2020 has been a record year for the blockchain industry. The transaction volume of Dapp exceeds 270 billion US dollars, 95% of which come from Ethereum's DeFi ecosystem, and DeFi has become an important driving force in the blockchain industry. The development of DeFi is rapid. Now the total lock-up volume of DeFi is about 24 billion US dollars. It once reached 26 billion US dollars. A year ago, the total lock-up volume of the DeFi market was only 777 million US dollars. DeFi users have also reached 1.2 million.

In 2020, DeFi has become the focus of much attention in the encryption industry. As more and more players enter this field, there is no doubt that DeFi will continue to maintain an upward trend until 2021.stable currency

stable currency

The growth of the stablecoin market in 2020 is astonishing, from $5 billion at the beginning of the year to $25 billion now, a 5-fold increase. The biggest contributor is USDT, which also makes the most widely used stablecoin . The market growth of stablecoins is closely related to the development of DeFi. The development of DeFi requires more stablecoins to be locked on the chain.

USDT is a fiat currency-collateralized stablecoin. At present, there is also a cryptocurrency-collateralized stablecoin Dai, which is widely used. Dai is a stablecoin launched by MakerDAO. The circulating supply of Dai has increased by more than 10 times in 2020, but the most Potential stablecoins are algorithmic stablecoins.

The development of stablecoins follows the path of "connecting to the fiat currency world" and continues to move towards "encrypted native coins", from USDT to Dai, but Dai has sacrificed part of the decentralized assets after adding centralized assets such as USDT and USDC. Features: Algorithmic stablecoins, as the third type of stablecoins, have undergone development and innovation in DeFi, and will be reborn again in 2020, entering people's field of vision.

Represented by the flexible stablecoins of AMPL, YAM, and BASIS, the price stability is adjusted by adjusting the money supply through algorithms, which can be described as an innovative stablecoin in the DeFi world.These stablecoins do not require the use of collateral and attempt to build the native tokens of the cryptocurrency industry through market supply and demand. I want to completely offset the price control brought by centralized institutions through algorithms, but I don’t have enough market recognition to maintain my own price stability. By giving arbitrage space to the cold start of the model, most of the users who enter are to obtain The excess returns of the early "spirit of getting rich" were more of a collapse than the final result.

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DEX (Decentralized Exchange)

At the beginning of 2020, the Ethereum order book model DEX occupied an absolute mainstream position. At that time, there was not even a conventional term to describe the on-chain liquidity pool that used the constant pricing function to perform market-making behavior at any price. Now we will use this An emerging model is called AMM - Automated Market Maker.

Uniswap is a phenomenon-level product in DeFi decentralized exchanges. It has opened up a brand-new liquidity pool model of AMM-automatic market maker, provides convenience for all projects and individuals to list coins, and its simplicity and ease of use have brought more users to DEX, ushered in development and prosperity, and allowed DEX to see the opportunity to surpass CEX.

Now Uniswap's simple and straightforward exchange page has appeared in all DeFi products and has become a standard module. The successive successes of Balancer and Curve indicate the strong potential of the AMM market, and there are more designs and innovations to be tapped in this direction.

At the same time, the AMM model greatly reduces the cost of liquidity providers. The listing fee of centralized exchanges is a very large fee, which can now be saved and invested in the liquidity pool to increase the depth.

borrow money

borrow money

Borrowing occupies an important position in the financial market and is a rigid demand. The DeFi protocol can empower users to borrow assets。

The most mainstream DeFi loan so far is overcollateralization, which means that users must provide collateral that exceeds the total value of their borrowed assets. It's like a bank mortgage, where an individual mortgages their home or vehicle to get a loan. Using the DeFi protocol, users can mortgage various encrypted assets to borrow encrypted currency assets including stable coins. When the ratio of the value of a borrower's collateral to the value of what is being borrowed falls below a specified value, their collateral is liquidated to ensure that the protocol remains solvent.

For DeFi lending at present, the volatility of the cryptocurrency market is too high, which is the dilemma faced by its overcollateralization. Often a huge fluctuation will cause the user's assets to be liquidated, and this fluctuation is sometimes only short-lived, but Assets will still be liquidated, which is also a reason for limiting its development. The improvement and innovation of its algorithm is an important direction for the next development.

In addition, the second-tier expansion may also be a new direction for the development of DeFi lending. Lower fees, faster speeds, and more experience are also a new direction for development.

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Insurance

With the explosion of DeFi, the sudden wealth effect continues to appear, investors and speculators continue to join, DeFi assets are increasing, and crises in the market are also emerging. Hackers are also eyeing this huge market. The DeFi protocol is attacked and causes frequent property loss incidents. Lightning loan attack arbitrage, protocol vulnerability attack, oracle operation attack, etc., are all affecting the stability of the market and the assets of market participants. security.Under such circumstances, DeFi insurance projects are becoming more and more important, and people's demand is becoming more vigorous. It is hoped that the insurance sector will participate in the construction of the DeFi LEGO ecosystem to provide customers with optional protection methods.

However, the DeFi insurance sector has not been peaceful recently. The personal address of the founder of the old popular insurance project Nexus Mutual was attacked, and 370,000 NXM were stolen; Under the influence of the hacker attack, the price of Cover’s tokens plummeted from more than $700 to a minimum of $9. Cover also started a new network and launched a new network.

The successive accidents of the two insurance projects also, to a certain extent, show the importance of the insurance sector and the urgent need for further development.secondary title

financial management

For users in the currency circle, how to participate in different DeFi protocols at different times to maximize returns is a question that deserves the most attention. For users, the most ideal way to obtain income is to invest stable currency in the highest interest rate lending agreement. Then the most primitive way is to get up every day to manually check which agreement has the highest annualized reward, and evaluate which agreement to move the money to. We do it manually and in lending agreements such as Compound, Aave, Fulcrum, and dydx. butThe emergence of the revenue aggregator completely releases the energy consumed by users in selection, and will use less time and less energy to obtain greater benefits. YFI, the currency that exploded in the early stage, is the token of the income aggregator yearn.finance.

The income aggregator is to help users automatically select the safest and highest-yielding DeFi products for investment in the whole network, and make dynamic capital and strategy adjustments. Another brilliance of the aggregator is that this economic model can achieve the effect of blood transfusions from other projects on the market.

The income aggregator is a financial product closely related to the user's income, and the income is the most concerned thing for the user. There are also several directions for improvement in the future development of the revenue aggregator: further lowering the threshold for user operations, further reducing user gas fees and handling fees, further increasing user revenue, and further improving investment security. Once a project completes these improvements, it will definitely become a hot product,epilogue

epilogue

I asked where you are going, the direction of the sea you pointed to, the future of DeFi is the sea of ​​stars. 2020 is a year of progress for DeFi, and 2021 will be a year of harvest for DeFi. DeFi: stable currency, DEX, lending, insurance, and wealth management. These five sectors are what we need to focus on, and there will definitely be explosive products .

In 2021, DeFi is worth looking forward to.