Some people say that DeFi is the third wave of the blockchain industry after Bitcoin and ICO. Under the tide, where is the challenge? What about the trend?
On the morning of June 13, Babit's first community interactive interview column, She Knows, the first phase of the first DeFi technology special event kicked off. The topic of the dialogue was "DeFi, what is the new financial technology?" 》
Babbitt editor Ye Zewei and Li Tianfang, the founder of the Hydro Protocol, a decentralized trading open source agreement, Wang Qi, partner and operation leader of the DOS Network, and the CEO of the blockchain investment community Axonomy, Tao Quming and Ethereum The person in charge of the content, A Jian, has a wonderful discussion.
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The DeFi project side is staged with external observers to decode DeFi from the inside out. Here are some of the highlights:
1. There are two major types of DeFi projects in the future. One is based on the underlying technology and capability development, and the other is the integrated blockchain technology capability, which provides DiFi projects for specific scenarios applicable to ordinary users.
2. The biggest problem with DEX is how to create new usage scenarios and do things that centralized exchanges can't do at all.
3, the dependence on the authoritative data source predictor can not solve, it is responsible for the credibility of the data-winding process.
4. The essence of business is to improve efficiency and create value. Openness and transparency are the basic requirements of the future distributed business form. For this reason, it can be realized by centralized or decentralized technical means.
6. Centralization and decentralization are not the purpose, but the means. In the end, how to use it depends on the specific problems we have to solve.
7, in fact, 90% of users really care about not DeFi technology itself, but the new investment and profit opportunities created by DeFi technology.
8, the blockchain industry will also be subject to the rules of the Internet industry: the user has the world.
What is the future of DeFi?
Question 1: The DeFi project is often high in the technology of the Tucao, and it is difficult for ordinary users to get started. DeFi target users are people with certain technical capabilities?
Wang Qi: The current DeFi application threshold does exist. Mainly reflected in the use of account private keys, wallets and other tools. Understanding and operation of financial products. And the difficulty of supervising the deposit and withdrawal of funds. Therefore, the current DeFi is still a large-scale market, and there are very few ordinary users who can use the normalization.
The target users of DeFi will not stay in the minority forever, but the road to application promotion is still very long. For example, the front-end UI and products are simpler and easier to use, and even the average user does not feel the existence of the blockchain. For example, to find a better model to increase liquidity and attract users. For example, to solve the problem of supervision and deposits and withdrawals.
Li Tianfang: Reducing the cost of use is important for any product. I think there are several special challenges to simplifying DeFi products.
First, the most common way is hosting: for example, it is very difficult to buy a ticket, you give me the money, I will do it for you. But hosting and trust have been done too much, and DeFi's "De" has failed. DeFi product managers need to know how to balance.
Second, a large part of the complexity of DeFi products comes from the outside world. For example, the Ethereum wallet is difficult to use, making all DeFi products difficult to use. This has also led to many products starting to make their own wallets, and Hydro is like this. But this strategy has not been reliable for a long time. Drops will not be a mobile phone, so the DeFi project should not be a wallet.
The first users of any new technology product are hard-shell users, and they are useless. We recognize "It's better to have 100 users love you than 1 million kinda like you". Letting the top 100 users love your product is a startup that can be controlled and the hardest to do. I am not worried about horizontal expansion.
Tao Quming : There are specializations in the industry. There are two major types of DeFi projects in the future. One is based on the underlying technology and capability development, like Hydro and DOS Network. Another class of end-user integration and integration of blockchain technology capabilities, providing a DiFi project with a specific scenario.
The bottom chain is the chassis and engine for manufacturing cars. The first type of DeFi project produces a variety of cars on the public chain, while the second class provides taxis, long-distance passenger transport, and freight services. Users end up enjoying services and Internet products that were not available in the traditional Internet era.
I prefer to use the term open finance, not DeFi. DeFi is too hard and hard to understand.
Ajian : DeFi's way of lowering the threshold is not necessarily the project owner's own initiative, but the openness of the blockchain application, so that those who are good at building UI and products will develop on the basis of existing agreement projects and provide services together. . Question 2: DeFi players are mostly from the C side, will future B end users participate in DeFi? What is DeFi still lacking?
Tao Quming : Certainly, the B-end user will mainly participate in the second type of DeFi project I mentioned above. It solves the problem of the last mile of the DeFi application, or it is combined with the user usage scene and lowered. User threshold, which is currently lacking in DeFi development.
For example, the team has developed a lottery-based lottery service based on the compound loan-based interest-loss function. The pledge of ETH is risk-free, and the generated interest income participates in the prize pool draw, improving the fun and ease of use of DeFi products and services. There may be a situation in the future, such a project that solves the last mile problem of the DeFi application will play a major role, just like the role played by the exchange in the speculative scene. The blockchain industry will also be subject to the rules of the Internet industry: users will get the world. Question 3: How to balance efficiency and decentralization in DeFi?
Li Tianfang : You can ignore efficiency first, and DeFi's entry point is "low frequency, high value."
Tao Quming : I do n't agree, this will greatly limit the potential of DeFi. I think that based on the specific application scenarios and product design, choose the appropriate centralization and decentralization technology. Efficiency and decentralization are actually two dimensions. It is not that decentralization must be inefficient. Centralization and decentralization are not the purpose, but the means. How to use it depends on the specific problem we have to solve. .
Wang Qi: DeFi has higher requirements for security (decentralization). In many scenarios, the blockchain only needs to be a financial settlement layer, and efficiency is not a key factor. So we see that DeFi applications are mostly in Ethereum.
A Jian: Too many projects are desperately telling how to improve efficiency. Few projects say that we don't want efficiency, we must go to centralization. I am very happy to see that many projects adhere to the purpose of decentralization.
Many times we are only controversial about the definition of words. Just like decentralization, everyone defines it differently. I think that at the application level, open and license-free is its core connotation. Stick to this point DeFi does not have a bright future. Question 4: Many DeFi projects have their own tokens. Is it possible to make a DeFi "Euro Zone"?
Wang Qi: It is more difficult to share a token from multiple projects from the perspective of the interests of all parties. But is Dai a little bit of DeFi "Eurozone" feeling?
Li Tianfang : If a DeFi project has a Token, it is best to make 99% of users have no perception. There are several ways to do this.
Tokenless: There is no coin at all. In fact, this year's new batch of agreements, such as uniswap, compound, dydx, are all without coins. (Their business logic is useful for ERC20 representative positions, but there is no agreement currency)
Right to work: Just like a New York taxi, Token stands for the right to work. MKR is an example. The “work” of the holder is the liquidation arbitrage. The key is that only 0.1% of users need to know how to play this game is enough.
Membership: Probably a discount membership card. The user does not need to know the existence of this coin at all. But high frequency users will be interested.
Speaking of the "Eurozone", from an investment perspective, of course, someone can tie assets together. But in the end there is still a question of motivation. Question 5: What are the general problems in the current DeFi project? Any suggestions?
Tao Quming: The user threshold is too high, and does not have the ability of direct 2C, it will solve. A Jian: I don't think it is necessary to be harsh. Pan Chao said that it is not easy to introduce identity systems and credit systems. I also think that the credit system at this stage is really not a bottleneck.
Question 6: Where is DeFi's next tipping point?
Tao Quming : I think it is a user aggregation that combines a popular application scenario of DeFi. 90% of users are not concerned with DeFi technology itself, but with the new investment and profit opportunities created by DeFi technology.
After the emergence of the centralized exchange, Bitcoin developed from the geek circle to the mainstream market, and the wealth effect continued to attract new capital, talents and technology into the blockchain industry, and today's development.
Therefore, centralized technology and applications are greatly promoting the development of decentralized technologies and applications.
A Jian: I have a disagreement with Tao. Centralization agencies can't help much in the blockchain.
Decentralized finance has shown a different pattern from traditional finance. If you want to play in this circle, you don't have to look forward to your own killer in the traditional field.
What DeFi does is the automation of financial contracts. The technical basis of this automation is smart contracts, and the point of attack is clear that it is a traditional financial institution. Because traditional financial institutions are still more automated, they still need to introduce human resources and introduce the underlying regulatory system. . And DeFi just throws it all away.
DeFi is to use a bank without human resources to fight against a bank that operates. It’s not good to be successful, but it has its own ecology and roads, which is great.
Tao Quming: I totally agree, but this does not mean that the future of digital finance must be completely decentralized, it will be the greatest degree of trust and de-intermediation. But 90% of users' Bitcoin may be in a centralized exchange.
A Jian: Closer to home. Things always have to be done slowly, and the results will naturally appear. I am more looking forward to predicting the development of the market.
Exchange and DeFi
Question 7: What is the biggest problem facing decentralized exchanges? What is the solution?
Li Tianfang: Speed and efficiency are not a problem at the moment. Just relying on the idea of "moving things that don't need to be done on the chain to the chain" can be 2-3 orders of magnitude before. Liquidity is undoubtedly a big problem. At present, there are several ideas for improving the fluidity of DEX.
One is to put together the fluidity of all DEX (0x). The second is to reduce the cost of transporting liquidity from centralized trading. The third is to use a crowdfunding method to fight a market maker's fund pool (uniswap).
Ultimately, liquidity is not a technical issue. Is the liquidity of a centralized exchange due to technological advantages? Most of the second- and third-line centralized transactions are also very poorly liquid, and they are all brushed out. The biggest long-term advantage of centralized trading is not centralization, but the network effect brought by the first-mover advantage. DEX can do what today's centralized exchange can do on the chain, even if it's as fast as it can't overtake.
The biggest problem with DEX is how to create new usage scenarios and do things that centralized exchanges can't do at all.
Question 8: What is the role of decentralized exchanges in the ecosystem of DeFi?
Li Tianfang : The DeFi project is divided into two categories. The first category is nouns, coins, combinations, futures, and ether cats. The second category is verbs, borrowing, lending, liquidation, and mortgage. The action provided by the decentralized transaction protocol is "exchange." Exchange is the basic operation that most DeFi projects require. Mortgage and liquidation are exchanges. In addition, arbitrage is required to maintain price issues, and arbitrage is also a deal.
In order to achieve "no trust", many of the above scenarios are initiated directly from smart contracts. Smart contracts are not able to place orders on centralized exchanges. This is the role of the decentralized trading protocol in DeFi.
Prophecy machine and DeFi
Question 9. The function of the prophecy machine is to write the external information into the blockchain and complete the data intercommunication between the two worlds. Can the predictor not get rid of the dependence on a few authoritative sources of information in the real world?
Wang Qi : The data chain consists of two layers, one is the data source, and the other is the porter who carries the data to the chain. There are trust issues in both. For data sources we have to rely on authoritative sources of information. However, you can cross-reference data from multiple data sources for comparison and aggregation.
The reliance on authoritative data sources is not a technical issue, and the predictive machine level cannot be resolved. It is not feasible to decentralize the data source through ordinary user voting, the delay is high, the manual voting cost is too high, and incentives are required to ensure participation security.
Li Tianfang: The price generated by the transaction is also the result of a manual consensus of users. If the DEX fluidity is good enough and the user engagement is strong enough, the price reference is valid. Insufficient liquidity, or reference to the data of the out-of-network centralized exchange, is more informative.
Go back to the problem of data chaining. The prophecy machine is responsible for the credibility of the data-winding process. We can decentralize the oracle to ensure that there is no need to trust a single authoritative entity. Decentralization means no access, and multiple nodes need to achieve consensus after getting the data. Question 10. Which DeFi application is most effective for decentralized predictors?
Wang Qi: At present, the place where DeFi mainly uses the prophecy machine is where the asset price is used. In particular, the price of assets in cryptocurrencies and the prices of traditional financial assets. For example, the stable currency of the loan product and the crypto asset mortgage needs to calculate the mortgage conversion rate based on the asset price. Derivative trading platforms require asset prices to determine profit and loss and liquidation. Therefore, such DeFi projects benefit the most.
Many projects now tend to use self-frame predictors as a temporary alternative. This is a central solution. The reason is that the current trust in Dapp is largely based on the trust of the centralized team. Most applications are difficult for users to use if the team is gone.
But I believe that with the implementation of projects such as Boka, decentralized governance is becoming more and more mature, and the decentralized Dapp and prophetic opportunities in the true sense are ushered in a day of eruption. We are optimistic about the better decentralized governance brought about by the cross-chain ecology.
Ethereum and DeFi
Question 11: Taifang is expected to turn to PoS within 2 years. What impact will it have on DeFi?
Ajian: Ethereum 2.0 means PoS consensus mechanism (Casper), sharding, and eWASM (a new virtual machine that replaces EVM).
The more complicated problem in the fragmented blockchain is the so-called contract cross-slicing interaction, and so far no particularly good solution has been seen. eWASM follows the Web Assembly (a mature web browser standard) that supports the development of multiple high-level languages, which may make DeFi's contract writing easier.
Sharding mode has a greater impact on DeFi, because one of the highlights of DeFi is the freedom to combine different protocols. It is based on the premise that the interaction between the contracts is convenient enough. However, the fragmentation interaction will be completed in the third stage of Serenity. There are many uncertain factors, so there is no need to rush to make a conclusion. Question 12: Why is there almost no algorithm to stabilize the currency in DeFi?
A Jian: Mainly still not economically viable. The stable currency is to maintain a stable price with the existing purchasing power (such as the French currency). The most critical issue it faces is how to stabilize the currency when the stable currency itself deviates from the purchasing power of the legal currency.
When we look at an asset, if you want to improve our evaluation of the asset, it is necessary to introduce an asset that is independent of the risk of the asset. If the risk-related is the same direction, it will not support, and will only fall simultaneously.
The algorithm stable currency can only call the assets that it issues, and its own issued assets can not be independent of the risk of stable assets, so it can not achieve stable prices.
Therefore, the most suitable for DeFi is the pledge-type stable currency, because the asset situation is clear in the chain.
The quantitative theory is an entry point for understanding the currency, but if the quantity is the whole of the currency, it is also an oversimplification problem.
Are you entrepreneurs in DeFi's rivers and lakes?
Question 13: Axonomy is a traffic portal for DeFi, and users can participate in DeFi projects (mortgage, lending) on Axonomy to receive platform rewards. What are the judgment dimensions when you choose to put on a DeFi project?
Tao Quming : 1. What is the underlying public chain based on the project; 2. What is the function of the DeFi project; 3. The specific implementation of the business logic and the rationality of the business structure; 4. The security of the DeFi project; 5. The risk control of the DeFi project. Mechanism and boundary conditions; 6, the actual operation of the project, etc.
Frankly speaking, EOSREX, MakerDao and other pledge loan projects account for more than 90% of DeFi market, but the user scale is still very small. Most users only listened to DeFi, but how to play, which heat is more suitable for playing, not know.
Recently, the more popular Lockdrop class DeFi can be seen as an upgrade to the token airdrop. For example, chainx, EdgeWare, users can pledge a certain amount of BTC or ETH in a certain period of time to obtain the Token of the new project. Axonomy provides this kind of gameplay, and Xiaobai can participate without much professional operation.
How to achieve open and transparent is a necessary condition for DeFi. The essence of business is to improve efficiency and create value. Open and transparent is the basic requirement, or purpose, of the future distributed business form. In order to achieve openness and transparency, it can be realized by means of centralized or decentralized technology.
Some needs can hardly be achieved by decentralization in the short term. For example, KYC in many business scenarios, abstractly said, the establishment of the corresponding relationship between the entity and the Internet account, the current technology can not be resolved. A certain degree of centralization is unavoidable. Question 14: Hydro and DOS network, how far do you think the current state of perfection is far from your heart?
Wang Qi: We will encounter some development pits brought by the underlying mechanism of the blockchain, which will eventually be solved in the technology upgrade.
The biggest problem is in the actual application scenarios and user engagement and enthusiasm. The perfect state is not technical, and whether the realization of technology can conform to the development and existing form of the future blockchain can bring real use scenarios and bring practical meaning to more users.
Li Tianfang: Smart contracts can not only transmit information, but also transfer value. They can research each other. This is a new way of playing, so it is important to design interfaces and find partners.
But it takes time for startups to find cooperation. The docking may become a mouse too early. But some important technology docking was too late to be eliminated.
Early entrepreneurs are not qualified to talk about strategy. Don't think too much, bow down and execute. This makes sense, but the external world of the blockchain has changed too much and is constantly iteratively updated. The internal problem is to distinguish what we do for short-term purposes and which have long-term value.
If the Ethereum 2.0 property changes, some of the technology in Hydro can be thrown away. The mistake is not to invest too much in these short-term advantages. But it can't be too idealistic, and it's even less reliable to write code for future technologies beyond three years.