It's About Decentralized Application

The Decentralized Finance (DeFi) ecosystem has made great progress in the past couple of years, and I've been considering the competitiveness and market size at the agreement level. I analyzed the former in April (), this short article will concentrate on the latter.

Regarding the current DeFi status of Ethereum, my biggest concern is it is susceptible to one or a few invisible ceilings (I will explain below). According to Eugene Wei's definition, the invisible ceiling is an invisible upper limit-it can not be measured directly, and will only can be found in an analysis that violates the facts-but it really limits growth. Although it is prematurily . to create an assertion, the DeFi ecosystem might have touched these limits. For example , the greatest value of ETH pledged in the DeFi protocol makes up about about 2-3% of the sum total ETH. In this specific article, I'll evaluate the benefits and drawbacks of the existing DeFi system in accordance with CeFi (centralized finance). Then, I'll try to explore some invisible ceilings that limit the growth of DeFi and produce solutions. Application Scenarios of DeFi Even though the application scenarios of DeFi are very rich (including no-running lottery, prediction market, pledge, identity, and so on ), its current main uses are the following:

* Increase leverage (for example, pledge lending in Maker, Compound, or margin trading on dYdX) * Transactions (e. g. 0x, Uniswap, Kyber, IDEX, dYdX) * The three major applications of synthetic asset exposure (such as Synthetix, UMA) account for the majority of the DeFi activities. Each of the aforementioned decentralized financial agreements directly competes with centralized alternatives. Next, we analyze the dynamics of the application scenarios one by one to know the invisible ceiling of DeFi. For some traders, the two most critical options that come with leverage are leverage and cost. But in these two aspects, DeFi is inferior to CeFi.

* DeFi has lower leverage. Subject to system delay (Ethereum block generation time is 15 seconds), the leverage can not be too high. Why does a greater latency reduce steadily the maximum multiple of leverage? Thinking about the volatility of encrypted assets and the danger of serial liquidation within 15 seconds of block time, it's burdensome for DeFi to supply highly leveraged products. dYdX launched a 10 times leveraged BTC perpetual contract () in April, however in comparison, the typical leverage of BitMEX users is 25-30 times (). * CeFi has lower borrowing costs. CeFi organizations reduce trust-based mortgage requirements (such because the size of the loan department dealing with trusted customers) by expanding credit (such as banks like Silvergate), or by giving large amounts of customer deposits (such because the loan department of Binance and Coinbase) To achieve this. Even though sometimes, the loan interest levels of the existing DeFi agreements are lower, they have structural flaws. Although it is theoretically possible that traders will slowly start trading Compound's cToken-the protocol effortlessly replicates the advantages of Binance and Coinbase's centralized ledger-but this may decentralize the liquidity between cToken and the underlying assets. So can the DeFi protocol provide more leverage? Thinking about the volatility of cryptocurrency and the existing flaws of Ethereum (15-second block time), it's hard to imagine that a platform will give you more than 10 times leverage. The tragedy of Black Thursday on March 12 continues to be vivid (). But some Layer 2 solutions (such as Skale) can achieve 1 second block time and reduce network latency (please note that the vanilla optimistic rollup architecture can not reduce block time, so it can not solve this defect). But it's unclear whether decentralized exchanges (DEX) and traders like dYdX will transfer settlement to Layer 2 solutions such as for instance Skale. So in the end, can DeFi agreements provide more competitive loan interest levels? The clear answer is: probably not. I are expecting that in the next several years, increasingly more banks (which can provide credit through partial reserve loans) will enter the crypto field, and the cost of capital provided by centralized finance institutions will gradually decrease. Additionally , since DeFi agreements can not insure trust relationships, they require a greater mortgage ratio, that may further increase the capital (opportunity) cost. In the foreseeable future, I think the DeFi protocol won't be able to defeat conventional leveraged providers. Even though DeFi agreements can provide some clients with marginal profits that conventional vendors can not provide, industry share is quite small. Most market participants aspire to optimize the fee and availability of leverage, and the DeFi protocol is difficult to match CeFi in these two aspects. Today's market data also clearly shows this: almost all leverage in the present crypto ecosystem is provided by conventional exchanges. Source: DeFi Pulse, Skew It is worth noting that when all trading activities are used in a certain, open and credible neutral DeFi standard protocol (for example, an individual Layer 1 I mentioned a few weeks ago), then DeFi can eradicate basic risks, Thereby improving the capital efficiency of all market participants. But this possibility is quite low in the foreseeable future. Transaction DeFi protocols are far inferior to centralized alternatives in a number of main aspects. Over all, these factors prevent DEX from grabbing CEX's market share.

"Did DeFi bring a bull market? " On June 16th, COMP went on the web with an increase of 6000%+, an amazing increase. Everyone in WeChat groups is asking this question.

"Did DeFi bring a bull market? " With the total market value of DeFi reaching 7. 922 billion U. S. dollars and the total value of locked assets reaching 2. 56 billion U. S. dollars, it generally does not make sense to just look at the data, but on June 16, the total market value of DeFi was only significantly more than 2 billion U. S. dollars, and the locked assets were only one. 17 billion U. S. dollars.. How is it going? The price tag on Bitcoin has not moved previously day or two, and the silent market has made many onlookers sad. They originally expected the cost to go up after the halving event, which was unsuccessful. Nevertheless , with the popularity of DeFi, some analysts genuinely believe that DeFi has contributed tremendous value to the current Bitcoin story. Without this support, the price of Bitcoin could be notably below the common of the past 3 months. By 14: 47 on July 13th, the present price of BTC was 9375. 97 USD, with an increase of 2. 06% previously 1 week. What exactly is DeFi? DeFi is the abbreviation of "distributed finance", which usually describes digital assets and financial smart contracts, agreements and decentralized applications (DApps) centered on Ethereum. In short, it is financial pc software built on the blockchain. May be pieced together like Money Legos. Based on ETH, such as for example Compound, Maker, Synthetix, etc ., centered on BTC, EOS is just a small number, such as for example Lighting Network (Lightning Network), EOS REX, etc .

The existing state of prosperity in the DeFi space means that new tokens can be afflicted with boom and bust cycles. For example , Compound's token COMP has a historical most of US$377. 96 and a lowest of US$53. The existing price is US$173. 13, with a decrease of 12. 44% previously 1 week. Compound liquidity mining is an incentive plan made to attract new users (to increase new liquidity) and reward them with governance tokens. This well-designed growth mechanism frequently leads to an unnatural surge in the DeFi market. So far as Compound itself is worried, the total locked assets amounted to 694 million US dollars. As can be seen from the figure below, there's been explosive growth since June 16. ![What does the explosive growth of DeFi give the? ]() Source: DEFI PULSE It could be said that the most popular and fastest growing industry in DeFi is the lending platform. Similar to a bank, users can deposit money and earn interest from other users who borrow their assets. Nevertheless , in this case, the asset is cryptocurrency, and the smart contract connects the lender to the borrower, enforces the loan terms, and distributes interest. And all this happens without the necessity for mutual trust or middleman banks. Moreover, due to the transparency given by blockchain, by reducing middlemen, lenders can earn higher returns and have a clearer understanding of risks. As the value of Bitcoin and Ethereum locked in DeFi increases over time, the transaction method of getting Bitcoin and Ethereum is decreasing. This decline has further boosted the costs of Bitcoin and Ethereum. On the other hand, the cost increase of other cryptocurrencies can be associated with the growth of DeFi. You will find trading pairs for BTC, ETH as well as other cryptocurrencies, which contributes to the prosperity of the complete cryptocurrency market. Some analysts genuinely believe that this connection is Bitcoin and Ethereum prices provide subtle support. Although DeFi has achieved great success previously 3 months, in addition, it brings risks. The flexible nature of cryptocurrency means that the rising digital assets of locked positions will soon reverse. This may have spillover effects on Bitcoin prices.

The escalation in the past year is 3650. 03% The growth of DeFi, as well as driving the costs of other cryptocurrencies, has also achieved considerable benefits.

By 17: 30 on July 13th, some conventional currencies such as for example Bitcoin and Ethereum have fallen by 18. 50% and 10. 76% respectively previously year. On the other hand, DeFi tokens have shown a fantastic escalation in the past year. The highest is LEND, which will be 3650. 03%, SNX is 913. 38%, KNC is 676. 46%, as well as other tokens such as for example BNT, LRC, LINK, ZRX, etc . also have increased in varying degrees and therefore are still rising. LEND, with the best increase, is just a decentralized lending platform. It had been issued in 2017 with an issue price of US$0. 01. In September 2018, it absolutely was renamed from “ETHLend” to “Aave”, which is a Finnish word meaning “ "Ghost", the price of LEND can be as ghostly as a "ghost". Do not look at it's increase of 3650. 03% previously year. For an extended period of amount of time in 2019, it absolutely was 0. 0042 US dollars and the best price was 0. 44 US dollars. 99. 25%, which will be very nearly zero in the eyes of all investors. But in 2010, taking advantage of the “DeFi” trend, it suddenly became popular, and the increase was amazing. So far as the project itself is worried, in-may 2020, Aave introduced asset selection risk evaluation. The diversity of the agreement provides people with the ability to deposit digital assets such as for example LINK and SNX according to their preferences to earn additional borrowing capacity. Additionally , on July 8, Aave announced the launch of a new feature called Credit Delegation, that allows users to provide peer-to-peer loans without collateral requirements. For example , depositors can entrust their personal line of credit. For example , Karen deposits a USDT to Aave and entrusts her personal line of credit to Chad, who are able to withdraw funds such as for example ETH from the Aave agreement. The newest news, Aave Chief Operating Officer Jordan Lazaro Gustave announced, "We will soon announce a new token economic model, that may include liquidity rewards and plans for Lend token pledge rewards”. Source: Non-small

Veteran DeFi tokens such as for example LRC, REN, BNT, NMR, etc . have surged, that has brought joy to the. REN has increased by significantly more than 503. 58% in 2010. Unlike other DeFi tokens, REN is currently listed on the top exchanges Binance and Huobi, with 24h trading level of RMB 24, 930, 700 and RMB 13, 577, 200 respectively. Republic Protocol (REN) is just a protocol for BTC/ETH, BTC/ERC20 and ETH/ERC20 to trade numerous encrypted assets in distributed dark pools. It is the only zone proven to have such distributed encrypted asset dark pool trading technology. Block chain enterprises. In the standard American and European stock markets, dark pool trading accounts for about 10-30% of most trade volume. JPMorgan Chase, Goldman Sachs, Fidelity, Deutsche Bank, Morgan Stanley are among the few brokers with dark pool trading. REN was issued in 2018, and its annual historical price is $0. 16 in 2020. With regards to project dynamics, REN CEO Taiyang stated that Ren has generated a multi-party computing (MPC) protocol, RenVM. The initial use case we recently launched on the mainnet is just a bridge between BTC, BCH, ZEC and ETH. Ren, Synthetix and Curve reach a cooperation. To put it simply, DeFi will collaborate together to make the asset flow more smoothly. Source: Non-small In just one month, the "liquid mining" boom started by Compound has brought different levels of traffic and funds to the, and also brought new gameplay. To a certain degree, DeFi is apparently very "Blockchain", decentralization, distributed finance, etc ., seem to once again allow philosophy behind the blockchain shine.

After CertiK captured the Balancer attack at 2 am on June 29th, at 8 pm and 11: 23 pm Beijing time on June 29th, CertiK Skynet system (Skynet) again checked two balancer DeFi contract exceptions with similar axioms, The two exceptions occurred in block number 10360609 and block number 10361515 respectively. Distinctive from the attack on the 29th that simply exploited contract vulnerabilities, this time the hacker cleverly used the Compund financial model, and created a lot of COMP tokens out of nothing. The star DeFi project was attacked 3 x in a single day, making supporters concern yourself with the ongoing future of the entire DeFi market.

Event overview On June 29th, following the attackers borrowed tokens from the dYdX flash loan and minted them, they obtained cWBTC and cBAT tokens through uniswap flash loan, and then traded the borrowed tokens in a lot of Balancer token pools, thereby triggering Compound The airdrop mechanism of the protocol is always to have the airdropped COMP tokens, and then utilize the susceptible gulp() function of Balancer to update the number of token pools, then take all tokens and reunite the flash loan. The attacker is the same as exploiting the compound protocol's financial model, lightning loan and Balancer code vulnerabilities, and has COMP out of nothing, and the sum total profit is all about 11. 5ETH. CertiK analysis: psychological profile of the attacker

The two attacks at 8 pm and 11 pm on June 29th used exactly the same technique and used exactly the same payment address, that was confirmed as a team. Although those two attacks and the 2AM attack on the 29th both used the gulp() of the Balancer contract, the attack practices were different. The latter two attacks used the vulnerabilities of Compound's financial model instead of pure code vulnerabilities. In addition , the make money from the last two attacks is a lot smaller compared to make money from the very first attack, and the hacker who completed the very first attack does not have any motivation to attack again. CertiK judged that the last two attacks were imitation attacks using similar axioms 14 hours following the first attack. New DeFi Security Challenge

This attack mainly utilized vulnerabilities in the style of the financial model, instead of vulnerabilities at the code level. This new attack mode bred by the DeFi market makes the sole "code audit" service of most blockchain security companies useless. Conventional security technologies that only concentrate on the code level and cannot analyze the abstract model cannot deal with the brand new challenges brought by DeFi at all. And DeFi without model-level protection can just only be paid off to a hacker ATM that is acquainted with the DeFi financial model. Does DeFi security warning do more harm than good? This imitation attack has caused many people to question the blockchain security company: Will the analysis articles of the security company teach more folks just how to attack? Why have various safety warnings not improved the safety environment? Do we actually need security warnings? CertiK's standpoint is that not just safety warnings are essential, but in addition faster and deeper! Unlike conventional pc software systems, all transactions and all contract calls on the blockchain are open and transparent. After the attack, the transaction records on the blockchain would be the most simple textbook for hackers. Blockchain security companies must issue early warnings before imitation attacks to safeguard related companies. However , the recent frequent attacks prove once more that security warnings are definately not enough, and cannot change the present security status of DeFi and even the entire blockchain. Is there still a opportunity for DeFi security?

To be able to necessarily change the security status quo of DeFi, we should introduce new security mechanisms for new smart contracts (such as DeFi, IoT). This security mechanism must be able to perform model-level analysis, and must be able to adjust to the development of new kinds of contracts, and attempt to intercept it during an attack, instead of warning after an attack. The CertiK team is having a new secure DeFi mechanism predicated on CertiK Chain-CeDeFi (Certified DeFi)-that can be trusted DeFi, that may completely change the present passive security status later on. Attack reduction Take the attack on Balancer at 11 pm for instance: 1: Borrow three tokens of WETH, DAI and USDC through lightning loan from dYdX, the amounts are 103067. 20640667767, 5410318. 972365872 and 5737595. 813492 respectively. 2: Utilize the tokens obtained in 1 to mint the three tokens (cETH, cDAI and cUSDC). Step 3: Use uniswap to borrow (borrow) and mint (mint) cWBTC and cBAT tokens through flash loans. Step four: Bring the obtained cWBTC and cBAT to the token pool. Currently, the number of cWBTC and cBAT owned by the attacker are 4955. 85562685 and 55144155. 96523628, respectively. Step five: Use cWBTC and cBAT to conduct a lot of transactions in the token pool respectively, thereby triggering the Airdrop operation to distribute the unattributed COMP to the token pool. Step six: Call the gulp() function to synchronize the present number of COMP to the Balancer smart contract, and remove cWBTC, cBAT, and the additional COMP put into the token pool. When exiting the token pool, the number of cWBTC and cBAT owned by the attacker can also be 4955. 85562685 and 55144155. 96523628. However , as a result of additional COMP generated with a large number of transactions in the token pool, the attacker obtained additional COMP tokens. Here, the attacker can also choose to directly enter other token pools, reuse the attack practices from step one to step six, and get additional COMP tokens. Step 7: Repay the flash loans of uniswap and dYdX and leave the marketplace. Step 8: The attacker can still utilize the same method (step 1 to step 7) to launch attacks on other token pools. The attack mechanism is comparable, however the kinds of tokens borrowed through flash loans and used to attack are slightly different.

Reference link: news:

Chinese News:

Original analysis:

Attack transaction history at 8 pm on the 29th:

Attack transaction history at 11 pm on the 29th:

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It took DeFi 2 yrs to break through the US$1 billion market value. In the "312 Black Swan Incident, " the marketplace value was cut in half, but it quickly returned to US$1 billion within three months, with ups and downs. Tomorrow evening at 20: 00 (Tuesday), we invited Pan Chao, the pinnacle of MakerDAO China, and Philipp, the pinnacle of imToken business development, to talk to you about the DeFi following the "312 Black Swan Incident" in just 90 days. What perhaps you have done? Scan the QR code of the poster at the end of this article to sign up. The worthiness of DeFi's locked assets has returned to a historical high-$1 billion. You have to know that after the "Black Thursday" of cryptocurrency occurred on March 12, DeFi was still sitting on the edge of the cliff, and just 90 days later, not merely the worthiness of the overall locked assets returned to the level ahead of the black swan incident., The market value of DeFi ecological projects also have hit recent highs. What did DeFi study on the crisis during this period? What changes have now been made? Could be the visible asset price recovery a spectacle or even a real return of value? What is the following growth point? These dilemmas require careful examination and thinking.

Data source: debank. com DeFi's "Black Swan" On March 12, the sharp decline in the cryptocurrency market and the abnormal blockage of the Ethereum network caused a DeFi domino reaction. The vast amounts in collateral in the basic currency agreement Maker system failed to be auctioned normally and debt occurred. The decentralized stable currency Dai once had a 10% premium. The interest levels of multiple secondary market lending agreements (Compound, dYdX) remain high, and the not exactly 100% fund utilization rate not merely prevents depositors from withdrawing funds, but additionally exposes lenders to excessively high interest levels. High network fees allow it to be burdensome for decentralized exchanges to fit clearing orders. The lock-up value of the whole DeFi market has shrunk by not exactly half. Coping and experience In reaction to the crisis, MakerDAO took the lead in launching a number of policies, including lowering interest levels, joining the auction circuit breaker mechanism, introducing stable coins as collateral, as well as launched debt auctions, issuing additional equity tokens to recapitalize the system's debt. The secondary lending agreement adjusted the collateral risk parameters and rate of interest curve accordingly. A number of decentralized trading platforms also have improved the minimum transaction quota to alleviate the expense caused by the surge in network fees. These number of measures have alleviated the liquidity crisis of DeFi lending at the moment, and interest levels in the secondary market also have begun to gradually decrease, and funding tensions have eased. Two weeks later, the Maker debt auction was successfully completed and the system turned losses in to profits. Two months later, Dai's premium completely disappeared and returned to $1. At the same time, the costs of crypto assets such as for instance ETH have returned to their pre-crisis levels. The DeFi ecosystem, which has never lacked innovation, in addition has seen more lending, trading and insurance hedging agreements. Lessons and opportunities 312 The Black Swan is undoubtedly a blow to all DeFi agreements. But just as there are opportunities behind every crisis, DeFi's resilience has been tested and opened more windows. What have we learned out of this crisis? 1 . The performance problems of Ethereum which can be highlighted when extreme events occur urgently must be resolved. 2. Cryptocurrency isn't a safe haven, and independent systems can't deal with external economic shocks. The main contradiction of Ethereum may be the contradiction between increasing external demand and insufficient internal resources. On weekdays, this classic car could make do with it, but it is too fuel-efficient and it surely will be out of gear at critical times. To carry more and more complex lending options, the improvement of Ethereum performance is imminent. Prior to the launch of Ethereum 2. 0, the expansion of the vertical second-tier network was very important. Luckily, we now have seen that OmiseGO and Loopring have recently launched different solutions. In contrast to performance dilemmas, DeFi's greater challenge lies on the asset side. Aside from Ethereum, there are few highly liquid assets. This is simply not merely a scale limitation, but additionally just one point of risk. A well balanced currency system that only utilizes ETH collateral is difficult to cope with external economic shocks, specifically for highly volatile assets such as for instance encrypted currencies, which demand a diversified collateral portfolio. The occurrence of the crisis pushed Maker to incorporate assets such as for instance stablecoins and Bitcoin (wBTC) in to collateral to boost Dai's liquidity. At present, not exactly 3000 bitcoins have now been deposited in the Maker system as collateral assets, which quadrupled the amount of bitcoins in Ethereum DeFi.

Data source: defipulse. com For decentralized finance to go toward larger-scale adoption, real-world assets, such as for instance stablecoins, gold, and the issuance of traditional financial assets, must be chained. The startup Centrifuge has developed a protocol that tokenizes real assets. Recently, Centrifuge has partnered with Paperchain and ConsolFreight to tokenize music streaming royalties and trade invoices, respectively, and also have the opportunity to lend or issue stablecoins as collateral in DeFi. It is a small step, but additionally a big step. summary DeFi quickly recovered from the pain of "312" within 90 days, which is really a good part of it self. But at exactly the same time, you may still find many basic problems of decentralized finance on Ethereum that have not been solved well. We are fortunate to see that many projects are relocating the proper direction, but we might must be more patient with regards to time.

Other aggregate trading platforms can only choose to sell their very own coins, but DEX. AG provides users with a complete trade functions, and the default is to provide users with the buy function. Original title: "What is DEX. AG? —— DeFi Popular Science Series》 Written by: DeBank DEX. AG is definitely an on-chain aggregation transaction protocol. Currently, it aggregates transaction protocols such as for example Uniswap, Oasis, 0x, Kyber, and Curve.

What is the utilization of DEX. AG? When users use DEX. AG, they are going to discover that it's very different from other aggregate trading platforms. Other platforms can only choose just how many coins you own to market, and the platform informs you just how many coins you are able to exchange. However , DEX. AG provides users with two complete functions of purchasing and attempting to sell, and the function of purchasing is provided to users by default. When users need certainly to buy some DAI to pay off their debts in Maker, I can directly enter the total amount of DAI I want to buy in DEX. AG, and the platform will tell me simply how much ETH I have to pay.

Users no longer need certainly to keep trying, like in 1inch or other aggregate trading platforms, simply how much ETH can be sold to obtain enough DAI to pay the debt. However , there is certainly still a gap between DEX. AG's aggregation engine as well as other aggregation trading protocols. Should you want to sell 200 MKR in to USDT, DEX. AG will directly assist you to trade from Kyber.

However , other aggregate transaction protocols will first assist you to convert MKR to ETH in Uniswap and Oasis, and use ETH to Kyber for USDT. Users can get lower slippage.

The DeFi loan agreement Aave is developing rapidly. CEO Stani Kulechov mentioned the big difference between your project along with other loan agreements, usage scenarios and development plans. Original title: "The old tree blossoms, 3 minutes to understand the most recent progress of DeFi loan agreement Aave" Interviewed: Stani Kulechov, CEO of Aave Aave is just a decentralized money market protocol that users can use to earn interest on deposits or borrow assets. Aave is definitely an open source protocol, anybody can freely obtain code and build about it. Recently, Aave's market size exceeded $70 million. Currently, Aave supports 17 different crypto assets, of which 6 are stable currencies.

Fleetingly introduce the team behind Aave. The Aave team currently has 17 people and is headquartered in London, with offices in Switzerland and Europe to work remotely. Aave happens to be devoted to expanding the Asian market and is recruiting community managers in Korea and Vietnam. Aave was originally the P2P lending type of ETHLend. Why did you decide to switch to a pool-based model? In the P2P loan model, borrowers and lenders can set their own rate of interest, duration, collateral along with other parameters to generate loan requests and loan offers. In ETHLend, if their conditions match, the machine will automatically match the loan offer and request. In the Aave loan pool, the liquidity deposited in the agreement is automatically allotted to the borrower, and the borrower can quickly have the loan through mortgage. This provides more selections for the borrower's loan term-as long since the collateral remains above the threshold, they are able to repay whenever you want. The lending pool causes it to be easier for users to take part in lending. We understand that Aave will allow anyone to take part in the lending pool with parameters set on their own. Is it possible to elaborate? Yes, starting your own pool is part of our multi-pool strategy. Initially, Aave will start several pools to open the multi-pool ecosystem. Our first pool is just a loan pool secured by Uniswap liquidity provider tokens (Unitokens). Which means that Uniswap liquidity providers can acquire liquidity leverage through the use of their Unitokens as collateral for Aave. In essence, Aave will generate a fresh currency market. Every currency market was created to release value from DeFi and bring depositors a profit in accordance with risk appetite. Like Aave can create pools with different risk levels, every one of which attracts different types of liquidity. LEND will soon be used for governance and voting to find out which pools can access LEND-based insurance. Liquidity providers can use their aTokens to vote and manage their fund pools. Weighed against the present governance system, users may have a larger say in dealing with their liquidity. Is it possible to tell us more about LEND tokens? LEND token would be the governance token of the Aave protocol. After the governance function is launched, LEND token holders should be able to vote on protocol updates and take part in the governance of the Aave protocol ecosystem. We're exploring the use of LEND tokens as a governance vote for new lending pools to select insurance. Anybody can use their own assets and parameters to generate their own loan pool, of course, if the pool features a good sense of risk get a handle on, they are able to decide to access the LEND token-based insurance system. LEND holders ensure the security of the protocol by staking LEND in a pool. In case of danger, governance will vote to cut back the pledge of LEND. If the pledged LEND cannot make up for losing, the LEND will soon be cast centered on governance voting to make up. The protocol features a integral backstop module, and Aave community members can deposit stablecoins in this module. When notably reducing or casting a fresh LEND, the backstop module can act as a buyer to ensure the selling price of LEND. Once purchased, LEND will soon be locked for a period of time. In this way, any auctioned LEND won't flood the marketplace in large quantities, and the protection of the LEND price gives the Aave agreement more stability.

What's the largest big difference between Aave along with other lending agreements? A significant function of Aave is "Aave interest-bearing tokens" (also known as "aTokens"). Whenever you deposit in the Aave agreement, you may be given a corresponding quantity of "aToken", that is 1: 1 from the underlying asset. aTokens generates interest directly in your wallet, to help you see the growth of your balance every 2nd. In order to decide to receive this interest at any Ethereum address. Another cool feature is rate of interest conversion when borrowing. This allows you to select between stable and floating interest levels whenever you want, so you always obtain the most readily useful rate of interest. Like in the event that you initially opt for floating rate of interest, however the rate of interest rises sharply, you can switch to a stable rate of interest. We also adjusted the rate of interest model to fill the gap between your floating rate of interest model and the stable rate of interest model, thereby making the brand new stable rate of interest more competitive. The absolute most concerned feature is flash loan, which allows developers to borrow money without any collateral. Fundamentally, they offer any developer with the exact same opportunities since the richest person, and the transaction will simply reverse if the loan is not repaid, so the risk is quite low. Flash loans can be utilized for various basic tools in DeFi, not only to make money through arbitrage. What have flash loans been used for up to now? Flash loans are mainly used for arbitrage. Another use case is to use flash loans to pay off debts to prevent liquidation penalties. The best example is DeFiSaver, which uses flash loans often a day. DeFi Saver enables you to manage all DeFi activities in a single place. It also enables you to put up a computerized self-liquidation procedure, use flash loans to settle debts, release collateral and sell the main collateral to settle the Aave agreement, thereby avoiding liquidation penalties.

DeFi has all of the benefits of decentralized applications. There's absolutely no barrier to entry. Anybody on the planet can use the DeFi application on the chain at any time, completely breaking the geographical and time constraints.

This article represents the author's personal opinion, maybe not the positioning of Mars Finance. The content is supposed to convey more market information and doesn't constitute any investment advice.

Author丨 JackyLHH Source | Vernacular Blockchain

Because the Bitcoin block reward halving was settled in May, we can see that the focus of the whole crypto industry has shifted to ETH 2. 0, IPFS, and DeFi. With the entire cryptocurrency market in "no waves", the tokens of many DeFi projects behaved extremely dazzlingly-there is a huge price increase of 2 to 4 times. The decentralized lending platform Compound has turned into a recent star. Through the strategy of "borrowing to mine", the sum total value of the loaned crypto assets has increased by about 850 million US dollars in just a couple weeks, and the price of its Token COMP is even higher. It hit a higher of $372. 27 on June 21.

Chart: The cost trend of Compound Token COMP, source: CoinGecko At precisely the same time, according to statistics from DeFi Market Cap, the present total market value of DeFi projects has exceeded US$7. 4 billion, and two months ago, the sum total market value was less than US$1 billion. Put simply, in just over two months, the sum total market value of DeFi projects has skyrocketed by significantly more than 700%. Additionally , the lock-up funds on DeFi projects also have shown explosive growth, that has exceeded US$2. 08 billion.

* On April 14, the sum total market value of DeFi was US$1 billion;

* On June 9, the sum total market value of DeFi reached US$2 billion;

* On June 16th, COMP started mining by generation, which trigger a DeFi boom;

* On June 25, the sum total market value of DeFi exceeded $6 billion;

* On July 4, DeFi had a complete market value of US$6. 6 billion;

* On July five, DeFi had a complete market value of US$7 billion. Whether it's the sum total market value, the scale of locked-up funds, or the Token price, DeFi projects show a blowout development. Could be the spring of DeFi coming? How will it develop as time goes on and how will it affect our lives? Today, we will speak about these topics.

DeFi VS CeFi

Before delving in to DeFi, we must know very well what DeFi is and its particular main benefits and drawbacks. DeFi is in accordance with CeFi, that is the abbreviation of Centralized Finance. Even though term CeFi has only been coined lately, it's definitely not a fresh thing. The present conventional financial system could be called CeFi, such as for example conventional banks, stock exchanges, various financial institutions, etc. DeFi could be the abbreviation of Decentralized Finance (decentralized finance), also called Open Finance. DeFi uses blockchain technology and smart contract technology to displace the traditional trust centered on people or third-party institutions with decentralized protocols to build a transparent and open financial system. To understand it simply, CeFi requires you to trust the intermediary (person or organization), and DeFi requires you to trust the agreement (code).

After centuries of development, CeFi has mature services and products and good user experience, but its flaws are that it is relatively closed and requires permission to make use of it. Like many underdeveloped areas in Africa, you can still find numerous individuals who can't take pleasure in the services given by banks along with other financial institutions. One of many major benefits of DeFi is that it is open and transparent, no permission is required, and anybody on the planet can use it without any restrictions. For example , anybody can mortgage ETH assets to DeFi projects MakerDAO or Compound, and lend out the crypto asset DAI that is anchored 1: 1 with the USD. Of course, DeFi still has many shortcomings, such as for example poor user experience, high learning barriers, and immature services and products.

DeFi development status and main representative projects

In terms of market value, the sum total market value of the present DeFi project has exceeded US$7. 4 billion, and the scale of locked-up crypto assets has exceeded US$2. 08 billion, showing a blowout development. It may be said that DeFi has turned into a force that can't be underestimated in the blockchain industry. Let us look at the current DeFi from how many user growth. In accordance with Dune Analytics statistics, as of July 8 in 2010, the sum total number of DeFi users was approximately 240, 000. In the beginning of 2018, this data hadn't broken 100. From the figure below, we can also begin to see the rapid growth of DeFi users.

Figure: DeFi user growth, source: Dune Analytics DeFi was born following the emergence of the programmable Ethereum blockchain. From a distribution point of view, most of the current DeFi projects are concentrated on the Ethereum blockchain, followed by public chains such as for example EOS and TRON. From the perspective of product form, the present DeFi already includes decentralized wallets, KYC and identity authentication, decentralized trading platforms, decentralized lending, staking, stable coins, along with other infrastructure. The whole ecosystem is consistently improving. Picture: DeFi's ecological services and products, source: defiprime Below, we introduce a few representative DeFi services and products: 1 . DeFi dark horse: Compound Compound is just a decentralized borrowing platform on Ethereum. Counting on the Token distribution principle of "borrowing is mining", it has attracted numerous investors to make use of it for mortgage and borrowing in just a couple weeks. Until now, how many Compound users has exceeded 30, 000, and the amount of crypto assets available for borrowing has exceeded 1 . 57 billion U. S. dollars, and the loaned crypto assets are almost 900 million U. S. dollars, which makes it the DeFi with the greatest total borrowing among decentralized lending platforms (accounted for). The top three crypto assets with the most mortgages and loans on Compound are DAI, USDC, and ETH. The initial two are stable currencies which can be 1: 1 anchored to the U. S. dollar.

Figure: Loan data on Compound, source: Compound official website Figure: The composition of the sum total borrowings of DeFi projects, source: DeBank 2. Stable currency lever: MakerDAO MakerDAO is definitely an old decentralized borrowing platform on the Ethereum blockchain. Its market value has long occupied the very best of the DeFi rankings (recently surpassed by Compound). Its stable currency DAI has always been regarded as the biggest competitor of the centralized stable currency USDT. In accordance with its official website, you can find currently significantly more than 400 DApps with MakerDAO embedded, and the sum total value of locked crypto assets exceeds 623 million U. S. dollars, ranking 2nd in the sounding decentralized borrowing platforms (the first is Compound, Is 685 million U. S. dollars). The collateral assets supported by MakerDAO have changed from the single ETH to guide a number of encrypted assets, including BAT, USDC, WBTC, TUSD, KNC, and ZRX, among which USDC, WBTC, and TUSD are stable currency assets. 3. DeFi with the most users: Uniswap Uniswap is just a decentralized trading platform on the Ethereum blockchain. It mainly provides liquidity services for ETH and ERC-20 Token. It is also the DeFi application with the biggest number of users. In accordance with data from Dune Analytics, Uniswap has 92, 000 users, accounting for 38. 61% of the sum total number of DeFi users. In line with the Ethereum browser, Uniswap transactions account for 36. 971% of how many DEX transactions on Ethereum.

4. DeFi with the most Token usage: Brave browser Brave browser was founded by Brendan Eich, the father of JavaScript. It is targeted on privacy protection. The biggest feature could be the introduction of the Token economic incentive mechanism. The native token of the Brave browser is known as BAT, that is the absolute most used token in DeFi in the next quarter of the year, with a transaction level of US$931 million, which exceeds the sum ETH and DAI. The aforementioned is just the end of the iceberg in the DeFi ecosystem, and there are numerous familiar applications, including the web version of the small fox wallet (MetaMask), Veil emphasizing predicting the marketplace, StakeWith. US for staking, stable currency WBTC, and infrastructure Bancor, 0x, etc ., tied to the size of the content, usually do not introduce an excessive amount of.

DeFi's impact and future prospects

Based on a Decrypt report on July 8, DeFi (decentralized finance) keeps growing at an incredibly fast rate, and 1000s of new users have entered this ecosystem in recent weeks.

Based on recent data from the investigation platform Dune Analytics, since June 1st, the top-ranked DeFi protocol indicates an amazing growth rate. The asset pool and the token exchange protocol Balancer performed the very best, with its user base increasing by a lot more than 580% since June. In second place is the liquidity exchange Cureve, with a user growth rate exceeding 170%. Increasingly more evidence implies that DeFi is bringing a new round of storm to the cryptocurrency field and could in the course of time help the typical citizenry use cryptocurrency more widely.

Since March, the amount of users of the DeFi protocol Balancer has increased. Source: Dune Analysis The Dune Analytics dashboard used to measure DeFi users was developed by 1confirmation partner Richard Chen. It includes the 20 hottest DeFi protocols. Considering that the end of Might, users of most these protocols have increased. Dune Analytics allows users to create their particular dashboards to track statistics in the blockchain ecosystem, including the gas price of Ethereum or relevant indicators of decentralized exchanges (DEX). Other DeFi services and products with a higher increase in new users include: the consumer of the decentralized exchange aggregator 1inch increased by 43%, the asset loan agreement Compound increased by 40%, and Uniswap increased by 37%. Compound recently begun to distribute COMP governance tokens to facilitate the community to control the development and future of the decentralized protocol. In May with this year, Uniswap also released an upgrade to guide lower transaction fees and some new features, including oracle pricing and lightning loans.

The blockchain market has been dull for a long period, and only recently did I find a trace of fiery breath, which is brought by Defi. By using "borrowing is mining", Compound's token COMP has doubled its price by significantly more than 20 times in only 30 days, becoming the best choice of the Defi industry. At the recent Blockchain International Week Conference held in Hangzhou, Defi has also become a well-deserved protagonist, so much in order that many voices in the market begun to say that the following round of bull market will soon be brought by Defi. Before proceeding to another discussion, I think you are able to make an easy definition of Defi. I wrote a well known science article "All Referring to Defi, What Is Defi? "Introduce what's Defi, which gives a clear definition: Defi is a general term for various financial services in which users have their own private keys and digital currencies would be the main human anatomy. 2. Business competition between Defi and Cefi At present, Defi's business mainly includes: decentralized transactions, lending, mortgages, financial management, and may have some derivatives later on. These lenders are fundamentally included in the present Cefi, but Defi does it again in a decentralized way. For example , transactions. Centralized transactions have been the main-stream of the market. The transaction volume is very large, which is fundamentally an order of magnitude more than that of decentralized transactions. For example , lending, mortgages, and wealth management. Even though these businesses are Defi's main organizations, they've been currently Its size just isn't much like centralized exchanges at all; for some financial derivatives, centralized exchanges already have a layout, and the transaction volume just isn't small, however the layout of decentralized derivatives continues to be in its infancy. You can find made products and services and an excessive amount of influence. Obviously, Defi has many innovations, such as cross-chain, automatic market-making mechanism, asset synthesis, and so on They are all innovations of Defi, plus they are all of the potentials of Defi, but you will find none yet. Formed a scale, there isn't enough trading volume support. I have also seen the concerns of other bigwigs about Defi. They think that if Defi is simply moving around in the existing circle, it won't bring more new items to a. Pan Chao, Director of MakerDAO China: If DeFi wants to hook up to the real world, it must first recognize the reality. DeFi just isn't a secured asset island. Once the fruits on this island are eaten, you need to transport the food from other areas to resolve the issue of the supply side. In the past, there were only encrypted assets on DeFi, but now there is progress, such as bringing fiat currency assets and stable currency assets to DeFi. The next phase is to get hold of more real assets and map them, including electronic gold, accounts receivable, and so on, Are to resolve the issue of the supply side. You are able to only produce when you are full. 3. Inventory At present, the blockchain market all together is principally centered on competition for stock, whilst in the stock market, it really is mainly centered on transactions, and lending can only just function as second best; Trading is the core demand of the present digital currency market. Trading is highly volatile, effective, and easy to operate. On the other hand, borrowing just isn't considered a core demand, borrowing money is slow, and you will find upper limits on income. There are various rates of interest, Constraints such as deadlines don't meet up with the "speculative temperament" of the digital currency market, and the operation is complicated. This is often known from the comparison of the trading amount of the 2. Currently, the locked assets of the Defi market have just exceeded 2 billion US dollars, whilst the daily trading amount of a medium-sized centralized exchange is significantly more than 2 billion US dollars. What's interesting is that although everybody's demand for Defi just isn't high, everybody's demand for Defi project tokens is very high, and even the demand for Defi tokens is significantly more than the demand for Defi business, which is maybe not healthier. Some individuals also think that the high demand for the Defi project's tokens can also be a good thing, at the least there exists a demand, and there exists a demand because of it. However , this heat is dependant on the escalation in the buying price of tokens. If the buying price of the token increases, the warmth may be maintained. When the price cannot sustain the increase, the warmth will begin to decline. Now the tokens issued and listed on the exchange are projects with a specific degree of accumulation and market visibility, along with market hype, all have such a good market performance. However , the entire demand for lending in the complete market is bound. If more lending platforms emerge later on, it'll face the issue of dividing the stock market. Aside from a few leading organizations, it really is difficult to own some Defi projects later on. Supported by real trading volume, the buying price of tokens can also be highly probably be difficult to react an excessive amount of. Four, increment Should you want to really produce a bull market, you need to seriously consider the increment. The increment includes a few aspects: the very first is the escalation in personnel, and the second is the escalation in business. At present, the influence of the blockchain is getting bigger and bigger, but many people are limited by once you know some concepts and news. You have to let him really enter the operational level, such as let him go right to the exchange to buy digital currency. The worse is far. Because Defi has decentralized properties and must master the private key alone, there are numerous new concepts and several additional operating procedures. They are the thresholds. For that reason should you want to depend on Defi to include more users, it really is one A really difficult thing, we must continue steadily to perform a good job in popular science and user guidance. Even if you continue steadily to use science, it is very difficult to increase users; even when you will find new users, this part of the new users probably will come from centralized exchanges. These users already have a specific theoretical foundation and a specific understanding of blockchain and digital currency, but they also have developed the habit of trading on a centralized exchange. Should you want to bring them over, then you definitely There needs to be a special business that can attract their business. This is exactly what we call incremental business. At present, the Defi industry, whether it is trading, lending or financial management, is temporarily no different from the services supplied by centralized exchanges. Under the same circumstances, it really is still burdensome for your efficiency and user experience to exceed centralized exchanges. of. For that reason if Defi wants to stick out, it must constantly consider these problems: What are our advantages over centralized trading? What can we provide that centralized exchanges cannot provide? Security and own control of the private key are one of the advantages, but this advantage is not even close to enough. Because the three major exchanges never have had too many security accidents, even when an accident does occur, they've been fundamentally paid in full, which is still safe in the user's perception. What else can Defi provide besides security? What innovative organizations can only just be achieved by decentralized exchanges, although not centralized exchanges? So how exactly does the experience of a decentralized exchange far surpass that of a centralized exchange? These questions must be answered demonstrably. That is thinking from the perspective of increment. Increment is one of the fundamentals of a and is the foundation of the bull market. Five, wealth creation effect Obviously, some people say that if the bull market is coming, trading volume just isn't the main factor. The wealth-making effect is the most important, and the wealth-making effect only needs air and bubbles, and it has little to do with fundamentals. They think: Why did the 2017 bull market come? It absolutely was because at that time the ICO issued currency triggered an advantageous effect and triggered crazy participation in the market. And just why some people began to say that Defi provides a bull market in this round is because Defi's currency issuance and the “borrowing as mining” model has triggered a specific degree of wealth effect and triggered certain market expectations. However , how big the balloon can blow is dependent upon the size of the balloon it self besides the amount of air inside. If the balloon is too small, it won't hold much air, and Defi, compared to the previous transaction, the "balloon" it self will soon be much smaller in size and may hold not as air, and it may be difficult to aid 2017. This type of huge wealth creation effect. Moreover, the present stage is significantly diffent from that of 2017. During those times, the country's control of digital currencies had not been so strict. There is no specific regulation to define “all ICOs are illegal fund-raising”. During this period, you must depend on issuing coins to cause This wealth effect must first face legal constraints, and you will find legal risks inside. Defi is a good entry way and a future trend. It is still in its first stages. Whether it's the existing functions, the use of the product, the amount of silkiness or how many participants, the flow is bound, and it can generate much wealth The effect can also be subject to natural constraints. We can stay concerned about this, but at exactly the same time we must also rationally look at the development of Defi. Obviously, whatever the case, Defi is a good seed, maybe 1 day it'll start, that will really trigger a bull market in the market. Six, conclusion Obviously I really hope that the bull market should come, however the arrival of the bull market needs the support of real trading volume. Even though DEFI is developing rapidly now, its current trading volume is difficult to aid the arrival of a bull market. If DEFI would be to bring a bull market, we are able to only hope that there will be more wealth effects, that is, more bubbles. End

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