Editor's Note: The original title was "Three Low-Key Product Trends in the Crypto World"
Foreword: The bear market in the crypto world continues, but the products in the crypto field have never stopped building. The most prominent in 2019 is the progress of DeFi. Compared with the beginning of the year, there has been great development from the scale of its mortgaged assets to the diversity of its products. Progress has been made in stablecoins, loans, futures, and synthetic assets. However, progress in dApps and other areas is still small, and there is still a long way to go to enter the mainstream. So, what kind of development will the crypto world usher in in 2020? The author Richard Chen (partner of the early crypto fund 1confirmation) believes that there are three low-key product trends in the crypto world that deserve attention: smart contract insurance, joint curve, and wallet user experience. The original text is from coindesk translated by "CiQi" of the "Blue Fox Notes" community.
The cryptocurrency space has never lacked news and drama, and 2019 is no exception. But under these noisy appearances, many teams are already building the open financial products that the world needs.
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- Hong Kong Securities Regulatory Commission releases position paper on supervision of virtual asset trading platform [Simplified Chinese]
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In the long run, the adoption of products is the ultimate force to promote the development of the industry. I have spent a long time thinking about how to achieve the fit of the product and the market. I think the following three low-key product trends will achieve substantial breakthroughs in 2020:
Smart contract insurance
DeFi is a typical representative of Ethereum in 2019. The amount of ETH mortgaged by users exceeds 2.7 million, and financial products that generate a large amount of income through collateral are used. This means that about $ 664 million of assets were locked in DeFi applications in 2019 because people want to use rather than spend their cryptocurrencies.
Compared with traditional finance, one of the biggest advantages of DeFi is composability. We have seen a lot of aggregators such as InstaDApp and Zerion. Their construction integrates MakerDAO, Compound, and Uniswap.
However, the composability of DeFi comes with systemic risks. If an underlying currency such as Compound is hacked, every project built on Compound will suffer. This is similar to 2008, when the subprime mortgage default crisis eventually caused Lehman Brothers and Bear Stearns to collapse like a house of cards (Blue Fox Note: MakerDAO is currently a lower-level project in DeFi).
In addition, high-yield DeFi savings accounts like Linen and Outlet target mainstream users, so the first question that comes with it is: What are the risks?
Historically, smart contract audits and formal verification have failed to capture critical vulnerabilities. Traditional insurance companies are too slow and too bureaucratic to enter this field, which has led to the rise of crypto-native insurance programs. The three projects, Nexus-Mutual, Upshot and Convexity, have launched insurance businesses in the mutual assistance, forecast market and financial derivatives fields. Each of these products has its advantages and disadvantages, and they are useful on their own, often for different purposes.
I am most interested in mutual aid insurance. In the past few years, we have seen many DAO experiments on Ethereum, from TheDAO to MakerDAO, to MolochDAO, Metacartel DAO, etc. The insurance version of DAO is mutual assistance in the real world. It is owned by the community, similar to an insurance company operating in a "self-help" manner, and its benefits are for its members. There has been precedent in history that when insurance companies are too slow to enter certain markets, the mutual aid model comes in to fill the gap. In the 17th century, British merchants and sailors pooled their resources to form the first version of marine insurance.
A similar phenomenon is now happening in the field of smart contract insurance. Projects like Flexa, Paraswap, and Totle are pooling their ETH reserves and are designed to provide insurance services to users. To date, more than $ 1 million has been insured, and this number will continue to grow in 2020.
2. Joint curve
The joint curve is a smart contract that mints and destroys tokens. (Blue Fox Note: Joint curve, bonding curve proposed by Simon de la Rouviere, it describes the functional relationship between "token buying and selling price" and "total amount of tokens issued.") Buying a joint curve will push up token The price makes it go up the curve and vice versa.
It is not surprising that the short-term price of cryptocurrencies is driven largely by speculative trading on exchanges. Considering that the price of tokens affects the economics of the crypto network, the joint curve is very suitable for projects such as these: they want their token success to be directly related to the formula determined by a basic indicator, not to speculators Related to the whim.
In addition, its tokens are always liquid because its counterparty is a smart contract and not another buyer or seller. The joint curve prevents liquidity from being spread across multiple exchanges in a multi-token economy. Union curve tokens are not transferable, so they can be used well as DAO tokens. Buying a joint curve is like buying a membership for exclusive rights, such as earning fees from certain uses. These fees can be used to purchase a joint curve, which drives up the token price and causes token holders to capture value directly from product use.
Many projects in 2019, such as Fairmint, Forte, Nexus Mutual, Uniswap, Cheeze Wizards, etc., are using joint curves. It is expected that more projects will test new joint curves in 2020. (Blue Fox Note: The joint curve expresses the game of interests by combining mathematical formulas and smart contracts, and has the opportunity to realize a more reasonable token economic model, which is worth paying attention to)
3. User experience of wallet
The biggest bottleneck for large-scale adoption of dApps is the user's entry experience. According to Dapper Labs CEO Roham Gharegozlou, up to 99% of new users lost when told to download the Metamask plugin. Using today's dApp is like trying to use the Internet in 1993. At that time, there was no Netscape browser. You had to go to a bookstore to buy a TCP / IP software floppy disk and follow the 38-step installation process. (Blue Fox Note: Whether downloading and using wallets or installing plug-ins, although there is a high threshold, it is not insurmountable. In addition to using the threshold, the strength of user needs needs to be considered. If there is enough rigid demand, these can be overcome So, in addition to the user experience, we must also consider the product and market requirements.
Fortunately, in the past year, a lot of excellent UI / UX research has been done to improve the dApp user experience, and they will be implemented in the wallet in 2020. There are two main points: contract-based accounts and meta-transactions.
Contract-based accounts (as opposed to externally owned accounts) are supported by smart contract codes and do not require a private key to access funds. Smart contract wallets use contract-based accounts to eliminate the need for users to manage private keys, and their funds do not need to be escrowd.
These wallets can also be programmed with traditional banking security features, such as account recovery, fraud protection, withdrawal limits, and more. Next year, Ethereum users will move from the most used externally owned accounts to contract-based accounts.
Meta-transactions rely on relayers to broadcast user transactions to the Ethereum blockchain, thereby giving dApps and wallets more flexibility in user experience. dApps can subsidize users who try dApps before buying cryptocurrencies. This part of the cost can be counted as user acquisition costs (Blue Fox Note: CAC, also known as customer acquisition cost). Users can also use dApps only with Dai, without having to hold ETH to pay for gas.
I wrote about the wallet pattern earlier this year, and I believe that the ultimate successful wallet path will be unmanaged + local integration. We will see that users log in to the dApp using email and password, as they are used to using Web2 applications. It eliminates the need for seed phrase backups (Blue Fox notes: mnemonics) or plugin downloads, which will help dApps connect to more users.
Risk warning: All articles of Blue Fox Note can not be used as investment advice or recommendations. Investment is risky. Investment should consider personal risk tolerance. It is recommended to conduct in-depth inspection of the project and make good investment decisions.