RenrenBit held an online AMA sharing themed "Yield Pursuit and Marketization Mechanism". In the field of encrypted finance, the popular DeFi lending products in 2020 let the market see that investors have a strong demand for stable financial management in addition to high-risk investment needs such as currency speculation. Analyze the interest rate level of the DeFi market and the needs of users for "arbitrage" and "financial management".

On the afternoon of July 14th, RenrenBit held an online AMA sharing themed "Yield Pursuit and Marketization Mechanism". This sharing invited RenrenBit lending center director - Huang Bo and DeBank founder - Tang Hongbo as keynote speakers, Bixin editor-in-chief - Tian Chuan as the host of this AMA.

Special thanks:

Special thanks:

DeBank, Bixin Block

media support:

Lianwen, Block Rhythm, , PANews, Chain Node, Deep Chain Finance, Milin Finance, Bo Chain Finance, Blocklike

Editor-in-chief Tagawa: The recent DeFi data looks impressive, breaking through the level before 312. While observing the massive growth of DeFi user data, is the rate of return of mainstream DeFi projects currently on the market attractive enough to users? How to analyze the interest rate level of the DeFi market? Are there any arbitrage opportunities? Is the main demand of users is arbitrage or financial management?

image description

(DeFi data)

The appeal to ordinary users is very limited. DeFi really became lively after Compound started lending and mining. The incentives of Comp tokens distorted the interest rate of the entire DeFi lending market, and the value of Comp was mined by borrowing money. It should far exceed the interest paid. In the first few days, you can earn 1% daily income. As more and more people come to arbitrage, as of now, the overall income of depositing stablecoins in Compound has fallen back to 10%. about.

(from DeBank data)

image description

(from DeBank data)

Tang Hongbo: For the borrower, because of the mining subsidy, after paying the interest on the coins mined by borrowing money, there is still a 5% annualized return. The above picture is the overall interest level of the current DeFi market. For those who need to borrow For users with a stable ratio, it is still very attractive.

Speaking of arbitrage, for those who want to participate in DeFi arbitrage, they can borrow money from the DeFi market first. Then go to a CeFi platform like RenrenBit to lend money, so that you can mine DeFi tokens on the one hand, and earn interest on lending on RenrenBit on the other. Therefore, on the whole, the rise in this wave of locked positions is still mostly arbitrageurs brought about by the issuance of coins by DeFi platforms.

Huang Bo: From the analysis of market data, before Compound released the governance token, Compound’s loan amount was about 16 million, and the interest rate level reflected by the overall loan-to-deposit ratio does not have room for arbitrage, because these arbitrageurs pursue At the same time, high returns are willing to bear certain risks, which will inevitably prompt users to have extremely high return expectations. Since the release of COMP, the borrowing-to-mining model has led to a substantial increase in interest rates, and there is also room for arbitrage. However, the market will return to rationality and calm after the heat, so I think the room for arbitrage is limited.

But another type of wealth management users pursue stable returns and pay attention to risk at the same time. Some DeFi products will be considered. Although the yield is low, the characteristics of DeFi make them feel that the risk is low. Purely from the perspective of sound investment, I think it is attractive.

Editor-in-chief Tagawa: Users with different risk preferences have different choices. As a practitioner, how do you view the risks of the DeFi platform, and where are the potential biggest pitfalls? What criteria should the user choose?

If you, as a retail investor, do not have the ability to study security risks, mortgage rates, governance processes, liquidation processes, network availability and other factors in advance, you may make high-risk choices while not paying attention to potential risks, thus Miss out on those solid investment opportunities with low yields. Faced with these challenges, how should users judge which yields are opportunities and which financial products are inherently extremely risky?

In our opinion, as an ordinary user, it is really difficult to fully understand the complete logic behind a financial product, but the advantage of the DeFi market is that its market information is completely open and transparent on the chain, so each platform Both its current real-time mortgage rate status and historical liquidation data can be traced and audited, but it is very difficult for ordinary users to obtain these data, so our DeBank has made complete security for all DeFi protocols Risk research, and real-time tracking of the business data of each DeFi platform, including their historical capital scale, mortgage rate, lock-up volume, liquidation volume, etc., as well as the market value of their platforms, etc., are all within our monitoring range . The core is to help users identify the risks of DeFi investment, and at the same time let users understand how much the platform has to cover your financial losses if risks arise.

image description

(from DeBank data)

Editor-in-Chief Tian Chuan: Which data point is the most important and should users pay attention to?

Tang Hongbo: Different product agreements need to pay attention to different things. If a single indicator is the most important, I think it is the market value of the project. Project market capitalization is the best indicator of the overall strength of a DeFi protocol.

Huang Bo: I think what DeFi brings includes the innovation of financial models. The problems of asset transparency and capital operation brought about by centralized organizations can be well solved in the DeFi field. Natural data asset transparency is The best way to break the barrier of user trust brings risks in many aspects, as Mr. Tang mentioned just now. Although the open source and public chaining of the code can give users a sense of trust, the security audit of the contract is a big black hole, because the team behind the decentralized finance is responsible for the release of the contract and the management of AdminKey, without going through a third party Those audited by the security team will not be touched at all. In addition, we must also pay attention to the audit cycle, because many contracts are only audited when they are first released. money machine.

image description

(From the Security Audit Report of SlowMist Technology)

Huang Bo: In addition, I would like to say that financial products are not simply Internet products that solve users’ pain points. As long as assets are involved, there is a strict economic system behind it, and various roles are involved in the system, and different roles must have a purpose. Therefore, it is recommended to participate in financial investment activities, or try to figure out what these roles and their purpose are. Of course, a role does not only refer to a person, but a certain mechanism in the system is also a role. Find out the revenue logic, whether the product's revenue link is positive or deformed, and whether there is a market basis.

Editor-in-Chief Tianchuan: It is understood that RenrenBit has also introduced a mature market-oriented interest rate model in DeFi. What is a market-oriented interest rate model? What are the reasons for choosing to launch the "Lending Market-oriented Governance Model" at this time, and how to understand the use of DeFi to innovate the pledge lending ecology?

Huang Bo: In the two years since RenrenBit was established, we have been making products that are valuable to users. From the initial C2C lending, we have been committed to handing over the pricing power of lending interest rates to the market, breaking the original barriers caused by poor information. In the deformed lending market, you can now see that more and more service providers are also participating in this model. But the current model also has some problems. for example:

1. The efficiency of fund matching is not high, and there are many idle funds;

2. Many fund providers take their own capital costs and friction costs into account;

(These factors will eventually be reflected in the interest rate and cannot reflect the real market interest rate)

Huang Bo: RenrenBit is positioned as a financial platform, so we have to think about it from the role of the platform. From the experience of traditional finance, the interest rate is based on market supply and demand. DeFi is one step ahead of this point, so RenrenBit will combine market-oriented interest rates with the understanding of the financial industry, comprehensive technical security, and 100% transparency of asset certification to launch a new lending model. In addition, we also have our own liquidators. innovation.

Huang Bo: The market-oriented lending and investment products we will launch soon can achieve not only asset transparency, but also process transparency, data disclosure, and governance model disclosure. Any user can verify the truth of every income or loan interest rate. fake.

Editor-in-Chief Tagawa: When is the plan to launch? Is it to deploy a smart contract, or is the result uploaded to the chain?

Huang Bo: The APP package of Grayscale has been completed, and our colleagues in the marketing department will synchronize with you the specific release information.

Editor-in-Chief Tianchuan: DeFi is developing very fast now. Some users think that it has even surpassed the services provided by CeFi in terms of trading arbitrage and options, but the product experience and details are slightly different from those of centralized platforms. How about such encrypted financial products? And what exactly does it mean to serve users?

Tang Hongbo: At present, the total amount of loans in the entire DeFi lending market is 1.2 billion US dollars. I dare not say that it exceeds the CeFi market, but at least the gap is not too big.

Editor-in-Chief Tagawa: What about user experience? I haven't used comp so I don't have a say.

But the benefits of DeFi are strong composability and fast innovation. For example, stable currency exchange and American options products. At present, compared with centralized exchanges, the products in the DeFi market already have an advantage in liquidity. Projects in these two directions are represented by Curve and Opyn, both of which surpassed centralized products in just a few months after their launch. The following are the data performance of Curve and Opyn since their launch.

(from Curve data)

image description

(from Opyn data)

Tang Hongbo: The advantages of these products will actually create some advantages for DeFi compared to CeFi. At the same time, because the accounts of DeFi products are all interoperable, I am personally optimistic about the increase in users brought about by various financial product innovations. In the end, the borrowing needs of these users are likely to be deposited in the DeFi protocol on the chain. Therefore, if DeFi wants to grow, it seems that for the time being, it will not rely on competing product experience with traditional CeFi, but will focus more on financial innovation.

Editor-in-Chief Tianchuan: Can you add to the development direction of the combination of CeFi and DeFi, what innovations are worth doing?

Huang Bo: In fact, everyone has been arguing over which of CeFi and DeFi is the ultimate development direction. First of all, the two products provide users with an additional choice. Whether it is central or decentralized, the ultimate goal is to create value for users. Meet user needs. Finance involves financing and the transfer of a large amount of funds. It is closely related to human nature, fraud and other illegal activities. It can be understood that as long as financing issues are involved, there is no way to rely purely on the spontaneous behavior of the market. At this stage, I think a strong centralization must be involved. We see that the current DeFi projects, the technology itself is decentralized Yes, but governance cannot be separated from the centralized mechanism.

The advantages and disadvantages of CeFi and DeFi have been discussed by everyone just now. I think that with the continuous innovation and experimentation of practitioners and the overall infrastructure development of the blockchain, the two parallel lines will converge in the future. Specifically, innovation What are the points, I think this is what all of us practitioners should keep exploring.

Huang Bo: We have actually been exploring DeFi since 2018. Its transparent mechanism, which cannot be tampered with, is urgently needed in our current business. Our launch of 100% margin is also a centralized self-regulatory attempt, because in this industry It is very difficult to do self-certification of centralized applications. Specifically, the point of integration is that we are trying to use centralized users to experience decentralized data flow.

The first phase of the "Yield Pursuit and Marketization Mechanism" AMA of the financial theme month has officially ended. If you want to know more about the financial theme month, you can join the "RenrenBit Friends" community, and we will see you next time.