Where is DeFi?
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.
Since June, DeFi has become more and more popular. It is not an exaggeration to say that the summer of 2020 is the summer of DeFi.
The DeFi boom has three notable manifestations:
2. DeFi star projects can generate up to hundreds of times and thousands of times of income. Like Aave's 100-fold return and YFI's thousand-fold return, these will attract the attention of high-risk capital and countless crypto investors.
3. Forked coins began to appear.
Not to mention more performances. Welcome everyone to continue to add in the message.
So, here comes the question, is DeFi overheating? Is it too late to get in now?
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DeFi is currently the only field of crypto projects that can generate real income, except for Bitcoin and Ethereum public chains, especially from Uniswap, Balancer, Curve, Synthetix, Compound, Aave, etc., which can capture actual fees . If Uniswap’s daily trading volume of 100 million US dollars yesterday is used as its average daily trading volume in 2020, then the annual trading volume can reach 36.5 billion US dollars, and the fee income that can be captured can reach 109.5 million US dollars. In the field of encryption, the figure of this income is definitely not a small number.
The following is a statistical data graph from MESSARI, let's take a look:
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The growth of DeFi is not only driven by the market value of its entire sector, but also by the actual progress of its business.
*Uniswap, Balancer, and Curve are the troika of DEX. Their trading volume in the past 7 days has exceeded 100 million US dollars, reaching 690 million US dollars, 487 million US dollars, and 159 million US dollars respectively. In the past 7 days, DEX trading volume exceeded 1.7 billion US dollars, surpassing the whole year of 2019 in just one week.
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*The overall number of DeFi users has increased from 45,136 users on June 25 last year to 275,998 users on June 25 this year, an increase of more than 600%.
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(DeFi user growth, SOURCE: DUNEANALYTICS)
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It took 160 days for the amount of locked assets in DeFi to reach $100 million; it took 495 days to go from $100 million to $500 million; it took 263 days to go from $500 million to $1 billion; it took 146 days to go from $1 billion to $2 billion; It only took 20 days for $2 billion to $3 billion.
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At present, the gas fee of Ethereum has become one of the biggest obstacles for DeFi to reach large-scale users. The second big obstacle is scalability. If there is congestion, the speed at which DeFi can process transactions will make people anxious. In a special period (such as the black swan event of 312), if the transaction cannot be completed quickly, it will also cause losses. Some mortgage positions need to be redeemed through on-chain transactions. For example, during a rapid market decline, failure to reach a transaction in time may result in liquidation of the position. This is why the new DEX recently launched by FTX is based on Solana (SOL), mainly considering its advantages of good scalability and low fees.In addition to cost and scalability, there is also user experience. At present, many DeFi projects are in English and require the use of web3 wallets, which has a relatively high threshold for initial contacts. If it is liquidity mining, it involves the time and rate of return of various liquidity pools, the operation of adding liquidity, the exchange of tokens, etc., and there are not small thresholds. These are all things that DeFi needs to improve at present, otherwise it will not be able to reach large-scale users, and it will only be self-satisfied in the core circle of encryption.》。
Liquidity Mining: Combinable Benefits and Risks
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No matter how tortuous the future is, DeFi will move forward step by step.
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Yesterday, the daily trading volume of uniswap exceeded 100 million US dollars, more than half of which was contributed by ampl. Ampl will not be the last project to highlight on Uniswap, and more other projects will come out in the future, which means that Uniswap still has a lot of room.
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Balancer is also a good example. Balancer (BAL) had a liquidity of less than $30 million at the beginning of June, and one and a half months after it started liquidity mining, its liquidity has reached $260 million, ranking first among DEXs .
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(Balancer locked assets change, SOURCE: DEFIPULSE)
More and more projects regard Balancer as the first choice to guide project liquidity. These include mStable (MTA), YFI, and recently UMA has also built a liquidity mining pool on Balancer.
Among them, the price discovery and liquidity of YFI were basically realized on Balancer at first. It once had a liquidity of more than 100 million US dollars, and its price soared from the initial price of 3 US dollars to 4,500 US dollars, and the highest increase reached 1,500 times. Still above $3,000, this is the craziest price increase this year.Uniswap has gradually become the center of decentralized transactions, and balancer has gradually become the center of liquidity mining. The future of DEX cannot be ignored.》
In addition to DEX, the space for subsequent derivatives is also very large, and there is a gradual fermentation process here.
2. How far can the DeFi concept go? Is it the hottest trend?
Blue Fox Notes: DeFi has short-term bubbles, but the entire encryption field is full of bubbles. DeFi has just begun, not just a concept, but one of the few areas in the encryption field where products and markets fit. Blue Fox Notes has been emphasizing that DeFi is one of the biggest trends in the encryption field since last year. You can refer to Blue Fox's article last year "
Why DeFi is the second breakthrough in the history of encryption?
Is it the hottest trend? The construction of DeFi is not a matter of a day or two. To a certain extent, there will be bottlenecks, and the trend in the encryption field changes periodically. Today is DeFi, tomorrow it may be public chain or storage, or Layer2, or NFT or DAO. …
Even so, Blue Fox Notes has always firmly believed that DeFi is a long-term trend. Can not be ignored at any time.
3. Can AMPL enter the top five by market capitalization?
Blue Fox Notes: This is a delicate question. Before talking about whether AMPL can enter the top five in market capitalization. What needs more attention is whether AMPL can withstand the negative spiral problem that may occur when it falls below the target price. This is the key to AMPL's long-term survival.
From the perspective of potential, if the positive cycle of AMPL is not broken, as long as it is higher than $1.009, people will continue to enjoy its unprecedented feast and continue to obtain incredible high returns. This positive cycle of income mainly depends on the actual asset support of newcomers and people's continuous holding. If this support can continue, it is entirely possible for it to enter the top five by market capitalization.
But there is also a big risk here. If the lack of market winds changes, the sell-off intensifies, and a break below $1.009 may also form a negative cycle that is the exact opposite of the current positive cycle. How high AMPL can rise, and how low it can fall.
AMPL needs to form a community culture similar to Bitcoin and Dogecoin in order to fundamentally resist the negative cycle in the future. Once it resists the negative cycle, it has a greater chance of surviving in the future. The longer it exists, the more likely it is to survive in the future.
In whatever form, AMPL will leave its mark on crypto history.
4. How does DEFI guarantee security? Coin theft also happened?
Blue Fox Notes: DeFi originally refers to decentralized finance. However, in the current DeFi, most projects have administrator keys, which has a certain centralization risk, although this risk is very low. Stealing coins is mainly a risk of smart contracts. This is also the biggest risk of DeFi. At present, risks are mainly prevented by strengthening contract code audits and various bug bounty programs.
DeFi is a very high-risk game in the early stage, so it is not suitable to invest a large amount of assets and control the risk well.
5. Why does DeFi become a hot spot?
Blue Fox Notes: DeFi has become a hot spot because after more than two years of exploration, it has found the fit between the product and the market, and has visible and tangible business development, regardless of the amount of locked assets and transaction volume. progress. It has been dormant for a long time before it became a hot topic, Rome was not built in a day.
6. Is DeFi now the end?
Blue Fox Notes: On the contrary, DeFi is not only not the end, but just the beginning. During this period, the market will go back and forth, encounter bottlenecks, and there may be black swan events similar to 312, but as a field, it will continue to rise, and its potential development is less than 1%.
7. Talk about the core driving force of the bull market, which part of the projects are currently on the market, what conditions are restricted and the activation conditions?
Blue Fox Notes: The bull market itself is a trend. It will be presented through several items. First of all, the two biggest engines of the bull market are btc and eth. The halving effect of Bitcoin takes at least half a year to a year to digest and show its power. The POS of Ethereum's ETH2.0 can explode with greater energy than today's DeFi. These are expected to gradually become clear at the end of the year.
Secondly, after two years of dormancy, DeFi suddenly detonated in June, and this detonation is a matter of course. It’s not just brought about by liquidity mining. Liquidity mining is just the tipping point.
From the market, COMP, Aave, Kyber, BNT, LINK, TRB, BAND, BAL, RUNE, etc. gradually exploded, igniting the entire market, and the biggest explosion came from AMPL and YFI. YFI has soared from only $3 when it was initially market-making on Balancer to a maximum of $4,500, an increase of up to 1,500 times. Such a high-yield myth is enough to attract the attention of larger capital and attract the attention of more users. For a project like AMPL, the design of its mechanism causes it to have a retention and siphon effect on assets, causing its market value to rise continuously until it cannot be sustained and turns downward.
From the above perspective, the bull market in the encryption market has two pillar engines, one is btc, which has the strength of the encryption ace army, and can attract the attention of traditional media, the public and institutional capital; the other is eth, which has the promotion of the encryption ecosystem Power, which changes its economic mechanism through the PoS mechanism of ETH2.0, is one of the biggest pulls in the future encryption market.
Finally, the introduction of some big projects to the market this year may further promote the FOMO sentiment, such as the successive launches of Polkadot and Filecoin.
《------Extended reading------》
《The Leverage of mStable and the Possibility of Balancer》
《Liquidity Mining: Combinable Benefits and Risks》
《DEX: A booster for the bull market?》
《Bancor V2: Introducing an AMM that reduces slippage》
《Balancer takes over from Compound?》
《Simple understanding of DeFi liquidity mining》
《Balancer takes over from Compound?》
《Does Bancor have a chance to overtake Uniswap?》
