Editor's Note: This article comes fromChain News ChainNews (ID: chainnewscom), published with permission.

Chain News ChainNews (ID: chainnewscom)

Translated by: Lu Jiangfei

, published with permission.

Written by: Ari Paul, Co-Founder and CIO of Cryptocurrency Investment Fund BlockTower Capital

Translated by: Lu Jiangfei

Decentralized finance (DeFi) tokens have led the recent cryptocurrency bull market, just as initial coin offerings (ICOs) "stimulated" the 2016-2017 bull market. However, is such a metaphor appropriate? What are the similarities and differences between DeFi and ICO?

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similarities

3. Both ICO and DeFi try to "decentralize" the existing business model, and both build applications and communities through token speculation. ICO and DeFi mainly choose some existing centralized business models in the market and then decentralize them. They both guide the early network effect through speculative token price appreciation. The most common saying in the ICO industry is "the decentralized version of a certain project", and it is precisely this speech that attracted many people to enter and build the earliest communities. These communities may obtain ICO tokens through speculation. Economy Profit. DeFi provides a "decentralized version of exchanges and lending platforms", which also creates a lot of liquidity through speculation on new tokens;

the difference

4. Both ICO and DeFi have had some impact on the Ethereum blockchain, such as rising transaction fees and network congestion, but these impacts have also stimulated research and investment in Ethereum expansion solutions. Since 2017, we have seen many so-called "Ethereum killers" competing products, most of which focus on network scalability. In addition, we have also seen the community focus on Plasma chains, side chains and other Layer 2 scalability solutions, and today the Ethereum network scalability research continues (including the planned Ethereum 2.0), with the Ethereum gas fee Record highs, these expansion projects may accelerate development;

5. In order to better support ICO and DeFi, other protocols have begun to follow in the footsteps of Ethereum, but Ethereum still has most of the transaction activities of ICO and DeFi. For ICO, the ERC-20 token launched by the project party has the advantage of "combinability" and has a broad infrastructure support base (such as supporting multiple digital currency wallets, easy to add to exchanges, etc.). For DeFi, the "composability" advantage may be further expanded, because DeFi protocols usually interact more extensively, and cross-chain solutions are still in their nascent stage.

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the difference