Opinion: DeFi is like the ICO of the year? Or is it more like subprime?
The defi currency represented by sushi plummeted, so defi once lost its momentum and thousands of people stepped on it. Defi is the ico of the year, defi is subprime mortgage, and defi is not a real loan... Various theories emerge in endlessly.
The little bee still said that Defi has bubbles, which is true, but under this bubble, Defi still cannot hide its light.
There are many things with bubbles. In BTC back then, Papa Ma said directly: "Blockchain is not a bubble, but Bitcoin is." Then the BTC bubble shattered. After a plummet, there were several rounds of ups and downs, and it is still ups and downs around $10,000. The former Buffett no longer said that Bitcoin is worthless.
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Discrimination: liquidity mining
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DEX: market making and mining
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Borrowing: Borrowing for mining
Some people also think that it belongs to liquidity mining like comp, because it seems that users have mortgaged coins and then borrowed money to mine, which seems to have lost liquidity. In fact, there is no, because after the user mortgages the currency, the loan is a stable currency, and the liquidity of the stable currency is stronger. Therefore, Little Bee believes that loan mining cannot be regarded as liquidity mining.
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defi vs ico
First of all, the little bee will chew on the words. Defi is an application, its content is finance, its form is blockchain, and it is a financial form executed in the form of blockchain. And what about ico? This is a model of currency issuance and financing. One is an application and an industry, and the other is just a money-making model. What is the comparison between the two?
Second, let's compare the essential differences between the two. Defi is a financial form that runs on the blockchain, and ico is financing under the blockchain. Don’t look at it as if the coins of the financiers and investors and the coins used for financing (mainly ETH back then) are all on the blockchain. It is transferred online, but the specific transfer ratio is determined by the centralization of the currency issuer, so ico is centralized. This is the essential difference between defi and ico. The execution of defi is all on the chain, its financial model is visible on the chain, and its execution is a smart contract. As for ico, it has no model, and its specific execution is on the chain. This is the essential difference between the two.
Again, it is precisely because of the essential difference between on-chain and off-chain. Still because of the difference between on-chain and off-chain. If the ico project returns to zero, it will return to zero, and if it runs away, it will run away. Defi projects, such as yam, had problems, but some people still took over to make yam 2, and sushi was also acquired. Because defi is on the chain, as a public thing, it is possible to be sustained.
In the end, due to the difference between on-chain and off-chain, when users participate in DeFi, the coins in their hands may plummet, but they will not lose everything. Of course, some friends will say that falling like that is almost the same as losing everything. But in the process of falling, investors have the opportunity to leave the market. Take sushi for example, it took 4 days for it to fall from 11 dollars to 1 dollar, and investors have the opportunity to stop losses at any time during these 4 days.
How can ico be the same? ico collects your eth, sends you coins, and then you enter a long wait. Some coins were broken after being listed on the exchange, and some coins have not been listed on the exchange. Some coin lovers told Little Bee that they have been waiting for 3 years, from 2017 to 2020, and have not yet entered the school. Little Bee couldn’t bear to tell him, don’t wait...Of course, he also knows it in his heart, but he just doesn’t want to hurt Just myself.
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defi vs capital disk
Is defi a fund disk?
Literally, DeFi is to use money to make money, it seems that it is really a capital market. However, when we go to the bank to make deposits in exchange for interest, this is also making money from money. Can we also say that this is a capital market? No one ever said that bank deposits and loans are funds, right...
defi, decentralized finance, decentralization is just its form, it is still finance in essence, and finance is the content of defi. So we cannot say that defi is a fund market.
Baidu Encyclopedia, a popular science platform in China, defines funds as follows:
Defi We need to distinguish two things, one is the operation of DeFi, and the participants participate in the capital operation mode of DeFi, which is the primary market of DeFi projects;
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Secondary market: all funds
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Primary market: defi is not a capital market
In the primary market of DeFi projects, it is definitely not a fund market.
The first one is DEX. CEX is a centralized exchange, which is basically just needed, and an exchange is needed for currency speculation. Well, DEX, as a kind of decentralized exchange, can not place orders for the time being, but it can make investors’ assets safer and transactions faster. Obviously, there is also demand, and this is definitely not capital. The essence of market-making mining in DEX is that users inject coins into the transaction pool of DEX to make the transaction pool larger, thereby reducing transaction slippage (price deviation during transactions), and market-making is obviously necessary Yes, users who participate in market making can make money, and they may also lose money. Market making is risky, so it is understandable to get some mining rewards for market making. Therefore, dex + market-making mining cannot be regarded as a capital market.
The second type is the lending platform, which is not a fund market anymore. There should be no dispute about this matter. There is a demand for borrowing. For example, Little Bee holds some ETH and does not want to sell it. Now that it has fallen, I want to keep it and wait for it to rise. Then, Little Bee can mortgage these ETHs, loan them to dai, and then use these dais to speculate in coins, such as buying KEYs to grab praises, such as buying some coins with potential, etc. Therefore, there is also a demand for borrowing, so it is certain that interest will be paid when borrowing. Loans always have interest, and it is not a problem to obtain a certain amount of mining income at this time. Therefore, lending + lending mining is not a fund.
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From primary to secondary market
It is impossible to separate the primary market from the secondary market.
For DEX+ market-making mining, because there are mining coins produced and flowing to the secondary market, the value of the secondary market-making mining coins has no motivation for value growth, but the driving force for price decline is quite strong. However, because the mining currency itself, on the one hand, is the platform currency of this DEX, which can reflect people's expectations for this DEX, so it also has an upward momentum. On the other hand, the mining currency itself also has a trading pool in the DEX, and it can also be City, so there is a certain demand. Of course, Little Bee does not recommend that you pick up mining coins like sushi. However, you can't think of sushi as an air coin or a capital disk.
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defi lending vs subprime
Regarding the defi subprime mortgage, the little bee stayed up all night. The first reaction of the little bee is that defi and subprime mortgage are not the same thing at all.
However, netizens said that this is an analogy. The little bee thinks carefully, let’s not discuss other types of defi, just talk about defi loans, collateral currency, and obtaining loans. In the subprime mortgage crisis in the United States, it was mortgaged house loans, which seems quite similar.
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lender
On the defi lending platform, the borrowers are all mortgaged coins, and they all have a little money.
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loan model
Next, let’s compare loan models. Defi lenders, who borrow $100 of stablecoins, must mortgage more than $100 of coins in order to obtain loans, which are all over-collateralized.
And what about the subprime mortgages that year. Let's think about it. Defi lenders really paid for mortgages. The subprime mortgage buyers back then, on the surface, they seemed to have mortgaged their houses, but if you think about it carefully, they only provided a down payment for that mortgage, and the larger mortgage part was not mortgaged by the lender at all.
See the essential difference, defi lending is an over-collateralized loan
Mortgage This is a small mortgage + a larger percentage of credit
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Foam
On top of defi loans, there is a mining model and currency, which is at most 1-2 layers. For example, comp, we can understand mining as a first-tier product, and comp’s secondary market hype as a second-tier product. And like mkr, there is only 1 layer. YFI is a loan aggregation platform, not an additional layer on the basis of the first two layers, so YIF is only the second layer. So defi is just a 2-layer derivative.
On the basis of subprime mortgages, multiple layers of financial products have been derived. This is the main subprime derivatives in the market,
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risk
The risk of defi lending is that the mortgaged assets will plummet, and it may be too late for the smart contract to sell the currency to close the position. Of course, there are other risks that may exist in the code. However, you must know that the mortgaged assets are all voted through community governance, and they are often mainstream currencies, and it is difficult for mainstream currencies to experience a particularly large plunge. Even if there is, you can sell it quickly and get back part of the loan. Therefore, the risk of DeFi is relatively low. After all, it is much easier to sell a coin on an exchange.
In contrast, the ultimate collateral in the subprime mortgage crisis was the house. Houses are not that easy to sell.
Although houses and coins may not be willing to take orders when the market falls. But selling coins is much faster, and the house is different. When going through the transfer procedures, if the decline is serious, the buyer may repent, and the loss of repentance may be smaller than the loss of receiving the order.
Compared with houses and coins, coins obviously have stronger liquidity. Therefore, the risk of defi lending is much lower than that of subprime mortgages.
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Defi vs cefi
Defi is better than cefi in a thousand ways, open, transparent, non-tamperable, and non-appropriation... Many authors, including Little Bee, have written too much about it, so I won't say much.
What Little Bee wants to say today is that DeFi is still very young.
Do you know the difference between defi and traditional finance? Why does no one say that bank deposits are funds, but DeFi has such doubts?
Because banks take money from depositors and lend it out, they are used for production and consumption. After the enterprise borrows money, it hires employees and buys equipment to produce products and services, and then meet the needs of social production and life. After consumers get a loan, they go to consume, use credit card to buy a house with a loan, etc.
However, DeFi loans are mainly used for currency speculation.
What is the essence of finance? The essence of finance is the redistribution of social funds. Through the financial system, some people get more income through investment, and some people earn more money after taking out loans...
As for defi, at most it is the redistribution of funds in the currency circle. It has not yet fully integrated with society. This is the main problem of defi now.
As some friends said, for defi mortgages, if you mortgage 100 yuan, you can only get a loan of less than 100 yuan. This fails to achieve the role of credit at all. For the same reason, defi has not been able to integrate with society.
write at the end
write at the end
Whether it is bubbles or risks, we must understand its source. ICO, capital market, their risks are not speculative currency speculation at all, not in the secondary market, but in the primary market where their funds circulate, there are problems, so neither IEO nor capital market has vitality.
On the contrary, the bubbles and risks of DeFi are more in the secondary market. It has no logical problems in the model. Of course, there are some details that need to be gradually improved. Defi is more similar to BTC. There is not much problem in their essence, and more problems lie in speculation.
The primary market bubble, this thing itself is a bubble.
The secondary market bubble, this thing itself is expected, so it will cause waves in the secondary market...
Defi has a bubble, and you can expect it to crash. But if you expect defi to return to zero, then you are really thinking too much...
(Of course, the defi of some cottages really has no core competitiveness at all, and it is inevitable to return to zero)
The current problems of defi are actually the problems of the entire currency circle. Defi is a financial platform, the public chain is an information platform, and BTC is a payment platform...they have not yet formally connected with the real economy and social life.
Whether it is defi or the currency circle, if it cannot be integrated with social production, it will become another gaming industry. Although it is not glorious, it will still be alive. The current gaming industry is still booming in every corner of the world.
However, if the defi and currency circles are in line with the real economy, the future will be limitless...
