Text | Edited by Wang Zelong | Produced by Tong | PANews
While the industry's flagship military bitcoin, Ethereum's "digital gold", and "global financial settlement layer" halo are gradually diminishing, DeFi has evolved from the community's native edge concept into the industry's mainstream narrative, which is increasingly carrying more people from the industry and beyond Hope. How is DeFi doing in 2019? How will it change in the new year?
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1. The total amount of financing exceeds 500 million yuan.
If you pull the time back to the beginning of 2019, MakerDAO seems to be the only "gimmick" in the DeFi sector. DeFi products in other directions will have no climate in terms of number of users, amount of lockup, and business model. The Makers are absolutely dominant.
However, the market changes rapidly over time. According to DeFiPulse data, as of December 31, 2019, the proportion of locked positions in Maker in the DeFi sector has fallen to 50.97%. New synthetic asset platforms Synthetix, lending platform Compound, InstaDApp and other latecomers have "pirated" With less market share, wrestlers are becoming more diverse.
If you look at the data of the DappTotal DeFi section (introduced some DeFi products in EOS), the proportion of Maker's lock-up in the overall market has dropped to 35.8%, and the share of EOSREX and Edgeware, which are ranked second and third, total About 36%, roughly the same as Maker. The DeFi ecosystem has basically formed a super strong situation.
DeFiPulse data shows that as of December 31, 2019, the amount of DeFi ecology has approached $ 670 million. Judging from the changes in the amount of lock-up, there are amazing items in various categories such as borrowing, DEX, payment, and assets. The most notable is the loan platform Nuo Network on Ethereum. DeFiPulse data shows that the platform Between January 25 and December 28, the amount of locked positions realized an explosive growth of 115,999,900%, reaching USD 6.96 million. Regardless of the total amount of locked positions or the growth rate of locked amounts, borrowing projects are the "hands" in the DeFi sector.
In contrast, Augur, a star project derivative platform in early 2019, and Bancor, a star project in 2018, both seem a bit lonely. Between January 1, 2019 and December 28, 2019, the lockup amounts of the two were recorded at 42.94. % And 68.60%. The predictive market project Veil, which is closely connected with Augur, has died after being launched only six months after being launched, even though it has received blessings from top-tier capital such as Sequoia.
In addition to the Ethereum-based DeFi, the performance of Layer-2 Lightning Network, which is deeply plowed into Bitcoin, is particularly worth mentioning. According to the data of Lightning Web Browser 1ML, as of December 31, the number of Lightning Network nodes has reached 10,925, the number of channels is as high as 35,298, and the locked funds in the network have reached 862,56 Bitcoins, or approximately 6.25 million US dollars.
In terms of financing, PANews conducted statistics on the projects on DeFiPulse and found that the five types of projects, including loans, DEX, derivatives, payments and assets, totaled USD 74.2 million in 2019, exceeding RMB 500 million.
Among them, the financing amount of the lending sector accounted for an absolute majority, reaching as high as 61.9 million US dollars. MakerDAO was the same as DeFi's peers with two rounds of financing exceeding 27.5 million US dollars (one round of financing was not disclosed). Subsequently, ACINQ, one of Lightning Network's main development teams, ranked third with a financing amount of $ 8 million.
The investors of the DeFi project are mainly US funds and VCs. Almost all of them are top-level institutions in the industry, such as a16z, CoinbaseVentures, Polychain, Paradigm, etc. VC institutions in China include Dragonfly Capital and NGC Ventures.
The overall amount of DeFi lockups in 2019 has been steadily rising, and product richness has been gradually improved. The feasibility of the business model with MakerDAO as its core (the so-called "moneylego") has been initially verified. Although DeFi faces certain twists and turns in 2019, such as the closure of Veil, the boundaries of the DeFi ecosystem have also continued to expand, and it "breds" to public chains such as Bitcoin, EOS, Polkadot, and various types of DAO and DEX internally. And other generalized DeFi hyperplasia. 2019 is a happy year for DeFi.
However, there must be shadows behind the light. DeFi still has many problems to be solved.
2. The lack of DeFi: insufficient technical kinetic energy, financial ecology still needs to be improved
- The development of the main public chain is less than expected, and the price and liquidity are weak
The current DeFi is mainly built on public blockchains such as Ethereum and EOS. However, in 2019, DeFi has made great progress, and the two public blockchains, Ethereum and EOS, are not doing well. Ethereum 2.0 with high expectations is still facing difficulties in 2019, such as the difficulty of coordinated management by major developers, inconsistent opinions on expansion plans, and repeated bounces of network upgrades (such as the Constantinople fork). What's more, the price of Ethereum is gradually lowering (especially in the second half of the year)-this is obviously not conducive to the value capture of the DeFi project.
EOS's embarrassment is not too much to let go. In a little more than two years, the blockchain 3.0 of millions of TPS has become a laughing stock of all living beings. The scarcity of RAM resources is expensive and the network is frequently congested, and the integrity and richness of the ecosystem is difficult to achieve. Similarly, the price of EOS also started to decline gradually in the second half of 2019.
Not only that, Ethereum, EOS and other public chains also have obvious shortcomings in liquidity. According to a December 23 article by TheBlock, Bitcoin's current liquidity is 5 times that of Ethereum and more than 10 times that of other cryptocurrencies. This obviously poses a lot of challenges to DeFi's price mechanism and user experience.
- Hidden systemic risk
The most famous point in the development of DeFi is the composability of DeFi, that is, DeFi projects can be nested with each other. MakerDAO, as the "central bank" in the Ethereum DeFi system, adjusts quasi-interest rates to affect the operation of secondary lending products such as Compound. Compound, Uniswap and other secondary DeFi products make the entire ecological product form richer, and also improve the efficiency of rapid conversion of different assets.
This means that a single or several DeFi protocols fail or are attacked, and the entire DeFi system may collapse due to its interconnected and nested features.
It is also worth noting that due to the current over-debt in the DeFi ecosystem, asset utilization is low. In this regard, many people in the industry have proposed a "SuperfluidCollateral" solution, which can be simply understood as the same asset is used for mortgages, and can also be used for other purposes such as borrowing. One kind of doubt about "super fluid mortgage" is that after implementation, it may trigger a systemic risk of thunderstorms caused by long lending in similar P2P lending.
Undoubtedly, how to look at the "combinability" of the asset side and the product side in the DeFi ecosystem is a problem that must be clarified before DeFi can develop in depth.
- The user has a small body and a high degree of overlap, and there is still distance to go mainstream
Acala Network cited Alethio analysis, saying that the maximum daily transaction volume of Ethereum's DeFi market in 2019 did not reach 15,000. These transactions were initiated by more than 20,000 Ethereum independent users. Among them, MakerDAO, Compound, Uniswap, and Augur existed between the four projects. Many repeat users, obviously, the overall size of DeFi users is still small.
There are obscure concepts in the use of overlay DeFi (such as MakerDAO users need to understand key concepts such as CDP, Maker, DAI, governance, and voting), and cumbersome operations (according to Roham Gharegozlou, CEO of Dapper Labs, when told to download the Metamask plugin) , Up to 99% of new users have been lost), large price fluctuations and other issues, DeFi's education and training for mainstream users is obviously a long way to go.
3. What will DeFi look like in 2020?
- BTC may gradually replace ETH, becoming the most critical anchor asset of the DeFi ecosystem
In a sense, the largest DeFi application is actually Bitcoin, not MakerDAO. No matter from the perspective of liquidity, volatility, asset size, etc., Bitcoin is fully qualified to serve as the underlying asset and de facto central bank to support the DeFi ecosystem. More importantly, major countries, including China and the United States, treat Bitcoin as a commodity or currency in a certain sense, rather than securities, which greatly reduces regulatory risks.
At present, some teams are already trying to introduce Bitcoin into the DeFi ecosystem, such as packaging BTC into imBTC and xBTC in the ERC20 format, modeled on the MakerDAO model and based on the Bitcoin sidechain RSK DeFi platform Money on Chain.
- Generalized DeFi map rolls out, DeFi format competition is fierce
From a grander perspective, DeFi should be considered as open finance. Digital currencies such as DCEP and other central banks, Libra and other stable coins with global influence potential, Des represented by Uniswap, and native stablecoin giants such as Tether in the crypto world should be included in the scope of DeFi.
To the naked eye, the growth of these products or institutions in 2019 is very impressive. Taking the head of Dex Uniswap as an example, its lock-up amount has exploded from approximately $ 470,000 in early 2019 to $ 27.357 million at the end of 2019.
Another example is Libra and DCEP, both of which are expected to be launched in 2020, whether it is Libra's commitment to "bankthe unbanked", or DCEP's "partial replacement of cash" "Will undoubtedly make the DeFi layout richer and more complex.
- CeFi and DeFi dance together to increase mobility
In contrast to DeFi, there is CeFi in the blockchain industry: centralized exchanges, stablecoins, and lending services. Compared with the current DeFi, CeFi obviously has a huge advantage in terms of liquidity. For example, the world's largest stablecoin USDT often occupies more than 30% of the transaction share of cryptocurrencies in 2019. If USDT is introduced into the existing DeFi product design, it will obviously help boost the growth of DeFi.
In fact, this is already what DeFis are trying. DDEX, one of the largest DEX, has started to support USDT in the new version of the margin business. It is expected to enhance the liquidity in the platform's loan pool; MakerDAO launched its multi-asset mortgage DAI (MCD) system at the end of 2019, and also introduced BAT. A liquid token.
MakerDAO CEO Rune's attitude towards this type of CeFi and DeFi is quite clear: the introduction of centralized assets can increase the liquidity of Dai and the decentralized financial ecosystem, and expand the cryptocurrency to as many people as possible, expanding the crypto DeFi Overall market value.
- ETH turns to PoS, or is characterized as securities, regulatory risk significantly increased
The current DeFi is mainly built on Ethereum, and the transformation of the latter in 2020 will be a key internal factor affecting the development of DeFi. With the launch of Ethereum 2.0 in 2020, it is expected that products within the Ethereum ecosystem will shift to PoS on a large scale. As perpetual income is generated, Tarbert, the new chairman of CFTC, stated that ETH was tested or identified as securities based on Howe Test.
If this assertion is true, many products in DeFi may repeat the same mistakes as the stable coin Basis and the prediction market Veil, and it is difficult to escape the bad luck of project closure due to high compliance costs.
It is believed that this is not only the key battle for DeFi, but also the Achilles heel of the entire crypto world.