Explain the encryption cycle and value flow in detail

Editor's Note: This article comes fromBlue Fox Notes (ID: lanhubiji), reprinted by Odaily with authorization.

Editor's Note: This article comes from

Blue Fox Notes (ID: lanhubiji)

Blue Fox Notes (ID: lanhubiji)

, reprinted by Odaily with authorization.

1. The bull market in 2017 was driven by the crowdfunding of Ethereum-based encryption projects. Due to the short-term irrational high returns, people rushed to enter, which in turn pushed up the prices of ETH and BTC, and finally the bubble burst due to the sell-off of BTC and ETH. In this cycle, BTC was halved in 2016, laying the foundation for the arrival of the bull market, but what really drove the bull market was the crowdfunding of Ethereum and the super high returns triggered by crowdfunding. Of course, there are also big problems in this. First, such high returns are not sustainable, because there is no fundamental support at all. The second is that a large number of junk projects have been mixed in, and projects that have nothing to do with the blockchain have joined this grand bubble.

2. The ancestor of the entire encryption field is Bitcoin, not only because Bitcoin pioneered encryption technology, but also because Bitcoin has brought super high returns. The first batch of people to participate in Bitcoin, because the rise of Bitcoin has brought a lot of benefits. And this part of the income was fed back to various subsequent encryption projects such as Ethereum, thus opening up the encryption ecology. From this point of view, no matter what the reason is, no matter whether you like Bitcoin or not, no matter how much ETH you hold, you should "show respect" Bitcoin, because Bitcoin is the real pioneer of the entire encryption field. Its historical status must be respected. Of course, it is not impossible to surpass Bitcoin, it all depends on the scalability of open finance.

3. Since the first driving force of the entire encryption field comes from Bitcoin, the halving of Bitcoin every four years has become one of the most important events in the entire encryption field. Because it is one of the most important foundations for the replacement of bulls and bears in each major encryption cycle.

4. However, with the gradual growth of the Ethereum ecology, more important impetus may come from non-Bitcoin ecological advancement, such as the progress of encryption based on Ethereum or other public chains. The most eye-catching progress is DeFi, Blue Fox Notes I have been paying attention to the progress of DeFi since 2019. At that time, many people thought that DeFi was just a hype, but now it has landed and has become an important base for promoting innovation in the entire encryption field.

5. Since 2020, the rise of KNC, MKR, LEND, LRC... represents the trend of value flow. Will COMP, BAL, BNT... get more attention, who I don't know, but as long as they make progress, they will be closely watched by the market. This is perhaps one of the rarest opportunities for DeFi projects to grow.

6. If 2020 is compared to 2016, and the current market momentum is driven by DeFi, then the question is, can DeFi bring a super bubble like the original Ethereum crowdfunding? No one knows this, but every time the method will be different.

8. What is different from 2017 is that DeFi, whether it is DEX, lending, or derivatives, is creating actual value and income, bringing visible benefits to its participants. Unlike crowdfunding projects in 2017, which were only financing, even if there is a bubble, it is relatively smaller than in 2017.

（Data：Visual Captialist）

9. Will DeFi become a periodic hype, such as the previous ICO, public chain, etc.? The hot spots to chase are different every time. The cycle itself also has a large cycle and a small cycle. The big cycle is similar to the level of bull-bear alternation. The small cycle is the ups and downs between bulls and bears. Such as oracles, platform coins, Layer2, DEX, etc. The focus of each small cycle is different, and it must exist, and it is inevitable. No one can say, whether the next focus will be encrypted storage, encrypted cloud computing, or NFT or encrypted games, encrypted Internet of Things..., but periodic hot spots are inevitable. There is no shortage of hot spots in the encryption world, and the so-called smart money will flow happily. Even so, DeFi is different from the previous hype hotspots. It already has real landing and support. Although it will encounter certain ceilings due to the backwardness of the public chain infrastructure, these are not unsolvable problems. The innovation of DeFi in the future will not stop, it will continue to attract people's attention.

10. DeFi is currently limited by the number of users and the amount of assets involved, and it is still a small role, but it will continue to grow. With the maturity of Ethereum layer 2, the arrival of sharding, and the participation of other public chains, DeFi has Opportunity developed into a really important financial force, and finally evolved into a very important part of open finance.

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11. In the development process of open finance, Ethereum will definitely benefit from the overall development. This is mainly due to ETH's position as the underlying asset, and its ability to capture transaction fees based on the Ethereum chain. In theory, it will push up the overall market value of Ethereum, otherwise Ethereum cannot carry such a large value flow.

12. Finally, will open finance be inferior to traditional finance? Traditional finance is an important foundation for the operation of today's economic system and has mature regulations. But don't forget that under traditional finance, there are still many problems that have not been resolved. In the movie "Margin Call" (Blue Fox Notes: The Chinese translation of this movie is "The Storm of Interest"), the final statement of the Wall Street boss in the film:

"It's just money. It's manufactured. It's a piece of paper, but there are patterns on it... It's certainly the same today as it was then. 1637, 1797, 1819, 1837, 1857, 1884, 1901 , 1907, 1929, 1937, 1974, 1987, 1992, 1997, 2000, 2008... the same reason, time and time again.”

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