Blockchain APP Platform (Blockchain APP Platform), this is the expression of Ethereum on the previous official website. The revised official website pays more attention toopen philosophy, instead of emphasizing some big and general slogans, such as world computer, blockchain application platform, etc., it is more pragmatic. Once the official website is opened, all you see are direct guides, such as the entrance for newcomers to understand Ethereum, information for developers on how to develop on Ethereum, and steps to teach users how to use Ethereum, etc.

Among them, an important ideological change is shown,Big, broad concepts become concrete。 

Over the years, the substantial development of Ethereum has not become concrete. The transformation of PoS has not been able to land for a long time. The number of people using the early established Dapps is getting smaller and smaller. The remaining people put their limited attention on more profitable places, new concepts, new platforms, and even new As long as it is labeled as a hot topic, it will be sought after by speculators. In the concept of these speculators/investors, the only few hard fork upgrades of Ethereum during this period are not new at all, bug fixes, and even improved experience are not new. As a blockchain practitioner, Ethereum Live more and more like a developer community.

It's ironic, it's a good thing。

It is also lucky to have such a rich developer community. The developers just turned Ethereum into a "usable" state. The performance is not good, right? Decentralized exchanges engage in off-chain matching, and the result is on-chain; the market value is Buddhist, right? MakerDao uses ETH to engage in stable currency; ERC20 is flooding, right? Compound uses multiple projects to provide liquidity loans. Some people regard these changes in available status as a sign that Ethereum has transformed from the bottom of the world's computers to the bottom of finance. Defi is indeed a hot concept in 2019. At present, more than 90% of Defi projects are built on Ethereum. So if you want to talk about any new concepts on Ethereum, it is estimated that only Defi can come up with it.

Explain why more than 90% of Defi projects are built on Ethereum. I think there are several factors, including objective and subjective. The objective factor is that other ecological Defi projects have just begun to be built, such as the Defi project Kava on Cosmos. And Akropolis in the Polkadot ecology, the specific application form has not yet appeared, but there is only a Slogan with an external name.

There are the following three subjective factors, which are mainly for developers

• Has a mature smart contract platform

• Own ETH assets with stable market value (despite the proliferation of ERC20 assets)

• Have a large number of cognitive users

As the first smart contract platform, Ethereum has been running for about 5 years. It can be regarded as a project that is relatively stable or has been running for the longest time. Other projects have not yet been launched, or they are dying . Developers like projects that are stable, have tutorials, and are easy to build. These are the advantages of Ethereum.

At the same time, during the ICO period, ETH has obtained a wide range of user education, and many projects have initiated crowdfunding by receiving ETH and BTC. In the minds of users, ETH and BTC are a good value target. After most outsiders enter the cryptocurrency circle, they will recognize BTC for the first time, and then know ETH. Therefore, the vast user audience is also a fertile ground for the operation of Defi projects.

One of the most important reasons is that ETH has been sitting firmly on the second place in terms of market value for a long time. Although it was once overtaken by XRP during the bull market in 2017~2018, it has been proved that the market value stability of projects with high consensus is still stronger than that of pull coins, and ETH returns Second, the market value of ETH assets has been given a higher value recognition in many ups and downs. A large number of Defi projects rely on ERC20 assets such as ETH as the medium of financial value, and the value fluctuation of ETH is not like it was when it was first launched in 2014. It is now very stable. As long as it is not a "big earthquake", there are rarely more than 20% in one day. This relative stability is one of the key elements for the growth of DeFi projects.

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Is Defi a killer app?

V God once said that finance is the best way to implement the blockchain. It is hard for you to imagine how cumbersome it is for many countries, even developed countries, to exchange a sum of money abroad.

Among the traditional financial services recognized by the public, the bank is the most direct central system. The banking system earns profits by providing security, absorbing deposits, and using deposits for lending services; the once prosperous P2P lending system, It is to provide lending "matching" services and earn profits from it; the New York Stock Exchange and the Shanghai Stock Exchange provide markets to allow investors to participate in stock trading and earn trading profits from it. Of course, there are all kinds of financial services. These centralized finances essentially gain profits by providing certain "services", such as security, convenience, incorrect information, etc. The biggest difference between decentralized finance and them is that , Defi directly integrates these "provided services" into "itself", thereby greatly reducing friction costs and improving transaction efficiency.

BTC demonstrates the possibility of value transfer across borders. When you want to send money to relatives far away in the United States, you no longer need to go to the bank, abide by foreign exchange controls, fill out a remittance form, and then wait for ten days and a half months to complete the remittance. The value transfer represented by BTC is no longer a bank. By using the blockchain wallet tool, you only need to click a few times to complete the remittance in about 10 minutes. The procedure is much cheaper than the actual remittance.

The MakerDAO project, the stable currency asset DAI issued by ETH as asset collateral, is anchored to the US dollar at a ratio of 1 to 1. Behind it is the value endorsement that people recognize for ETH, rather than pure credit endorsement. Through smart contracts, people can clearly see to its anchor relationship. Through interactive tools, people can easily obtain DAI and use DAI. The process is transparent, anti-censorship, and saves many tedious details.

The Compound project provides a variety of ERC20 Token lending services through the liquidity pool created by smart contracts, which effectively improves the liquidity of cryptocurrencies. People can simply mortgage their assets and lend assets; of course you can Borrow certain deposits directly from the liquidity pool for other purposes. Both the liquidity pool and the exchange rate are controlled by open source code, and the whole process is transparent and simple.

Dharma proves the possibility of P2P lending. Through the point-to-point matching relationship of smart contracts, it maximizes the flow direction of transparent assets. Compared with the real P2P situation, the biggest advantage is openness and transparency, and there is no high intermediate matching fee.

Above, BTC turns the cross-border remittance mechanism into a system code, MakerDao integrates the token issuance code into its own agreement, Compound makes contracts on the basis of MakerDao, provides lending services, etc., and there are many other Defi projects in progress Slowly turn "providing services" into its own mechanism. This is one of the main reasons why decentralized financial services will bring convenience to the public.

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Will Defi without Token become Fintech?

At present, many DeFi projects do not issue their own Tokens. Most of these projects are built on Ethereum. Designing their own economic model on the upper layer of Ethereum is indeed a complicated issue. You can take a look at the non-Defi projects built on Ethereum, how to design your own Token model, it feels awkward no matter how you look at it.

Chainlink's oracle call consumes ETH, and the contract uses Link to compensate the data provider; Loom's staking needs to enter the Plasmachain from ERC20, and then execute the lock on the contract on the Plasmachain; IoTeX's staking supports the exchange between mainnet IOTX and ERC20 Staking of two Token methods, and the experience of mixing the two methods for users is by no means easy to understand.

After 2018, Defi projects have coincidentally designed a Token-free model (except for Maker). One of the trends I judge is: Defi projects have also begun to return to the profit-making model of "providing services". The "providing services" in Defi may be based on their own The actions generated by the agreement, such as the generation of DAI, the matching in Dharma, the transaction in Dydx, etc., are not much different from the centralized method, but they have absolute transparency, and the subsequent added charging items may require Decisions are made by a decentralized community, not by the development team. Of course, it is not ruled out that the project uses the blockchain to make a semi-decentralized (Semifi) or centralized project, aiming to solve the key issues of centralized finance, not all of them, such as asset ownership.

It is difficult to judge the sustainability of this token-free approach. It is difficult to design a perfect economic model under a large structure. Although there are indeed a large number of practitioners, it is not unrelated to the lack of good ideas at present. Looking back at some projects that have already issued tokens, such as 0x’s ZRX and MakerDAO’s MKR, they are all a bit tasteless at present.

In addition, pay special attention to projects such as Cosmos and Polkadot that provide the underlying development. Projects based on CosmosSDK have a complete design model, and the economic model is indispensable. For projects based on Substrate, if you want to use Polkadot’s shared consensus, then these projects The situation is the same as that of the Defi project on Ethereum. Of course, based on Substrate, you can design a consensus independent of Pokaldot, which returns to the situation faced by CosmosSDK.

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Ethereum 1.0 and 2.0

Fragmentation

• PoS（CasperFFG）
  

• Fragmentation

• eWASM

The transformation of PoS is a wish made when the white paper was released. 2.0 will achieve a phased PoS consensus (PoW+PoS), which will bring certainty to transactions and improve security. Fragmentation is a research purely for expanding transactions on the chain, but it is difficult to implement. eWASM is a virtual machine developed based on the new vision, which aims to solve the performance of smart contracts. In general, the realization of the main functions of 2.0 will bring a great performance improvement to Ethereum.

In this case, Defi projects will face many changes, especially the smart contract layer may face a complete rewrite. Whether existing projects embrace changes or stay in the present is a question worth considering. In addition, a realistic question is whether high TPS is necessary for Defi projects? Borrowing and lending, generating stable coins does not seem like a high-frequency operation. Decentralized exchanges need it, but many decentralized exchanges now adopt the method of off-chain matching, and then submit the results to the chain. The original code may not be fully compatible, so it is very likely that the situation will be , As soon as 2.0 comes out, if the existing projects don't keep up, someone will definitely do the same project of version 2.0, and claim that it has higher security, newer, and faster, so as to defeat the existing competitors.

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This is the second article in the Defi Overview series. The next article will talk about the development and emerging opportunities of Defi vertical applications.

Part 1: Defi Overview (1) - The rise of decentralized commerce, arbitrage and the future

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