The blockchain has gone through more than ten years since the birth of Bitcoin, and its real turning point is the birth of the smart contract platform. The smart contract platform has brought new species, and the most important ones are finance and games. , and in terms of finance, mainly DeFi.
As Ethereum crossed the $200 mark, the value of cryptocurrencies locked in the DeFi (decentralized finance) market also reached $1 billion.
But a year ago, DeFi was still an obscure concept with a slightly speculative flavor. Now, almost no one doubts that DeFi will become an integral part of the public chain. We have previously popularized the video about what is DeFi. For details, click: [Getting Started] What is DeFi? Is it the same thing as FinTech?
Currently DeFi is still in a very early stage. Most products are relatively simple: over-collateralized lending (traditionally so-called safe collateralized loans), simple on-chain settlement exchanges (such as Uniswap and 0x). The mortgage rate of DeFi products is around 150%, which means that borrowers need to provide mortgage assets that are 50% larger than the loan value.
DeFi can satisfy some people’s financial needs that traditional finance cannot meet: opaque financial and economic crisis.
Through the integration and operation of intermediaries, traditional finance has improved the efficiency of the market and achieved better resource allocation. At the same time, due to the existence of intermediaries, the traditional financial system also has many problems, such as opacity and spam.
This leads to excessive debt and excessive inflation. Once the economic development stagnates or the economic distribution is excessively uneven, and the debt structure is not digested in time, an economic crisis will easily break out.
However, in the current financial structure dominated by intermediation, economic crises seem to be unavoidable and repeated. The core of the blockchain is transparency and distribution, which leads to it having the opportunity to change the status quo of the current financial structure. This is the key to why DeFi can play a role in the future.
In general, compared with traditional centralized financial systems, DeFi platforms have three major advantages:
1. Individuals with asset management needs do not need to trust any intermediary institutions. New trust is rebuilt on machines and codes;
2. Anyone has access, no one has central control;
3. All protocols are open source, so anyone can cooperate to build new financial products on the protocol, and accelerate financial innovation under the network effect.
In the development of blockchain technology, there have been ups and downs all the way, and many new concepts have appeared on the basis of this. However, so far, these concepts guided by theory have not been recognized by the public in real life, and there is no corresponding Product application landing.
As the financial system of the cryptocurrency market, DeFi is to a certain extent benchmarked against the traditional financial system. Although it is in the blue ocean market of hundreds of billions or even trillions, it is limited by the difficulty of interacting with the underlying public chain, single mortgageable assets, and cumbersome product operations. Problems, currently only popular among a very small number of cryptocurrency user groups, its development is still difficult.
1. The number of users, activity, liquidity, and transaction depth are far from enough, which is much worse than the corresponding centralized model in digital currency. For example, in the field of decentralized exchanges DEX, like Huobi and Binance are centralized exchanges, the depth, breadth and activity of transactions are several orders of magnitude beyond DeFi DEX.
2. The user experience of the product needs to be improved. To use DeFi, you must first register. After registration, you must connect the wallet and install several apps. The user experience is very cumbersome. And Internet people want to achieve the ultimate user experience.
3. The utilization rate of assets is low, and the main assets are mortgages. In the ecology just seen, derivatives, payments, stablecoins, loans, and insurance are actually mainly loans.
4. The development of DeFi is restricted by the performance of the underlying public chain. The current DeFi projects are mainly built on the Ethereum network. At present, the performance bottleneck of Ethereum is relatively prominent, and there is still a long way to go before breaking through the performance bottleneck. Under such circumstances, those DeFi projects with high performance requirements will be in an embarrassing situation.
5. Compared with traditional financial products, decentralized financial projects are much more difficult to use and require higher awareness of users, which will also greatly affect the development speed of DeFi. In addition, the security of decentralized financial projects has yet to be proven in practice.
In fact, the public chain is the underlying foundation, and the DeFi application is the superstructure. The two are essentially interdependent. The development of DeFi is inseparable from the public chain. Coupled with the constraints of other external problems such as lack of assets, cumbersome operations, and compliance, EHS as a Only by focusing on products can the DEFI project win a future in the market competition in 2020.
DeFi is a financial system that may be fairer, more inclusive and transparent for everyone. Sound familiar? These terms have recently entered the lexicon of fintech companies, especially with the development of crypto platforms such as Ethereum. They break away from physical or regulatory boundaries, provide products or services, and try to subvert the traditional financial industry.
But compared to the traditional centralized financial system, the DeFi platform is subversive. Leaving aside the inherent advantage of the blockchain that there is no centralized server, DeFi projects allow anyone to cooperate on the agreement to build new financial products, and catalyze huge financial innovations under the network effect. DeFi is equivalent to inserting a liquidity wing into assets, and countless endless ways to play will come out.
Imagine that your points in Starbucks are turned into tokens, which can not only be bought and sold, but also recharge your King of Glory with a skin after circulating on the platform. This simple scene alone can generate hundreds of millions of turnover and thousands of good jobs.
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Disclaimer: The information published in this article does not represent any investment suggestion of the company, nor does it constitute any investment advice. The picture is from the Internet. If there is any infringement, please contact to delete it. Please note the source for reprinting.
