Crazy DeFi: Only one developer, soaring 40 times in a day
Text | Produced by Tanya | PANews
How crazy is DeFi? The token that ignited a new round of DeFi fever was operated and maintained by one person, and he claimed that the token was worthless?
Last weekend, a new governance token YFI skyrocketed 40 times in one day, pushing the boom of decentralized finance (DeFi) to a new peak. Although its founder and sole developer, Andre Cronje, has repeatedly emphasized that his governance token is "worthless", it still cannot prevent YFI from soaring from the initial valuation of 30 US dollars to 2374 US dollars, and then the price fell to 822 US dollars in the next two days. Dollar.
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The total locked value and the currency price fly together
The yearn platform will automatically execute the procedure of finding the highest returns on other DeFi platforms. With YFI, users can vote on yearn and other system parameters, which can also help them understand the latest developments in liquidity mining and manage various protocols.
The incentive mechanism announcement released on Friday repeatedly emphasized that the token has no value, but the market does not think so. Someone listed YFI on Uniswap and Balancer on Saturday for investors to buy, which also gave miners a chance to sell. The price rose from $30 to $2374 overnight. Cronje said in an interview with the media that he did not know why this happened. "To be honest, I just want to spread out the voting rights because I don't want to manage these contracts anymore."
Perhaps one underlying factor for this phenomenon is the measurement of the "total value locked" (TVL) in the agreement, which is usually the basis for evaluating the valuation of a DeFi project. The locked value of yearn at the beginning of the weekend was about $8 million, and by Monday this number had skyrocketed to more than $147 million.
CoinGecko research analyst Daryl Lau pointed out that people who buy DeFi governance coins use TVL to evaluate the value of a project. However, in the "circulation incentive" scenario, the value is reflected by the currency price itself, which also gave birth to a "pseudo-Ponzi economics". The higher the price, the higher the TVL, and the higher the TVL, the higher the currency price, thus forming a virtuous circle. But this cycle won't last.
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DeFi tokens collectively "run away"
In recent days, YFI is not alone, and the high-profile trend of DeFi tokens has swept away the sideways fluctuations of Bitcoin.
As the volume of DeFi transactions continues to soar, the market value of many projects has surpassed Maker, the token of DeFi veteran MakerDAO. The market capitalization of Compound ranks first, the new stable currency Ampleforth ranks second, and the market capitalization of Synthetix Network ranks third. Aave (LEND) is similar to Maker in market capitalization, and even once surpassed Maker. Just yesterday, Aave (LEND) and Synthetix Network (SNX) tokens rose to $0.375 and $4.09, respectively, briefly surpassing MakerDAO (MKR) in market capitalization.
Of course, this fluctuation is only temporary. Now MKR has returned to the top of LEND, SNX and COMP, ranking 28th on the CoinMarketCap market capitalization list with a market capitalization of 453 million US dollars.
These tokens provide no direct monetary benefit to holders other than speculative gains, but they can vote in protocol decision-making processes. For some investors, they see this as an incentive, or a long-term bet on the DeFi industry.
The concept of LEND is similar to that of MKR. Their tokens will give users voting rights in protocol changes. The difference lies in the way in which lending opportunities are generated. This is especially important in MakerDAO, which requires the community to keep an eye on the price of Ethereum and ensure that DAI is pegged to the US dollar.
Ampleforth was originally called Fragments, and Fragments is a stable currency based on an algorithmic reserve and money supply strategy, but the Fragments team believes their project is a low-volatility cryptocurrency.
SNX is the underlying token of the Synthetix decentralized exchange, where users can trade on-chain assets anchored to the value of assets such as gold and stocks. In general, SNX holders can create these tradable assets by staking tokens, so as to obtain certain staking rewards as incentives.
Recently Synthetix announced a new decentralized asset management platform called dHedge. Aave’s protocol has also rolled out some new features.
As the DeFi craze continues to ferment, people can't help but think of the ICO bubble in 2017, and similar signs have emerged, because some projects with unknown origins have also begun to show weekly triple-digit returns.
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The surge is only temporary, when will the DeFi bubble burst?
From June 25th, the market value of DeFi just exceeded 6 billion US dollars, and by July 21st, the total market value of DeFi has exceeded 10 billion, an increase of more than 66% in less than a month. How long can this surge last?
Even Cronje himself thinks that this round of skyrocketing is only temporary. He said, "It will calm down after the token distribution is completed, and the system will gradually return to normal."
He emphasized that he himself does not own tokens, "price fluctuations have nothing to do with me." Price also doesn't affect how the system works, so "there's no real network effect."
The surge is only temporary, and investors who pay attention to DeFi need to be more careful about the severe challenges that DeFi will face in the future. Xu Kun, chief strategy officer of OKEx, told PANews that DeFi is facing three major challenges. The first is code loopholes. Programmable finance represents the power of technology, but loopholes after code stacking are always inevitable; the second is systemic risks, whether it is Traditional finance or programmable finance must take into account systemic risks, such as whether the DeFi ecosystem can carry it in the face of extreme market fluctuations; the third is asset on-chain, the complexity and uncertainty of asset on-chain for the entire DeFi industry It is a very big challenge and requires pioneers to try.
"The DeFi industry is currently facing a critical decision. The rapid growth of DeFi's trading volume is almost entirely rhetoric and marketing bubbles." Sam Bankman FriedDeFi (SBF), founder of the encrypted derivatives trading platform FTX, tweeted, but he also believes that in a certain In some respects, Apple is the same. Once the bubble bursts, it could leave an awkward endgame, but it could also mark the beginning of a true decentralization of finance.
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