Wuzhen·DeFi and CeFi must have a battle? A round table to understand the challenges and future of DeFi

On November 9th, the 2019 World Blockchain Conference hosted by Babbitt, Wuzhen entered the exciting agenda of the second day. On the morning of the 9th, "D-Future: The Future of Decentralized Finance" held a round-table dialogue on "Seeing DeFi: The New Financial Road or the Empty City?" Pan Chao, head of MakerDAO China, Liu Chunming, founder of Vite Labs, He Bin, founder of imToken, and Tao Quming, founder and CEO of Axonomy, attended the round-table dialogue as guests. In addition, Yan Li, founder of the calculation power pool, was invited as the host.

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The following is the contents of the round table compiled by Babbitt (slightly deleted):

Yan Li: First of all, please ask several teachers to define and interpret in their own way. What is DeFi? What do you do with DeFi? Why choose such a cut entrance?

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Yan Li

Pan Chao : DeFi is actually a very broad concept. If in a broad sense, any relationship with blockchain assets can be called DeFi. This is also why many projects are under the banner of DeFi, or want to have a relationship with DeFi. If you really want to give it an accurate or narrow definition, my definition is that DeFi is a decentralized managed financial protocol and open source product that does not require access .

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Pan Chao

1. It is decentralized hosting, which is a distributed account. In addition, it is an open source protocol. Many people compare DeFi to the LEGO of the currency, and you can piece together different agreements. For the user, it is disorderly access, so users only need to remember a dozen English words, you can create a wallet, you can conduct transactions, borrowing, etc. This is my definition of DeFi.

2. What is the relationship between our project and DeFi, why choose DeFi. In fact, we did not choose DeFi, DeFi chose us . If you haven't heard of MakerDAO, MakerDAO created the first native base currency on Ethereum. At the time of our launch, Ethereum had no endogenous currency. It was impossible to establish a finance without money. We introduced a stable currency, and then we can see that there are many applications on this basis.

Liu Chunming: DeFi, as its name implies, is decentralized finance. The essence of finance is the exchange of intertemporal transactions. Why is finance decentralized? The main advantage is that it does not rely on a centralized financial system and can reduce credit costs . For example, if you want to borrow money in a centralized system, you may have the risk of taking various risks. For example, there are a lot of old-fashioned roads, or P2P explosions, so people and institutions need to be centralized, which is a big risk. The new form of financial services generated based on blockchain technology is DeFi. It does not need to trust a person or an organization. It only needs to trust math and code. This is DeFi that I understand.

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Liu Chunming

The relationship between our project and DeFi is actually relatively close, because DeFi is a financial service application based on blockchain technology. Obviously its underlying infrastructure, that is, the public chain is the necessary foundation for DeFi to survive. For the public chain, we mainly provide lower-efficiency, faster, and lower-cost platforms for DeFi applications. Why do we choose to cut into this field, mainly because we need to have ecological landing and practical application projects, so we choose to do decentralized exchanges, do small loans, make payments and other DeFi-related applications. Because this kind of application has both high frequency and just needed scenes, it can really be used.

He Bin : From my understanding, more from the technical level to understand the current DeFi is mainly built on the Ethereum platform, with intelligent contracts to achieve financial engineering, so that the financial agreement itself has programmability, composability, formation Such a brand new, relatively innovative financial market .

For the user, his intuitive perception is that the opponent is the code in the blockchain network, and not the counterparty of the traditional financial market. One of the more important aspects of DeFi for users is that it relies on a digital wallet, especially a decentralized digital wallet to interact with DeFi.

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He Bin

For imToken, we have been very supportive of DeFi applications from the beginning, integrating these applications into the blockchain wallet, so that users can really experience the new paradigm changes brought about by decentralized finance.

Tao Quming: The first few guests have made the DeFi concept very clear. I personally think that DeFi is currently focusing more on the underlying financial infrastructure agreements, such as those done by MakerDAO. However, in the case of finance, Pan Chao also said that in addition to the basic agreement, DeFi must also have an application form. It should provide some new and different from the existing centralized finance, or traditional finance. Financial capabilities, new DeFi-based applications and scenarios. At this time, we will also face the main problem in our discussion of the topic, whether we call it LEGO in financial facilities, or ultimately apply such subversive and very efficient financial technology to every aspect of daily life, let it produce huge Social value, the middle application layer is very important.

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Tao Quming

This is also the development of DeFi's entire industry, because it is still very early. How to find a good combination between user applicability and user popularity, and DeFi innovation. There are no users, no scenarios, and in fact, there will be problems with the development of DeFi infrastructure. And many people are saying that many scenes of DeFi are toB, not toC. My personal opinion, I don't quite agree with this. Due to advances in technology, because of the blockchain, as we talked privately, if you talk about DeFi in general, the earliest DeFi products are bitcoin. It provides a raw value storage medium on the real blockchain without the need for admission, without KYC, which is a very financially strong product, but it is done on the blockchain.

The wave of blockchain technology we are now facing can make more stable coins on top of Bitcoin and a new era of innovation in various other financial products.

Yan Li: Everyone introduced the simple content of each platform on the platform by introducing the understanding of DeFi and combining with their own business. The advantage part, we all talked about when making definitions. Let us directly talk about it now. What challenges do you think DeFi will face in the future?

He Bin : From the moment I am concerned about the biggest challenge of the DeFi Ecology, the asset size is . For example, from the entire ecological map of DeFi, Dai of MakerDAO is the first to bear the brunt. Its current asset circulation, stable currency is still 1 US dollar. about. This will involve the design mechanism behind it, as well as the environment in which it is located. Its current issuance mechanism requires everyone to pledge, and Dai can be issued with an excess pledge of more than 150%, which is naturally limited by the market value of Ethereum and Ethereum. Overall ceiling. There are many challenges to be substituted for other more native assets on the Ethereum platform. At present, in addition to Ethereum, other Token market capitalization exceeds 10 billion, it should not be counted. How do we bring Bitcoin, or other traditional financial assets under the chain, to the scale of DeFi assets? This is a very big challenge, and it is also a must for DeFi to cross the past in the mainstream financial market.

Pan Chao : Just now He Bin also mentioned that the biggest challenge is on the asset side. Many people are saying that DeFi is slow. These are not problems with DeFi, but rather their own characteristics. Because it is a global consensus, it is slow. If you take a step back, just Qu Ming always mentioned that Bitcoin itself is part of DeFi, if it is really defined by a very broad concept. Let's take a look at what Bitcoin does, it connects a global trade market. You will find that it is not a coincidence that the largest Bitcoin mine and the largest ETH mine are in China. We have created goods with low cost and effective productivity, and Bitcoin goods are sold to the United States and Europe as consumer goods. And DeFi brings more than just a commodity. This thing can be used for mortgages. It can be borrowed. It forms a new money market and can have a global interest rate market.

At present, all the commodities that can be mortgaged produce liquidity, such as high liquidity such as ETH, and sufficient decentralized assets. The next step is to bring the bitcoin's mobility to ETH, which is what He Bin is doing now. The other part is to find some real-world assets related to the locality and map it to the chain so that it can bring more than a trillion market. Of course, there are some challenges, because there are some trade-offs in decentralization and centralization. This is the way DeFi wants to go to really have a large-scale application.

Liu Chunming : I think the DeFi challenge comes from many aspects, and the technical challenge is a core challenge. For example, among the specific DeFi users, for example, decentralized exchanges, why did they not replace the centralized exchanges at the current stage? That is to say, in the experience, the gap between decentralized exchanges and centralized exchanges is quite obvious. For example, if you are at a centralized exchange, users are used to reloading orders, trading in seconds, and withdrawing this set of processes. Ordering and withdrawing orders in this process do not cost anything. If we say that we are a pure decentralized exchange, putting the engine and settlement on the chain, you will find that your user experience is not so smooth. After waiting for a long time, it will take a long time to be successful, or you will have to pay the gas fee for ordering and withdrawing the order. In the daily trading needs, it is still not very satisfactory.

To make DeFi more popular and more acceptable to users, it also needs to be iterated at the infrastructure level. In other words, we also need to iterate the technology of the public chain to provide a faster and cheaper public chain for the DeFi application scenario. This is also the original intention of the Vite project. Vite is fast, we hope to build a fast enough. And a cheap enough public chain to push DeFi applications to the ground.

Tao Quming: DeFi faces the biggest challenge at the current stage is the challenge of user perception. He Bin always talks about the challenge that the original DeFi asset is very small. This is why I personally feel that I really realize that I can use DeFi. The number of users is too small.

Even among the industry users, there is really the ability to directly use DeFi users, no more than 10% in our venue. If you put it in the entire blockchain market, put it in the whole industry, or put it on the global market, the ratio is very small. This is what Axonomy is trying to do, as Pan Chao said, the real popularity of Bitcoin, bitcoin in 2009. But Bitcoin really began to enter the public eye after having a centralized exchange, because the centralized exchange provided a better user experience. Chunming also mentioned that some centralized platforms can help decentralized new financial products, or application promotion and popularization, which is what we Axonomy hopes to do. Lowering the threshold of DeFi technology awareness and the threshold of use can make the DeFi scene better interact with users and promote the development of the entire DeFi.

Yan Li: DeFi is a decentralized financial platform. When everyone hears the word "financial", when it comes to things related to money, our instinct is to think about money. It should be subject to Strict supervision. In fact, in the case of DeFi, there is also a CeFi, which has the same credit collateral. DeFi and CeFi, there must be a battle, how do you see this thing.

Pan Chao : I am quite surprised by the word CeFi. It was very strange when it was launched. Why should we create a word of "centralized finance"?

I think CeFi compares their strengths and weaknesses with traditional exchanges and decentralized transactions, or their position on the battlefield. Centralized exchanges are a two-tier solution for decentralized exchanges. Centralized exchanges should serve decentralized exchanges. They sometimes say that decentralized exchanges are slow. I think centralized exchanges are slow. Because the decentralized exchange is completely native to the blockchain, only one confirmation is needed. On the central exchange, more confirmation is needed.

There is also the current situation, there is a proverb, the tail shakes the dog, the cart before the horse, the unimportant things affect the important things. Of course, there are many reasons, including the current cryptocurrency is still very dependent on the legal currency system, the regulatory system. The two are not competing and conflicting issues. They solve different problems at different levels in the financial system. In a nutshell, a centralized exchange can solve many localization problems. For example, I know the founder of this exchange and trade tens of millions of assets here. I don't worry, if the currency is wrong, I can find them. If you don't know the exchange, the exchange is in a small corner of the world, and there is no resource to know it. If you don't worry about trading this asset, you can use the decentralized exchange, which is a global node. The decentralized solution is a higher dimension that solves the final settlement problem.

Liu Chunming : In my opinion , the benefits of DeFi or decentralization are not to bypass regulation . Decentralization is not about doing what you want, no punishment. The main problem solved by decentralization is to reduce the cost of credit, so I think DeFi or decentralized applications, it does not contradict supervision. Perhaps it will present some new challenges to the regulation of the entire system, but it may simply change the way it is regulated. For example, to supervise a centralized exchange, it is necessary to focus on the people and money of the central exchange, and ask the central exchange to escrow assets to the bank. However, it may be OK to supervise the decentralized exchanges only to do code audits, so as to ensure that funds are not misappropriated. Another example is the regulation of anti-money laundering. Decentralized exchange trading data is stored in the chain, will not be tampered with, and is traceable. In this case, it may provide some new tools for supervision, DeFi or CeFi, and the supervision itself is not contradictory. They will achieve the same goal, and the ultimate goal is to provide a more convenient for all users around the world. More equitable, lower cost financial services.

He Bin : At present, because DeFi has a very small body, it has not attracted the attention of the regulatory authorities. But when the scale of DeFi can grow to 1% of the traditional market, or even 1 in 10,000, because the regulation takes into account the entire financial market risk, there will be corresponding measures . But this is not the opposite. We can see that the ICO was very hot in the past, and there was a very big risk behind it. The state would take some measures. At the same time, we also see that some countries will guide the development of STO. This is actually the supervision and decision-making level for new technologies and new business logic. Under the premise of mutual understanding, there may be some new changes to better guide the industry.

I personally feel that DeFi itself, practitioners should be careful and know where the boundaries of risk are. Although our theme is that the application is unbounded, the risk is bordered, which is for the practitioner. In addition, it is more for the regulator to see the emergence of DeFi, and ultimately what its meaning and goals are. We are more eager to bring more efficient, more open and transparent financial market rules to the market through decentralized blockchain technology. Under such a goal, I believe that supervision is also good, and that being supervised by the regulators, as long as you align the goals and visions, you can reduce conflicts to a certain extent, and bring new ideas and technologies to the tradition. The financial markets, upgrading traditional financial markets, financial infrastructure, make it better and make it more accessible to a wider range of ordinary users.

Tao Quming : Actually speaking, DeFi and CeFi must have a battle. I personally feel that it is not necessarily a bad thing . And from the perspective of development, with the blockchain, with DeFi, it provides better technical means and conditions for the financial industry that has existed for thousands of years, to make various innovations at the application and product level. There have been fights between the boss and the second child on the Internet, and the third and the rest are the ones who died. I personally think that the final result is not necessarily who wins or loses. I prefer a word that is “open finance”, based on the Internet, supported by new technologies in the future of blockchain, the new Internet digital finance of the original Internet. Compared with traditional finance, it can have a broader financial inclusiveness, meaning that more people participate in financial markets and obtain various financial services and products. At the same time, finance can better serve the real economy and business, bringing value creation and efficiency to all mankind.

In the future, open digital new financial scenes, DeFi mentioned today, or traditional finance, CeFi, will have its place. Rather, a more effective combination of these two aspects may result in a more efficient and cheaper service than today's traditional financial markets.

Yan Li: MakerDAO is particularly famous. Just mentioned in the discussion, DeFi has some drawbacks. Asset access is relatively weak. Unlike traditional mainstream markets, it can access stocks, bonds, ABS, etc., and its access to assets is relatively thin. Second, the liquidity is relatively poor. Sometimes it is not comparable to the decentralized digital exchange. What solutions does Pan have on these two big BUGs?

Pan Chao : The second one is not a BUG, ​​it is a feature . Liquidity is the quality of the sub-quality. The frequency of trading at different levels is not the same as the transaction amount. It is like how many times you can borrow from a bank interbank borrowing, but it is a very high-frequency payment in daily payments. The two problems are solved. The current infrastructure brings the current results. On DeFi you can see a lot of big transactions, high frequency transactions.

As for asset issues, there are always more people to use DeFi, or to learn about DeFi products. There are a lot of problems that are not a problem with DeFi itself, but a problem with the blockchain itself. Many people have not owned their own digital wallet, a separate digital wallet. This involves more problems, such as the management of private keys, as well as the likes of Ethereum, the payment requires an asset first, the identity of the person, etc. These problems need to be solved at the same time in order to have a large-scale application of DeFi itself. Professional person.

From the asset side, I am not very negative. Especially in the Ethereum main chain, I can see many very large banks, including banks in France and Spain. They all try to issue bonds at Ethereum. This is a very big thing, proof. Ethereum has the potential to take on trillions of assets and release the huge liquidity behind it.

Yan Li: Vite Labs is actually a low-level solution, it is a zero-rate, very cheap public chain. At the application level, how do you combine with DeFi and contribute?

Liu Chunming : Regarding the application level of DeFi, we mainly made two explorations. On the one hand, we built a decentralized exchange on the public chain. At present, everyone is interested to experience it. I feel that its experience is relatively close to the centralized exchange. Some people may not know about the decentralized exchange, and there are still many real user transactions. With the advancement of technology, there are many problems that seem to be unsolvable, and they will all be overcome one by one.

DeFi's user experience, or the technical challenges it faces, I believe will eventually be resolved, this is the technical level. In addition, landing level. For example, we are now working with some US cities and state governments to establish some projects. It is also included in the promotion of some cooperation with the European Union, UNICEF and the Economic Community of West African States. For the Syracuse project, what is the main problem? Syracuse is a small city in New York State. Local housing conditions and household income levels are relatively low in the United States. The government has led a mutual aid microfinance project and built a code on the blockchain. Relatively wealthy people can make small donations to poor people and get some kind of incentive. The source and flow of the entire fund, how it is used is open and transparent in the chain, so as to prevent corruption and facilitate public supervision of the government.

When I first started this project, I still took some detours. We spent a lot of time telling the government what the blockchain can bring, what benefits it has, and where its problems are, how to land and so on. I found that with the application of this project, some of the following projects have become more and more talkative, including recently China has also introduced some policy support for the application of blockchain technology, so I believe that with the government level facing the district Blockchain technology, or the promotion and advocacy of blockchain application, believes that the process will accelerate and become faster and faster.

Yan Li: From the wallet products and experience, please ask He Bin to talk about how to promote the application?

He Bin : In fact, as a decentralized wallet, the pressure is quite big. In fact, the blockchain itself is said to be landing, and the application scenario may eventually encounter a hurdle. The user’s perception of the wallet and the curve that adapts to it are very steep. In the process of doing imToken, we are constantly challenging the balance. The balance lies in how to insist on decentralization, adhere to the unmanaged way, let the user's private key be self-sustaining, and manage their own assets. At the same time, under such premise, how to continuously improve the experience, this topic itself needs the whole industry to solve together. We also see the platform of the new generation, and we are also trying to make some breakthroughs. In the Ethereum, the user's account is set up on the contract through the smart contract, and the concept of the private key is concealed. It is no problem to lose it in the mobile phone because it has a "guardian program". As a very large threshold for the application, how the wallet itself evolves, the industry is also making progress, and imToken will continue to improve the product.

From the DeFi application, my feeling is that it is minimal, so try to tear a hole through a breakthrough with a very vertical detail. I am impressed with the fact that DeFi is constantly emerging from the Ethereum platform, or an agreement. The most impressive thing is the Compound protocol, which is very efficient to complete lending in a liquidity pool. For the user, the C-end user feels like using a balance, depositing his Ethereum or other assets into the contract, enjoying interest, or lending other assets. If you make such a breakthrough, you can use some minimalist thinking to bring the application to a reasonable enough scale before evolving it. This can give DeFi some ideas.

Yan Li: I would like to ask Teacher Tao Quming how to balance technology and supervision, stability and innovation, decentralization and user experience when sharing products. Can you share some real experiences and suggestions?

Tao Quming: What we are doing is helping DeFi get more users. We are also thinking about this problem. How to make DeFi more attractive to users, mainly do two things. The first thing, because He Bin always talked about the high threshold for users to accept a decentralized wallet, now the technology is still evolving. For users outside the threshold, our idea is not to give up on them. With the traditional Internet KYC method, these users can be caught and legally regulated with some centralized compliance. The hosting method can meet the needs of these users. .

In addition, it is necessary to bring DeFi's early industry dividends to more users, so that they can feel the real benefits of DeFi under the "currency standard", some users are willing to trade, or the high-risk demand of derivatives. A large number of users, like traditional financial stock trading and wealth management products, China is very obvious, financial users are far greater than stock trading users. why? It's very simple, because financial management is a relatively low risk, but its income is not so high, but compared with the traditional, we see that DeFi traditional wealth management products far outweigh the current centralized wealth management products.

What Axonomy does is to select really good DeFi projects, develop low-risk based on these underlying projects, and be high-yielding products compared to traditional finance, so that more users can learn emotionally. The best way to educate users is to let users earn money. After earning money, they will learn how to use the centralized wallet to get more benefits.