The DeFi Dilemma: The Industry Needs a Rethinking Movement

, Author: Wang Dashu, reproduced by Odaily with authorization.

Since Compound launched liquidity mining, sweet potatoes, sushi, salmon, corn, pearls, kimchi, carrots and other DeFi "foods" obtained by contributing asset liquidity have successively appeared on public chains such as Ethereum and Tron, satisfying The peasants who have entered the field one after another have sought to get rich.

However, with the dives of projects such as YAM, Sunshi, and Corn, the popularity of DeFi has gradually weakened. However, when Uniswap, the leading Dex, issues the governance token UNI, public opinion is immersed in whether the farmers’ carnival can continue. The scientists who successfully landed and the harvest The old farmers may be overlooking the end of DeFi, joking about the adventures of latecomers losing money.

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Cannon fodder situation

"Pearl didn't get on the bus when it was $1,200. As soon as the corn went online, I exchanged 10,000 TRX for three corns. The average cost was about $300. I hope that in the days when corn can sell for a good price of $1,200 like pearls, it will But it fell to $30." Zhang Jiajia, a retail investor, was annoyed.

Coincidentally, Zhang Jiajia is only a microcosm of the Fomo group. Lin Yi, who claims to be an old leek, saw the link to airdrop YFI forked coins. Without thinking too much, he directly clicked to recharge 10 Ethereum to the stranger's address. At that time It was shortly after YFI set a unit price that surpassed the price of Bitcoin by multiples, and it was not surprising that 10 Ethereum never returned.

This kind of operation is exactly the first case mentioned in the DeFi money loss guide summarized by the industry KOL Super Bitcoin: Excitedly send the currency to the contract address, and the assets are almost impossible to recover from the mining experience.

At the same time, the money loss guide also mentions other money loss cases, such as: seeing the high income of the pool, buying a hoe regardless of the cost, and digging for less than half a day, the golden hoe turned into rotten iron; Running away (the most on Ethereum); seeing the high income and rushing in, the income dropped to 0 in half an hour, the income was 300, and the handling fee was 1,500; dizzy and dizzy, originally adding liquidity, but repeated exchanges, wasting 5,000 handling fees.

Just staring at the annualized income, jumping into various pools repeatedly, the operation is as fierce as a tiger, and the handling fee is 25,000; the private key of the wallet is copied and stolen; the wallet permissions are authorized indiscriminately, and they are phished; , received a "sorry"; was fooled by promises such as "this time is different, the team is very reliable", bought DeFi tokens in the secondary market under FOMO emotions, and finally the currency price fell by 10% and so on.

Therefore, Cao Yin of the Digital Currency Renaissance Foundation once publicly subdivided the investors who lost money in DeFi into three categories: "The first type does not do research, and is deceived by apy, ranging from being locked up, to being hacked, such as Projects such as bread and rose; the second type follows the trend, does not research projects, does not participate in the community, and rides the roller coaster with the currency price, chasing ups and downs, this kind of people is the most; the third type is wishful thinking, long-termism The correct attitude, but the project research is not thoroughly understood, and the result is pua by the scumbag founder, and it is used as a cash machine, such as Sushi.”

Both Zhang Jiajia and Lin Yi have the above characteristics. Lin Yi had suffered losses in YAM before, but at that time he hadn't summed up any experience and was blinded by the wealth effect. Now that he has operated a wave, he began to really reflect on himself. "DeFi mining is a game for smart people to make money. It is really not suitable for me. In the future, it is the right way to honestly hold mainstream assets like Bitcoin."

Similar to Lin Yi’s experience, Zhang Jiajia also participated in Yam mining before the loss of corn. It was the first time he personally experienced DeFi mining. Afterwards, he successively dug carrots and kimchi, earning and losing. After a wave of operations, He sighed: In this world where money is computing power, retail investors are just cannon fodder, and they only benefit from a mining experience under the high gas fee.

As the two lamented, DeFi liquidity mining is an exciting agricultural society built by scientists on the surface, and the size of the contribution determines the harvest. However, it cannot be ignored that the essence of most projects is still between various DeFi protocols. Combined and nested with each other, a seemingly innovative and profitable nesting doll game is built.

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under the bubble

Since June, Compound has launched liquidity mining, Uniswap’s capital pool and AMM model, YFI has launched aggregate mining, and the price of token YFI has surpassed Bitcoin. These are the foundation and demonstration of this game. It is a variety of high-yield imitation disks on Ethereum, TRON, EOS and Binance Smart Chain.

Sushiswap, a Uniswap imitation disk on Ethereum, its token Sushi rose from less than $1 to $12 within 24 hours, some exchanges skyrocketed to $15, and then the price was halved on the second day and then the founding Some people dumped the tokens and dropped the price to $1.5. Although Sushi has been handed over to FXT, its unit price has been hovering around $2 without much improvement in the face of Uniswap’s money spree.

Sashimi, another mining project that succeeded sushi, saw its token Sashimi drop by more than 60% after its launch, and fell by more than 90% from the high point. Kimchi was even worse, with the price falling below 95% from the high point. .

In fact, the DeFi bubble on Ethereum can basically be counted from the collapse of YAM due to a code loophole. Even if the official quickly announced the restart after the crash and entrusted a domestic security audit company to send Shield Technology to do a security audit, it seems difficult to achieve good results According to Weibo KOL Super Bitcoin broke the news, investors participating in YAM may have ushered in a new wave of losses after the restart on September 20.

Of course, just like Lin Yisuo’s experience, compared to the DeFi bubble on Ethereum, Justin Sun’s Tron DeFi ecology is even more tasteless. Most projects are temporarily packaged for the purpose of collecting money, and the technical atmosphere is almost non-existent. , a large number of users suffered serious losses due to incidents such as counterfeit currency and smashing. In addition, compared with Ethereum, TRON lacks the underlying loan asset support, and the risk of systemic collapse is greater.

Compared with the DeFi products in the public chain ecology that can at least last for more than one day's bright moments, BakerySwap, a DeFi product developed based on Binance Smart Chain, can be called the "short-lived ghost" among the DeFi projects that started high and went low. According to the descriptions of users involved in mining, its token BAKE fell rapidly after a rapid rise. In just one hour after going online, the annualized income of the BAKE pool dropped from 1457349.58% to about 40000% times, and BAKE: BNB also changed from 1:1 It has grown to 100:1, and some investors even said that Binance is using DeFi to absorb BNB in ​​circulation.

However, if analyzed from the perspective of supply and demand, although the emergence of imitation items such as sweet potatoes, sushi, salmon, corn, pearls, pickles, carrots, and bread did not meet investors’ expectations of getting rich quickly, it made up for those who missed the early mining to get rich. Looking back at the investor psychology of Inspur, it can also be considered that the market’s Fomo sentiment towards DeFi liquidity mining gave birth to this bubble.

But the premise of the bubble is that a large number of imitation projects without underlying assets and technological innovations flood into the market. Whether it is the economic model, governance mechanism, or security issues they admire, they will be potential risks for DeFi and even the cryptocurrency market. .

Previously, cryptocurrency exchange Coinbase summarized potential risks. In terms of expansion, it includes four aspects.

One is the risk of smart contracts: DeFi smart contracts are easily exploited by hackers, such as the theft crisis of bZx, Curve and Lendf.me earlier;

The second is the risk of system design: Many DeFi protocols have not been in operation for a long time, but they provide a large number of incentives, such as Balancer. At present, only a simple loophole is needed, and FTX can obtain more than 50% of the income;

The third is liquidation risk: the encrypted collateral in the DeFi protocol is easily affected by market fluctuations, and there is a risk of debt positions being under-collateralized during market fluctuations, which in turn induces a liquidation mechanism and causes users to suffer further losses;

The fourth is the risk of bubbles: the price dynamics of some underlying network tokens (such as COMP) will be reflexive, because the expected future price is usually related to the popularity and application of the network, and the network usage is incentivized by the network. price impact;

However, despite the huge hidden worries under the bubble, there are still speculators entering the market amid the excitement of Uniswap issuing the governance token UNI and opening the money-spreading mode.

"After receiving the airdropped 400 UNI, I quickly mentioned that Huobi sold it at a unit price of 2 USDT. I really realized what it means to be money that is blown by a strong wind. However, the unit price of UNI soared all the way to break 8 USDT. , I went to pick up the order on impulse, and now I’m stuck again.” An investor who used to provide liquidity on UniSwap told the chain catcher.

The reaction of this investor represents the general sentiment of the market in a certain sense. Before UniSwap was issued, the industry generally believed that DeFi had come to an end. However, the rise in the price of its governance token UNI seems to have ignited the market’s confidence in DeFi.

But such confidence may only last for a while. After all, the recovery of the cryptocurrency market and even the arrival of the bull market require the entry of incremental funds. Obviously, DeFi is still far from realizing this.