DeFi: the blue ocean market that will be explored in 2021

In mid-December 2020, after Bitcoin broke through the 2017 high in one fell swoop, the prelude to this round of bull market officially kicked off, and Bitcoin started a wave of sharp gains with almost no callbacks. Under the leadership of Bitcoin, Ethereum has also gradually risen, reaching a peak of more than 1,200 US dollars. Breaking through the peak of 1,400 US dollars in 2017 should be just around the corner.

In the market, digital currency has become a hot topic of discussion again. Under the creation of various atmospheres, owning Bitcoin is equivalent to owning wealth, and Bitcoin holders have become the object of everyone's admiration.

As investors who have been immersed in the currency circle for a long time, we must be extra calm and vigilant about this, and not be affected by the emotions in the market, and indulge in Bitcoin and Ethereum and cannot extricate ourselves.

I have repeatedly emphasized that in digital currency investment, earning profits from Bitcoin and Ethereum does not require too much energy or skill for us, just to hoard coins honestly, so we Your goals should never be limited to Bitcoin and Ethereum, but should look to the vast starry sky, looking for the next shining galaxy.

From the official launch of Bitcoin in January 2009 to the present, looking back on the development of digital currency in these years, I think there are three application scenarios that have been proven by the market and have undergone brutal tests:

The first is the first-generation digital currency with only transfer function led by Bitcoin. Typical examples of this category include Bitcoin, Litecoin, and privacy currencies. This type of digital currency has developed to the present, and most of it has been separated from the transfer payment scenario in the consensus of the people, and has become a sign of value storage. Among them, Bitcoin is the king.

The second is the second-generation digital currency that supports Turing's complete smart contracts, led by Ethereum. There have been many similar currencies of this type of digital currency, but most of them have disappeared in the ups and downs of the market over the years, and have become the sands of history. In my opinion, only One: Ethereum.

The third is the rise of the entire DeFi scene caused by the issuance of Compound in June last year. At first it seemed that the rise of this scene was triggered by the speculative demand of liquidity mining, so it did not attract much attention.

But in fact, after more than half a year of development since June last year, we can say without a doubt that DeFi is the third application scenario that has been proven and tested by the market after Ethereum. Because the various applications born in DeFi are not just various mining on the surface, but in essence they hit various pain points in current blockchain applications. More importantly, many of these applications have actually generated real money.

In August last year alone, Uniswap, the leading decentralized exchange, had an estimated annual profit of $139 million, Compound’s estimated annual profit of $54.1 million, and Balancer’s estimated annual profit of $48.8 million.

Now this data is probably even more alarmingly high.

It is no exaggeration to say that apart from mining machines and centralized exchanges in all areas of the blockchain, I am afraid that there is no second area whose profit model and revenue are as clear as DeFi.

What is more noteworthy is that the current development of DeFi is still in a very early stage. Counting from June last year to the present, it has only been half a year, and it has only been more than a year since 2019 when the DeFi concept was proposed. Looking back at the development history of Bitcoin and Ethereum on this time scale, we can find that even if DeFi is a rising field as a whole, their current stage is only equivalent to Bitcoin in 2010 and 2016. Ethereum.

Apart from DeFi, what other fields can we see so far that have the market size and development space of DeFi?

Therefore, DeFi is the next blue ocean market we want to explore.

The first and second types of application scenarios I listed above are already clear cards. How to tell their stories has shifted from inside the circle to outside the circle, especially in the hands of institutional investors in Europe and the United States. It has little to do with us. .

And the focus of our vision and imagination now is DeFi.

Therefore, the judgment of the future development of DeFi is not only related to whether we can earn income other than Bitcoin and Ethereum in this round of bull market, but also related to what we should do in the bear market after this round of bull market or even in the longer-term market. How to layout.

Next, I will share with you my views on the short, medium and long-term development of DeFi in a series of articles.