, so now Polkadot is aware of this problem from the beginning, and avoids repeating the mistake of PoW low-performance consensus.

The second is the modularization of the development language. Napoca uses Web assembly instead of Ethereum's smart contract development method. Why did you do this? It is very difficult for you to update a smart contract on the Ethereum chain, so instead of updating many smart contracts, it is better to redevelop one, such as Yunlian Swap 1.0 and 2.0, which leads to smart contracts on Ethereum. Version after version is redeveloped. Every time a version is developed, your customers are required to take the initiative to migrate to the new agreement. The migration of assets and contracts is very troublesome, but smart contracts on Polkadot can be directly updated.

So Polkadot can provide a better and updated experience similar to the mobile Internet Web2.0 era, which is actually very important for smart contracts. Now all smart contracts are actually experimental. It cannot be said that if there is any smart contract, this smart contract will be used all the time. An updated iteration of this question.

The third is the issue of cross-chain. In the future, there may be several public chains coexisting, and each chain has assets and smart contracts of different standards. Now on Ethereum, it is very difficult to integrate other contracts. What's more, the communication of contracts between shards on Ethereum is also a problem. However, Polkadot adopts a cross-chain method, so that assets on different chains can cross-chain at the same time, and at the same time, it can also realize the interoperability of contracts between cross-chains. This is actually very important. Even if you have seventeen or eight public chains in the future, Even hundreds of public chains, different countries, different languages, different application environments, different security levels, and different encrypted assets share one chain.

These are the three places where Polkadot thinks clearly than Ethereum. Of course, there are many places that will not be listed one by one. The summary is that Gavin Wood is a developer of Ethereum. He has stood at the height of Ethereum, and he has figured out various problems of Ethereum. There are also many talented developers who developed together with him and made it. Such a high-performance supply chain of the next generation will inevitably avoid some problems of Ethereum, so as to solve some problems that he did not solve when developing Ethereum.

Question 3: How to participate in the Defi ecosystem, how to pledge, how to borrow, and how to play with Defi?

Cao Yin: In fact, participating in Defi is very simple. Most users who have never used Defi will think that Cefi (centralized finance, such as lending products initiated by exchanges) is easy to use. In fact, if you really open the website seriously, You will find that it is actually much simpler than Cefi. For example, centralized lending on centralized exchanges requires KYC. You have to take a photo of your ID card, write your name and the date of the day, and then take the photo and upload it. Some platforms are slower. It may take a day to give you an approval.

But Defi does not need Defi at all. As long as there is a smart contract wallet, Defi can be used. You even said that one person can register many Defi. And now many Defi teams are focusing on the customer experience of Defi. They don’t do the Defi protocol themselves, but they integrate a lot of Defi applications. You only need to connect to this platform and you can seamlessly use various Defi one by one. Defi applications. It even provides users with a platform for ordinary users to build Defi applications with one click. So Defi is not difficult.

At the same time, users must always be vigilant about all kinds of new things. You can’t think that this place is very safe just because you are familiar with it and you see it every day. In fact, it is also applicable to Cefi and Defi.

Question 4: What about decentralized storage projects?

Cao Yin: Including Filcoin and IPFS network, in fact, I have been paying attention to it. I personally think that IPFS is a very important infrastructure for the entire cryptocurrency ecosystem, and it may replace the current ToC public cloud like Baidu Netdisk. But it is not suitable for ToB, such as financial institutions and large Internet companies. IPFS is enough for ordinary users. This alone will make the next generation of blockchain-based Internet applications (Web3) have a very important storage foundation.

The computer is divided into three parts, one is what we call in and out, which is input and output, such as the on-screen keyboard is input and output; the second is computing, like the CPU; the third is actually storage.

In and out are originally decentralized; Ethereum is actually what we call a global computer, which is actually a decentralized global operating system. However, at present, decentralized storage cannot be solved, and IPFS is to solve this problem, which is actually very important.

At present, as far as the monetary economics of IPFS is concerned, there are still many problems, but everyone still has great hopes. And even if IPFS fails, there will still be many similar projects that will develop, so I personally think this direction deserves attention.

But whether it must be Filecoin in the end, I don't think so. In fact, there are several projects based on the economic layer on the IPFS network, such as Filecoin, and some avril are similar projects. I suggest that if you are really optimistic about the track, you can choose a few more tokens to form a package of assets. Put all your eggs in one basket.