What breakthroughs has Open Finance made in 2019? See how Pantera Capital summarized

Author: Pantera Capital

Compilation: Chain Wen

This article is an excerpt from "Finance 2.0 :: Pantera Blockchain Letter, December 2019"

We think that one of the most interesting applications of blockchain technology is to create a brand new open financial system, which is often called "Decentralized Finance" (DeFi).

Before the Internet, the so-called information revolution as we know it was actually radio or television. The "revolution" they brought was nothing more than a change in the way they accessed content. Basically it did not bring too much to the way people created new information More innovation. If we take TV as an example, you will find that there are only a handful of people who can watch TV-the Internet and writers basically control the content and how it is transmitted.

Unlike these information revolutions in history, the Internet not only subverts the way of accessing content, but also makes content creation more "democratized". In short, anyone (even your dog) can be on the Internet Post content.

Therefore, when Internet applications start to enter the financial field, we will find that 10 to 20 years from now, the world will change dramatically.

But what will it look like in 10-20 years? Here, we will list some basic primitives of the financial system, and then tell you what the future open financial system will look like.

At present, the market has begun to create solutions for these open financial system primitives, but in our opinion, there are three main obstacles that will prevent related technologies from taking off. Earlier this year, we mentioned these three main obstacles in A Crypto Thesis:


2. fiat currency "entry"

3. Freshman infrastructure

Below, we analyze whether these three obstacles are effectively optimized and improved in 2019.

Evaluation of three main obstacles to the popularization of open financial systems

At present, we have seen that scalability and fiat currency imports have improved significantly, and infrastructure has also made little money. At the Pantera Blockchain Summit held in October this year, two round tables discussed scalability and blockchain infrastructure issues. If you are interested, you can search for the replay of the meeting. Many experts in the field of open financial systems are at the meeting. Shared his unique insights on the Internet.


In the past year (especially in recent months), the scalability of the open financial system has improved dramatically. 0x has partnered with StarkWare to execute hundreds of transactions per second. Similarly, Uniswap started a trial at Plasma Group to test the throughput of 100 transactions per second. Recently, BloXroute was put into production on the Ethereum blockchain, which is also to improve network throughput. Previously, Ethereum has increased its own throughput by about 25%, but with the support of bloXroute, the network throughput may reach the current ten next year Times. In addition, Uniswap and 0x are also planned to start production in the second half of 2020.

Plasma's scaling technology enables higher throughput and lower latency without any collateral / capital requirements. We have made great progress in Plasma research, especially to mention the Matic Network, which has launched a trial on the Ethereum mainnet using Plasma technology and is expected to provide support for more complex applications in the coming months.

Finally, there is a new technology called "rollup" that can increase the expansion ratio by 10-50 times (without delay), which is actually the technology used by Uniswap in their expansion experiments. So, what we need to pay attention to now is to see when these technologies will actually be put into production. We feel that many things may happen in the first half of 2020, and then in the second half of the year, some applications using related solutions will actually be put into use. By the end of 2020, the throughput of some open financial system applications may be more than 100 times the current Ethereum, and the latency will be reduced to one tenth of the current.

2. fiat currency "entry"

In the past year, the "entry" of the open financial system has also been greatly improved. For example, Bakkt, they officially launched a futures contract product in September this year, and the transaction volume is rapidly increasing. Recently, the daily transaction volume exceeded $ 43 million. Bakkt may launch more products in the future. This trend is really exciting. Get excited!

On the consumer side, Wyre (and its many competitors) also launched a series of products that allow users to exchange US dollars for Ethereum, Bitcoin, or DAI in less than 30 seconds, all without leaving the wallet Or APP. This user experience is really great, and it solves the fiat currency "entry" problem very well. We believe that as more and more products are available on the market, the cost of fiat currency import for the development of the financial system will be further reduced, and it may even expand to more markets outside the United States in 2020.

3. Infrastructure

Among the three main obstacles to the popularization of open financial systems, the pace of progress in infrastructure is the slowest. The launch of Alchemy may be an issue worthy of attention in the development process of the open financial system infrastructure. Although Alchemy makes Ethereum node interaction cheaper and more efficient, they only solve part of the infrastructure problems, and there are still "interface" problems with Ethereum nodes, which means that Alchemy wants to obtain data and apply it to applications. Displaying relevant data in the program is still very difficult. In addition, other Alchemy-like solutions suffer from slower speeds.

Compared with the huge progress made by the open financial system in terms of scalability and fiat currency “entry”, and more improvements are expected in 2020, the speed of infrastructure optimization of the open financial system may still be slower. development of. Our expectation is that it will take about five years for people to feel the changes brought about by the open financial system infrastructure.

Fortunately, we believe that infrastructure obstacles should actually be considered "soft obstacles". Even if the infrastructure is not fully developed, building applications is still "possible." On the other hand, we consider scalability and fiat currency entry to be "hard barriers"-because these two issues are not addressed, the application will not be usable. Therefore, under the premise that these hard obstacles have improved and our expectations for the future, the development of the open financial system in the next few years should be very optimistic.

We will continue to update Blocking; if you have any questions or suggestions, please contact us!


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