Three months ago, Bitcoin had just recovered from the extreme plunge of "312" and fluctuated at $9,000. The market was once very confused about the market trend in the second half of the year.

Three months later, decentralized platforms such as Compound, Balancer, Uniswap, and Curve have taken turns to occupy the headlines, using various eye-catching data to attract the attention of the investment market to DeFi.

For a while, various concepts such as constant function market maker (CFMM) and automatic market maker system (AMM) became popular. With the help of Uniswap's open mechanism, the concept of IDO is also ready to emerge. Financing through the DeFi platform is becoming a new choice for the project side, and the myth of creating wealth with various 100-fold coins has also made a comeback, as if returning to a certain era in the history of encryption...

There is no doubt that DEX and AMM represented by Uniswap (strictly speaking, AMM is also a special kind of DEX) have successfully found a bright road for the chaotic DeFi track. The voices of "the bull market is coming" came one after another.

According to data on August 18, the total market value of DeFi reached US$11.529 billion, the trading volume of decentralized exchanges (DEX) exceeded US$404 million, and the total amount of borrowing on DeFi lending platforms was US$1.50 billion. The total value of DeFi locked assets is 6.24 billion US dollars, and the cumulative number of active addresses exceeds 300,000.

DeFi project Serum (SRM) has a global transaction volume of 360 million US dollars within 12 hours of its launch, and its price has increased by 12.37 times; Yam Finance (YAM) launched a token distribution plan, depositing 200 million US dollars within 6 hours... The market is gradually losing its mind, and entering the market People came in droves.

The person in charge of IBM's financial services and digital assets also revealed in an interview that he is helping financial institutions embrace DeFi; Huobi launched the Global DeFi Alliance to promote DeFi research and development; Launched on the JustSwap platform...

The fanatical atmosphere continues to spread, but it cannot conceal the embarrassment of reality: the main DeFi projects are all based on ERC-20, benefiting from the good ecology of Ethereum, relatively mature infrastructure and the popularity of smart contracts, such as Uniswap, Balancer, Popular platforms such as Curve build their businesses on Ethereum.

According to previous data, the transaction volume of ETH has reached 1.23 million transactions per day, and the computing power is hovering at 200TH/s. ~$3 (provided you can accept half a day to arrive).

secondary title

Three elements of DeFi success: performance, cost, and pan-assets

good performance

Restricted by the technical accumulation and concept problems at the beginning of its birth, the early blockchain architecture was criticized in terms of performance. Since a large number of project parties used it as an infrastructure and financing channel, its ecological advantages led to the outbreak of DeFi. on ethereum.

At present, the DeFi project represented by Uniswap is only a game for a very small number of people. If you want to realize the inclusive financial dream of DeFi, you must have performance requirements that can match the centralized network.

Although the developers of Ethereum have stated that Layer 2 is under development, there is still a question mark over the volume it can ultimately support and the matching support for business forms.

extremely low cost

At present, on Ethereum, if it takes half an hour to arrive at the account, the gas fee required is about 20 US dollars, which is determined by the design model of ETH: "the faster the more expensive".

This is a good strategy to alleviate the weak concurrency performance of Ethereum. It uses the price to flatten the peak and stimulate the mining enthusiasm of miners.

As an infrastructure, the cost is a bit high. Under the enlargement of the scene (such as liquidity service), the actual service cost is also being pushed up all the way, and the revenue can even be offset when the volume is insufficient.

This will reject a large number of high-frequency and low-price services, and a large number of small and medium investors will also be rejected, and the impact on the consumption scene will also be unfavorable.

Therefore, the transaction cost on the chain is reduced by at least two orders of magnitude, and the strategy of faster and more expensive needs to be reconsidered in order to effectively improve the above dilemma.

Pan-asset support

Looking at popular projects such as Uniswap, Balancer, and Curve, all of them are built around ERC-20 assets. This is related to ecology, but it also greatly limits the openness and scalability of the business.

The diversification and complexity of assets requires that DeFi must fully support pan-assets in order to truly serve the public and penetrate into the economic life of the public.

Ethereum has proposed some solutions for the support of pan-assets. There are also projects like Digix trying to connect various assets to Ethereum. The realization of smart contracts can also solve the connection of pan-assets to a certain extent.

However, limited by the fundamental model, it is difficult for Ethereum to fully support financial forms such as securities and large transactions.

From the perspective of performance, cost and pan-assets, Ethereum may not be the most suitable infrastructure. A fee of 300Gwei and a utilization rate of 95% prove that Ethereum has become a bottleneck for the upward development of DeFi.

Summarize

Summarize

Although the current DeFi track seems to be in full swing, it is more of a short-term boom caused by the capital game in the bonus period of the new model combined with the excessive investment demand brought about by the lack of hot spots in the industry.

If DeFi wants to develop sustainably and healthily, it must return to rationality and embrace scale, which brings opportunities for various public chain projects.

I believe that the flames of DeFi will not be extinguished quickly, but will be a long-term process of accumulation and competition. Whoever has better performance, more advanced models, and deeper concepts will have the chance to win the final victory.

At present, although Ethereum has "taken the lead", it is time for DeFi to consider where to go next?