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How to define DeFi?
Now it is often said that DeFi (decentralized finance) has reached such a speed. In fact, it didn't take long at all, just a month. I want to tell you about this today, because recently I went to several events in China, and everyone started to praise DeFi like crazy.
Let me first give you a quantitative definition of DeFi, which is actually very easy to understand. That is to say, if DeFi is regarded as decentralized finance, it must be a concept corresponding to cefi (centralized finance). It actually has two levels You can quantify or define this thing very well. We know that there are different participants in financial activities, and whether the financial assets themselves are licensed or not.
Take the centralized Huobi exchange as an example. If we want to trade on Huobi, we need to register an account and do kyc certification. If you want to make a market for Huobi, you must get their permission. You can become a market maker on their trading platform. Therefore, the first feature of decentralized finance (DeFi) is that it is permissionless, which is what we call permissionless.
Regarding the second point, we all know that the core of finance must be money, that is, your assets. So, for decentralized finance (DeFi), to judge whether something is decentralized finance or centralized finance, the second thing we need to look at is whether its assets are managed by a trusted third party or not. Is hosting?
When we go to Huobi or other exchanges to trade, we are actually saying that we have to put our own assets on their platforms first, which is equivalent to saying that we have no control over our own assets. This is typical This is a centralized finance. You need to put your assets in a trustworthy third-party custody, which is a typical centralization process. As for decentralized finance (DeFi), it does not have a trusted third party to host your assets, and your assets are actually hosted by code.
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Uniswap's decentralized exchange revolution
Just now I saw Brother Biao saying that the R&D efficiency of DeFi is amazing, and I also want to share with you the story of Uniswap and its founder. In 2017, that is to say, when ICO was the hottest, Hayden Adams was laid off by his company, and then he was really laid off. After he was laid off, he started to look at things he was interested in. At that time, the Ethereum Fund There was a core developer named Karl in the meeting, and Karl was his high school classmate, and then Karl said that you might as well come and see what you can do on the Ethereum ecosystem. Then Hayden started to do uniswap from the second half of 2017.
The core code of uniswap is only 30 lines, can you imagine? If you know how many codes a centralized exchange like Huobi has, you can see how big the difference is. Hayden worked alone for a year and a half, wrote more than 30 lines of code, and then launched it at the end of 2018, until 2019. There was no financing in mid-2019, and the company has always had less than 10 people. It is such a team. Such a lightweight thing now carries a transaction volume of 200 million U.S. dollars, and it is a real transaction volume, because you can’t scan the volume in the decentralized exchange, if you want to scan the volume You pay a lot of handling fees. Brother Biao just said that the development efficiency of low-end development is amazing. I think it is not only the development efficiency that is amazing, but its first-principle efficiency is amazing. He replaced all human things with codes and contracts. For example, if I want to build a centralized exchange, I need various operations and maintenance, and I need to rent servers, and then I need someone to operate and maintain this thing.
However, if I am going to do a decentralized exchange now, everything is done by the underlying infrastructure of Ethereum. Then your operation and maintenance personnel are all Ethereum miners. If I want to build a centralized exchange, I still need to find a market maker, and I need to have start-up funds. The decentralized exchange is very simple. Everyone is a market maker, and you don’t need to find a market maker. Each of us can provide liquidity to it. In fact, he is equivalent to completely determinizing many uncertainties related to people. In a sense, this is really a dimensionality reduction blow.
In a decentralized exchange, especially the AMA (Automatic Market Maker) model, what I trade with me is the contract itself, and I can figure it out. For example, if I want to be in a liquidity pool, I want to buy so many tokens, how much I need to spend, I can calculate this thing myself, and I can completely predict it. Uncertainty and all transaction frictions become determinable and predictable quantitative frictions, and then all operation and maintenance costs are allocated to the entire decentralized infrastructure. So, I think this thing is still very revolutionary.
Let’s go back to my second uncle. A friend just mentioned the threshold of DeFi. The threshold of DeFi is still quite high. The high here does not mean your capital threshold. In fact, the current threshold is mainly the operating threshold. I think the decentralization of Tron that day It is particularly funny when the exchange goes online, and of course it may be the result of a hasty launch. In the decentralized world, our grandson has overturned. After all, if you are a decentralized exchange, you don’t need permission to go online. Fake tokens, the experience is also very bad. I saw some novice users go to defend their rights with Brother Sun, saying that this is your chain, and it is also your DEX (decentralized exchange), why can’t you take care of Brother Sun? In fact, everyone is wrong to blame Brother Sun, DEX really can't control it. So I think now, the biggest threshold of DeFi is the threshold of everyone's cognitive change. In fact, it is like a sentence we often say in the English world, don't trust, just verify.
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About DeFi Liquidity Mining
The essence of DeFi liquidity mining is an incentive mechanism. DeFi projects distribute project tokens to attract funds to provide liquidity, so as to obtain project cold start and complete token distribution.
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Second Uncle's Story
Next, let me talk about the general history of the second uncle. I also said it because they think it is a better token distribution mechanism, and then they want to learn a halving mechanism like Bitcoin. Looking back now, I think it was a very wise decision, because now my uncle, after digging in a week, he caused a reason that the chips are highly concentrated, and if the chips are highly concentrated, it means that the change is completely changed. It has become a game where the big players have the final say. Later, Android himself said that he didn't think clearly. He is a person who lives in the moment. When he was designing, he never thought that this thing would become so awesome. After the distribution of tokens is over, the direct result is that the bargaining chips of this thing are very concentrated, which involves the later community governance and protocol governance, leading to the governance of the protocol may be decided by a few big players, but in fact it is not as good as imagined. It is not as decentralized as expected.
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Noncompetitive Analysis of Second Uncle and First Uncle
The developers behind Second Uncle (YFII) are Laobai (Dvaid White) and Gao Shifu (Gao Jin), who are also developers of the former YFII community. Their own ideas, their different ideas lie in the token distribution mechanism, they prefer a distribution mechanism like Bitcoin. Because my uncle finished digging in a week, which can be said to be very fast, and everyone has not reacted, and then the digging has already been done. Then they feel that there should be a better token distribution method like Bitcoin, and it should not leave no room for later people to participate. Then they proposed a halving mechanism similar to Bitcoin, and wanted to see if the token distribution model could be changed through the power of the community, and made a proposal, but the final result was not passed. Because everyone also knows that in the governance mechanism of DeFi, any changes and decisions need to be voted by token holders. If you are a token holder, if you want to make any code-level changes to the protocol level (protocol level), you need everyone Let's vote together, and then the vote will not pass, and then they say that they should rewrite such code by themselves, and then I am equivalent to saying that it is a technical fork.
Regarding the bifurcation event of the uncle (YFI) and the uncle (YFII), it is actually very different from the bifurcation of Bitcoin. The bifurcation of Bitcoin BCH and Bitcoin use the same hash algorithm, and the support between the two is required Competing in computing power, then such a fork is destined to have a strong competitive relationship. As we often say in English, it is cannibalism, and it will cannibalize each other. Because all computing power is limited, and the production capacity of mining machines is also limited, I define such a fork as a hostile fork, that is, a non-good faith fork. The risk of the first fork project will be relatively high, because she has to compete for the same resource. Then let’s go back to the second uncle (YFII). We often say that the second uncle is a fork of the first uncle. In fact, I think this definition is very imprecise. Because in the DeFi world, we should not call this a fork, or at least it should be said to be a non-hostile fork. Let’s not say whether it is a good intention, but it is at least a non-hostile fork.
I also talked with Andre Cronje about this matter. Although Andre is a geek, he is actually a very emotional boy and a very kind person. At the beginning, the communities on both sides had a lot of quarrels, but Andre complained to me that things should not be like this, because this matter itself is different from the fork of Bitcoin. This is not a fork that is not hostile. From his As a developer, at best, it is a continuation of his code and a new version of the code, or a deduction. But why are everyone so hostile to each other?
I am also an early participant of Uncle Uncle, and I have been digging Uncle Uncle, and Andre is a friend I met in 2008, and then I also felt that this matter was interpreted too dichotomously by everyone, and it may have something to do with the international political situation There are relationships. I chatted with Andre about the definition of this kind of fork, I think this fork is more like a cell expression (cell expression), it will be more like a cell differentiation, that is to say, the code of each After deduction, it will have its own characteristics. Therefore, I don’t think it’s not a fork at all. First of all, everyone thinks it’s a fork, but I don’t think it’s a fork at all. It’s actually a process of evolution at the code level.
I use an expression of changing the currency circle or a definition of changing a crypto to explain it. It is actually very simple. We just said that because of the fork of Bitcoin, it needs to compete for very limited computing power resources.
If we only look at our encrypted world, we only look at our currency circle. If we look at the currency circle as a closed universe, the funds may indeed be limited, so we may see that after the second uncle goes online, Then it may be because the second uncle’s mining income is relatively high, and then a lot of funds will be transferred from the big clothes to the second clothes. Yes, this is because we only look at the funds in our circle statically, but I personally think that, Why DeFi rose at this point in time actually has a lot to do with the overall macroeconomic environment.
Because we know that the current capital is excess liquidity, the main reason for the excess liquidity is that the global central banks are releasing water. One of the problems directly caused by the global central bank releasing water is that while the central bank is releasing water to oversupply money, it also needs to stimulate production. And investment, stimulating production and investment requires lowering interest rates. Most of the world except China now has negative interest rates. One result is that many Americans put money in the bank to give money to the bank.
In fact, we have two parallel universes, one is the fiat currency world and the other is the encrypted digital currency world. In the fiat currency world, the Fed’s benchmark interest rate is actually 0, and the Bank of Japan and the European Central Bank are all negative interest rates now. However, in our encrypted digital currency world, the benchmark interest rate is actually very high. Even if you are doing normal USD stablecoin lending, the normal annualized rate can be between 8% and 10%. If these two worlds are not connected, the funds in the currency circle may also be limited, and the uncle and uncle will have a competitive relationship. But we need to know that capital is always seeking profit, and it will always go back to a place with a higher benchmark interest rate.
At present, ordinary users in the United States do not have any wealth management products. They can do a very simple thing, that is, I directly open a personal loan in the bank. Its annualized interest is very low, about 3% to 4%. Then, I directly turn it into the USD stable currency USDC through Coinbase (cryptocurrency exchange), and then I directly put USDC in Compound for lending, then the direct interest rate itself may be 8%, like the craziest time ago At that time, the USDC lending rate on a certain platform rose to 50%. You can think about this interest rate difference.
Therefore, I personally think that this thing is not a limited financial resource that is currently competing.
The reason is very simple. Our current crypto universe is too small, whether it is in terms of volume or capital accumulation, it is too small, so compared to the entire pie world , is not worth mentioning at all, that is to say, it is of different orders of magnitude. Outside our world, there are countless fiat currencies waiting to go to places with high benchmark interest rates, because they also hope that their money will not sit still , They also want to say that their money can generate interest and compound interest, and funds will always pursue profit, so these two worlds are actually connected in the end.
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Second Uncle Machine Gun Pool
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Why are uncle and uncle not air coins?
Friends in the domestic circle, you may be too familiar with the concept of air coins. Maybe you have bought too many air coins in 2017, including many coins with high market value now, which are actually air coins. For example, Dogecoin is a very typical air currency, because it is actually a very interesting story. The common characteristic of Aircoin is whether it has a team. If it has a team, what the team is doing may only be able to do some so-called market value management (so-called pull or something), and it has no way Valuable.
Now that the uncle and the second uncle came out, the reason why they are not air coins is very simple, they can be valued. As I just said, the second uncle’s biggest function is that he has a machine gun pool, and the funds in the machine gun pool are about 70 million US dollars. Uncle Er’s platform is like an asset allocation strategist, or an aggregator for interest generation optimization
If you are a novice, you may not know where to mine and lend money, but now we have so many different channels, it is equivalent to saying that what the second uncle does is to say that I will make you the most Excellent asset portfolio.
The so-called machine gun pool means that wherever the income is high, I will go there. Then the bullets in the smart gun pool are the precipitated funds in the pool, and then we call it TVL (total value locked) in English. The standard of the weapon in the smart gun pool is our one-by-one investment strategy, or a zero-risk arbitrage strategy. .
Therefore, uncle and uncle are not air coins in the traditional sense, nor are they CX coins, because his currency can raise interest rates, which is equivalent to saying that his currency itself has a valuation, because the platform itself of uncle two is income.
Regarding the income of the second uncle platform, can you think of it as an investment account? Or think of it as a decentralized public offering fund. The public offering fund itself is profitable, and because all its investment strategies are risk-free. To be honest, Uncle Er, it will have continuous cash flow, so if there is any income, it has something to do with the holders. 90% of the income will be returned to all holders, and then 5% will be used as a developer fund, and 1% will go to When buying insurance, the remaining 3% is used for repurchase. In short, currency holders will benefit directly.
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Second Uncle Community Governance
The second uncle has now started community governance. If you pay more attention to our community forum, we have passed several proposals, and these proposals themselves were voted by token holders.
How many second uncles do I have, and I can only vote so much. Of course, there may be people with relatively greater influence in each community. There is a special position abroad, that is lobbyist. The job of a lobbyist is to specifically influence other senators and congressmen to believe in a certain political proposal that they think is good.
I think I am in the community, and the power of my vote is the same as the currency I hold in my hand. I don’t have any privileges, but the only thing I can do, maybe because more people know me, I can go to Tell everyone what I think, and if more people think what I say is right, then I may influence their decision-making in a certain sense. Because we are decentralized governance, in fact, everyone is a politician, as long as you are a currency holder, you can vote. What I do is nothing more than to do a good job in education and then convey some information in place.
I have quite confidence in the second uncle. In fact, as long as this group of people is there, as long as this group of people is there, this thing cannot be reset to zero. Then, if this group of people is gone, will it return to zero? In fact, it is not necessarily true. As long as this group of people is there, there is no problem with the contract, and the interest rate difference between the encrypted world and the fiat currency world can be continuously captured. I think the second uncle will not return to zero.
The YFII community has just done a global online English live broadcast, and the effect is quite good. Watch it:https://youtu.be/HD48juqPmA4
To join the YFII Chinese community, please add the assistant WeChat: myGrassU
