Ethereum gave birth to the prototype of DeFi
Editor's Note: This article comes fromHoneycomb Finance News (ID: fengchao-caijing), Author: JX kin, reproduced by Odaily with authorization.
Editor's Note: This article comes from
Honeycomb Finance News (ID: fengchao-caijing)
, Author: JX kin, reproduced by Odaily with authorization.
On October 26, data from DApptotal showed that MakerDAO's lock-up amount reached 1.8 billion US dollars, a record high. Who would have thought that 5 years ago, Maker's concept of mortgage lending was just a white paper.
It was at that time that, like Maker, many ideas about building financial applications on decentralized networks entered the exploration period. With the excavation of the Ethereum genesis block in July 2015, developers can deploy smart contracts on this simple decentralized system. Within 2 years, decentralized stablecoins, mortgage lending, and DEX trading platforms From a white paper to a beta application.
These applications were not called DeFi at that time. Although the Bitcoin market reached its historic peak at the end of 2017, decentralized financial solutions are lonely and niche. It was inconspicuous when the ICO and the "blockchain revolution" slogan came, and it quietly explored in small corners outside the mainstream market, including Maker, the current top DeFi protocol, and the predecessor of Aave.
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As a protocol for creating the stablecoin DAI, MakerDAO is now an essential infrastructure in open source financial protocols. On October 26, its total value locked (TVL) reached 1.8 billion, breaking another record and becoming a frequent visitor to the top three on the DeFi value list.
It took MakerDAO 5 years to lock up $1.8 billion from a white paper. 5 years ago, it was still a concept.
In August 2015, MakerDAO released a white paper. DAI has not yet been given the concept of a stable currency. It is defined as "the first transferable and interchangeable encrypted bond." The issuer (borrower) can issue DAI by locking value assets to obtain stable and low-risk interest income, which comes from the issuer's mortgage assets.
At that time, Bitcoin players who were active in the Babbitt community in China were not interested in this emerging thing. In the screenshot of the English version of the white paper, some people questioned its origin, "wearing a foreign vest to fool people"; some people think that this protocol is too complicated , "If you don't like to use your brain, don't play."
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DAI early white paper (picture from Babbitt)
New things with complex patterns are really not flattering in the encrypted world where profit from buying and selling Bitcoin is king. However, what else an encrypted decentralized network like Bitcoin can do besides transactions has become a topic explored by some geeks and scholars at that time.
Open-source financial applications have become a direction, but the efficiency that the Bitcoin network gave up for security has become a pain point for application developers. The market lacks a stable and efficient decentralized network to carry ideas similar to Maker.
Since this version of the Ethereum network does not have a graphical interface, all operations need to be performed through the command line. Turing's complete Solidity programming language is aimed at smart contract developers, and it is not very friendly to ordinary programmers. At that time, Vinay Gupta, the release coordinator of Ethereum, issued an article to remind developers that Frontier is the version of Ethereum "in its most initial form", and developers should proceed with caution.
Being humble doesn't seem to hinder testing. Augur, an ethereum-based prediction market (binary options trading), released a beta version and tutorials, and the project had to receive $5.2 million in financing at the time. The financial scene involved in Augur can be regarded as the early exploration of DeFi on Ethereum. Although there was no concept of DeFi at that time, it still lives with Ethereum to the present.
In addition to Ethereum, Bitshare is also an optional network for application developers. It is a concept proposed by BM, the founder of EOS, which allows users to use the delegated proof algorithm to build a peer-to-peer distributed stock ledger account and network. As early as 2014, the BitShares mainnet was launched. In the month when the Ethereum mainnet was born, the overseas venture capital group Peak announced the use of the BitShares 2.0 network to integrate it into the company's business.
BitShares was once regarded as a model for the application of blockchain technology in financial scenarios at that time. When the Babbitt community saw the plan of DAI, someone left a message, "It is better to engage in DAI than to engage in BitShares." No one thought that DAI and Ethereum, which were not optimistic at the beginning, have now become the protagonists of the encrypted asset world. BitShares, which lacks ecological construction, has moved to the edge.
Crowdfunding Track Absorbs Money TheDAO Sounds the Alarm
The gradual improvement of infrastructure has brought more room for developers to flex their muscles, and funds have quietly entered the market, paving the way for exploring open source financial applications based on distributed networks. The first scenario to form large-scale applications is crowdfunding.
In October 2015, WeiFund, an open source crowdfunding platform based on Ethereum, was launched. As of now, this platform is still providing services to users.
If it is placed in the process of DeFi, although the storm caused by WeiFund is not a big one, its appearance proves the value of developers trying to use smart contracts to build crowdfunding scenarios.
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Weifund early webpage
At that time, on Babbitt, someone left a message about the popularity of crowdfunding applications at the time in the message introduced by WeiFund, "It seems that there are many such platforms, and there are too many crowdfunding."
The emergence of "TheDAO Incident" also confirmed this popularity from the side. In May 2016, DAO, the largest crowdfunding project on Ethereum, raised nearly $60 million. A large inflow of funds attracted the attention of hackers, and bad luck happened.
On June 17, due to a major flaw in the smart contract, TheDAO was hacked, causing more than 3 million ETH assets to be separated from the fund pool. According to media information at the time, before the attack, the crowdfunding platform had about US$100 million in assets in its fund pool.
In order to recover the assets, the Ethereum network implemented a soft fork to roll back the transaction. Before and after the implementation, the community has always had disagreements on whether to roll back. The disagreement was resolved by the coexistence of the two chains, and ETC Ethereum Classic (the original chain network) was born from this.
In addition to smart contracts, wallets are also an important part of DeFi's ability to get out of the niche circle. If the smart contract realizes the entrance of the application scene, then the wallet is the door for the user to enter the scene.
In 2016, the Homestead upgrade of the Ethereum mainnet provided tools for "building doors". The Homestead upgrade has made three important changes - the removal of the Canary contract removes the centralized part of the network; the introduction of new code in the contract programming language Solidity; most importantly, the upgrade brings the Mist wallet, allowing users to maintain Yes, trade ETH, write and deploy smart contracts more conveniently.
As more and more financial applications use smart contracts to try, some traditional financial institutions have also begun to pay attention to open source financial protocols on Ethereum.
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The developer of smart bond (picture from Babbitt)
After crowdfunding and bonds, trading applications also came in October 2016. The Ethereum-based decentralized exchange IDEX was launched. In order to avoid the inefficiency of the Ethereum network, it adopted the order book model to support restrictions and management Orders, off-chain matching, and on-chain clearing achieve high throughput and real-time transactions. IDEX has become a platform on Ethereum that can conduct multiple transactions at the same time.
Fund pooling and open source finance involving traditional financial institutions are sprouting and exploring in the development of Ethereum.
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DEX iteration Today's mainstream protocol is born
In 2017, open-source financial protocols on Ethereum became more diversified. In addition to crowdfunding and transactions, lending protocols that play the role of commercial banks finally appeared in the form of applications.
In September, EtherDelta (EtherDelta), an iteration of IDEX, went online. Compared with the former off-chain matching, EtherDelta is closer to the purpose of blockchain decentralization and high invisibility. It has the characteristics of encrypted signature transactions and does not require account login, allowing users to use it safely in any corner of the world.
EtherDelta has also become the first stop for early exploration of decentralized transactions in China. Denny, the representative of the Chinese area of the Defibox Foundation, recalled that Yide was the first DEX he used. "At that time, I had the mentality of exploring transactions on the chain. The overall feeling was still affected by the performance of Ethereum, which was too slow."
In addition to Ede, the MakerDAO protocol, which has been running in concept for two years, finally came out of the white paper, and some people began to deposit ETH into it and became the issuer of DAI. According to data from DAppTotal, on December 18, 2017, MakerDAO’s lockup amount was $190,000.
Pan Chao, the head of China who joined the Maker team that year, believes that compared with today's market, it was MakerDAO that could be called DeFi at that time, because it built a mortgage lending financial system in the form of a decentralized protocol. And generated stable currency, one of the most important infrastructures in the trading world. When Pan Chao joined the team, he focused on the stablecoin scenario. "At that time, there was no concept of DeFi."
Pan Chao recalled that in 2017, the focus of the currency circle was on ICO, and few people paid attention to decentralized applications. It was so small that only developers who were professional players would use these financial protocols. However, although there are few protocols and low attention in the market, the mainstream DeFi protocols in the market today, such as the lending protocol Aave and the derivatives trading platform Synthetix, all took shape at that time.
In November 2017, Aave was not called Aave, its predecessor was ETHLend. The scenario that this protocol tries is mortgage lending. Users can use their own digital currency assets as collateral, and borrow ETH to participate in token crowdfunding or short-term arbitrage. In the early stage of protocol development, it issued 1 billion LEND tokens and raised ETH worth 600,000 US dollars.
It was not until September 2018 that ETHLend was renamed Aave, and it has become a mainstream application even now. Currently, according to DAppTotal data, Aave’s lock-up amount is US$1.09 billion, ranking fourth in TVL.
In addition, Synthetix, the leading platform for derivatives in the current DeFi protocol, was also launched in 2017. At that time, the name of the platform was still called Havven. At first, it also wanted to be the main stablecoin, called nUSD. Later, though, team development shifted to trading prospects. At the end of 2018, Synthetix, a synthetic asset agreement platform, was born.
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