At the heart of the DeFitization (DeFi) movement is open source code, where the execution of the contributing code is handled by Ethereum and its decentralized network.
Ethereum is a global decentralized value settlement layer on the Internet.
- Transfer value without the need for a central intermediary. (miner)
- Value can be unconstrained by central agencies. (EVM)
Today, the code on Ethereum can be used for a variety of "currency" like LEGO bricks for various uses such as lending, investment, savings, trading, etc… Although the DeFi stack is being formed, there are still very few users.
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To date, this development has been supported through various investments, including:
- Token financing ( Augur , 0x );
- Venture capital ( 1 , 2 , 3 , 4 , 5 , 6 ); and,
- Donation ( 1 , 2 ).
…but with these limited avenues, we need new business models to sustain ongoing development, testing and getting users.
Although the spiritual feature of DeFi is to eliminate the intermediary, I think that DeFi is hard to get attractive without an intermediary.
As an industry, DeFi is likely to be similar to the Internet, which means that the economic moat will be built around high-quality, reasonably priced centralized services. An effective paradigm is to build a centralized enterprise on top of a decentralized infrastructure.
These centralized companies should be transparent in the following areas:
1) Any increased costs (more than gas costs) 2) Any increased trust (more than smart contract risk)
…when combining the above with valuable services, it seems that you need to pay.
Maker's DAI has at least four different layers:
- Layer 1: Smart Contract
- Layer 2: Incentives
- Layer 3: Integration
- Layer 4: User aggregation
Open source contracts that communicate with each other constitute the DeFi building block
Assume that Maker's Layer 1 will be completed tomorrow (the black LEGO toy in the picture). In other words, the smart contract infrastructure does not require any changes. just now,
The work of the Layer 1 developer can increase the stack level to contribute to the Layer 3 or Layer 4 solution.
The network effect will begin to recombine at the above layers.
Layer 2 is the incentive layer of the Maker system (yellow Lego bricks in the picture), which forms a variety of stakeholders: MKR holders, DAI holders, keeper/arbitrage, researchers, modelers, etc. . Reward the work of the system through cryptographic economic incentives (such as DSR, DSF, MKR) and market-based incentives (such as DAI arbitrage).
Layer 3 is the "insert" layer where DAI is integrated into other DeFi protocols for exchange (eg Uniswap), lending (eg Compound) and various other purposes.
Layer 4 is the user aggregation layer of the Maker system (in the picture is InstaDapp's white Lego toy). Layer 4 is the login page for new users. Aggregation tools should be unmanaged and address a variety of user needs that are not met at the protocol level. Again, it should be possible to estimate the cost of a premium service.
The available business model that can be formed by the outer layer of the DeFi infrastructure:
1. Liquidity and market making
Example 1: Become a liquidity provider for Uniswap (reward type: encryption economy)
Uniswap is a value exchange solution that minimizes trust, but it can't work without liquidity, so the agreement is designed to be an encryption economy for individuals or organizations to use liquidity as a liquidity provider. Incentives.
Example 2: Become a Liquidity Provider for Compound (Reward Type: Encryption Economy)
Compound is a trust-minimizing lending solution. Like Uniswap, it has no liquidity and can't work. The liquidity provider provides assets to the Compound's agreement and receives cToken in return, which in turn generates interest over time.
Example 3: Help keep DAI stable (reward type: market based)
Maker's system has adjustable parameters to help keep DAI stable and has a global settlement agreement, but the most powerful stability mechanism may be that the market considers 1 DAI equal to its target price (currently fixed at $1). So far, DAI has been stable at around $1… and there are some small fluctuations. Any fluctuation of $1 means that there is a market-based motivation to arbitrage DAI, which Maker calls Keepers.
2. Financial knowledge and user education
Example 1: Click on MyCrypto landing page (business model: free + ads)
MyCrypto created an open source tool for interacting with the Ethereum blockchain. MyCrypto is a good introduction to the risks and various levels of security of various encryption hosting options.
Example 2: Messari / OnChainFX screening tool (business model: free + quality products)
Messari / OnChainFX brings new metrics and data points to help users better evaluate token supply, volume and market value.
3. Abstract and intuitive tools
Example 1: InstaDapp's unmanaged dashboard and protocol bridge (business model: to be determined)
InstaDapp is one of the first DeFi aggregators. Its dashboards are unmanaged and synchronized with the Debit and Exchange DeFi protocols. InstaDapp also created an intuitive solution (protocol bridge) for users who want to transfer debt between Maker and Compound for lower interest rates, mortgage options or clearing parameters.
- Information on the chain and under the chain (eg Chainlink, Augur, Harbor)
- On-chain analysis (eg Alethio)
- Scoring system (eg DeFi score)
- Provide transfer items between French and Dai (eg Wyre)
With only a few thousand users at the moment, it's clear that deploying smart contracts alone won't appeal to a broad audience. There is a need for powerful tools and resources around smart contracts to make the DeFi protocol available, intuitive and useful.
We have not yet developed this step, but the momentum is growing… and needs to be maintained, we need central support.
Comments on the above content are welcome.