Polkadot is a highly scalable project that can accommodate a large number of ecological niches. Through the observation of ecological niches, we can not only perceive the overall situation and clearly understand the overall development of Polkadot; but also observe the subtleties and discover which niches are positive. In a state of fierce competition or a blue ocean. Only by having a clearer understanding of the ecological development of Polkadot, as an investor, participant or developer, can we better grasp the dividends of the ecological development of Polkadot.
background
The upcoming 2020 is destined to be an unforgettable year. In addition to the raging new crown epidemic, the fall of some superstars, and the turbulence of the global financial market, these memories have become clearer because of the approaching new year. For currencies, the same seems to be the case, and 2020 is bound to be an important year for industry development.
Bitcoin in this year can be described as a wave of unrest, from the “312” plummet to the recent one or two months of skyrocketing, which is like a roller coaster. Of course, before the second half of the year, Bitcoin was not the most mentioned in the cryptocurrency industry, but another term that has attracted attention since this year and is currently even a bit rotten-DeFi.
After the “312” Bitcoin plunge, when people were full of complaints about the cryptocurrency market, as the weather gradually shifted from early spring to early summer, DeFi suddenly became popular, and this is still inseparable from people’s mouth. Legend has it that the “wealth creation effect”, after all, when other cryptocurrencies are still hesitating and lingering, some players have already earned this summer’s “first pot of gold” on the DeFi track, which is full of all kinds of speculation. As far as the player’s cryptocurrency is concerned, DeFi has naturally become the next outlet.
Later facts are true. The total market value of DeFi has been less than US$1 billion from the beginning of the year. After a midsummer, it has successfully stabilized to more than US$10 billion. The recent market value has floated around US$13 billion, and the total locked position has also broken through. The $16 billion mark may not only leave Bitcoin in 2020, but also this emerging financial “giant” DeFi.
The development of DeFi is not really smooth. You must know that when DeFi became popular, the congestion problem of Ethereum appeared again, and the gas fee also skyrocketed. However, this still cannot avoid the problems of Ethereum itself. On the other hand, it is also because of Ethereum. Due to the limitations of the Fang ecology, most DeFi can only be developed and operated based on Ethereum. Many other blockchain ecosystems that want to squeeze on the train of DeFi can only sigh.
In addition to the performance issues of Ethereum, people also include how to further expand the capacity of DeFi. After all, the ceiling of Ethereum is really visible to the naked eye. Therefore, people are beginning to explore more possibilities of other ecology and DeFi, and the Polkadot ecology is naturally among them.
What is DeFi?
In view of the functionality of reading, we still need to briefly describe some basic concepts about DeFi. What is DeFi?
The full English name of DeFi is Decentralized Finance, which translates to decentralized finance. Compared with “centralized finance”, DeFi’s advantage lies in the fact that with the help of the features of blockchain technology such as tamper-proof, traceability and smart contract functions, traditional financial Loans, transactions, and payments can complete the corresponding financial services without the intervention of certain institutions.
However, DeFi is not exactly the same as the mainstream FinTech (financial technology). The mainstream FinTech focuses more on artificial intelligence and strong data analysis capabilities to screen out customers that meet their own financial products, while DeFi focuses on the need for centralized agency review In the case of, the completion of services such as lending and transactions on the chain is inherently more convenient and reduces intermediate links. Therefore, DeFi may be called an important infrastructure for open finance or financial inclusion.
The value and utility of DeFi
After understanding what DeFi is, we also need to understand what impact DeFi itself will have on the cryptocurrency industry, even the financial system, and social production, in order to understand its future development direction. Below is our (Polkadot Ecological Research Institute) ) In-depth thinking about the meaning of DeFi in the eyes for your reference and learning (in view of the completeness and accuracy of the content expression, this part of the content is longer, readers interested in DeFi can read it carefully, I believe there will be special gains)
1 How will the value of DeFi be reflected?
As an innovative expression of decentralized finance in the digital currency world, DeFi may truly become one of the largest application scenarios in the blockchain world. Why?
We know that the traditional financial market, as a regulator and amplifier of currency and commodity value, has an annual circulation value far exceeding the real value created by entities. Therefore, the traditional financial market is indispensable for economic development, but even so we still see Many criticisms of traditional financial markets:
(1) The exchange of currencies between countries has a long time period, many intermediate links, high transaction costs, and extremely high friction costs.
(2) Due to the low currency circulation and the differences in sovereign laws, the global asset allocation market is actually relatively small. For ordinary investors and small capital investors, it is impossible for them to achieve risk sharing and asset preservation through the operation of global asset allocation.
So we have seen that since the 1990s, the median income per capita GDP in the United States has not changed much, but the overall wealth of the rich in the United States has doubled, not because these ordinary people do not have the ability to create wealth, but They have no channels for wealth allocation.
The wealthy people in the United States have made a lot of money by investing in some emerging markets and investing in the world in the past two to three decades, but the wealth of ordinary people has stagnated. The fundamental reason is that these rich people can hire high IQ and high education. The staff handles legal issues of investment and allocation of global assets, capital flow issues, risk control issues, and finding investment opportunities for them.
It is difficult for ordinary people to pay such a high cost to find their investment opportunities. This is the fundamental reason why the rich get richer and the poor get poorer. The secret of wealth increase does not lie in whose IQ is high or low, but in whose opportunity cost is lower in the wealth they have, and the result is better.
(3) Traditional financial markets have sufficient investment thresholds and physical margins. In the United States, the world’s most developed economy, it is relatively easy for ordinary companies to go public because they do not have the stringent profit index requirements and requirements for listing in other emerging markets. Business scale requirements, legal compliance requirements and other issues.
However, even if it is listed on the Nasdaq in the United States, the company’s assessment itself is also very demanding. After all, we cannot rely on a single idea and a few technical personnel to complete the listing. It will still require a certain scale and A business model proven by the market. Therefore, the traditional financial market is not friendly to good ideas and early creative companies. This will kill a lot of innovation, but it is also risk control.
In short, while protecting investors, traditional financial markets have also lost many opportunities for innovation.
Another investment threshold in the traditional financial market is the opportunity threshold for ordinary investors to participate. For example, domestic investors must buy 100 shares of the Shanghai stock index, and the value of 100 shares of Moutai is more than 100,000. As an ordinary investor, if he cannot buy a hand of Moutai after working for many years, he will miss the allocation. Opportunities for good assets. An ordinary investor who wants to allocate Hong Kong stocks also requires 500,000 stock funds and a certain amount of investment experience. However, we will find that good Internet giants such as Xiaomi, Alibaba, and Tencent are all in Hong Kong stocks. Young investors who meet the requirements cannot buy even if they want to allocate. These requirements are criticized by the traditional financial market.
(4) The game of financial derivatives, such as options, ABS (asset securitization) and other categories, has always been a game where top-level design rules and bottom-level investors pay. Throughout the design process of investment products, investors have always been passive receivers of prices, rather than risk observers, risk control designers, participants, and price setters. This makes the underlying investors who provide the greatest value foundation for these derivatives in the process of risk transmission always in the last link of the risk chain, and this last link is the lowest participation in the entire chain and the least right to speak. Part of it.
Criticisms such as centralized finance may not be too much to describe. Although we have seen many problems today, it has made unprecedented contributions to human society during the 400 years of corporate development. It’s just that the wheels of history are rolling forward, and we have come to the world of blockchain. Decentralized finance will open a new era of value flow.
2 What can DeFi bring?
(1) The flow of value without thresholds maximizes the scale of the financial market.
If 1 yuan to buy a fund is an innovation and revolution in traditional financial market investment, then decentralized finance (DeFi) without threshold will be a financial revolution. Blockchain technology can divide the value infinitely, which will greatly reduce the threshold of value investment. As an ordinary investor, through DeFi’s decentralized exchange, mirroring the leading companies in the traditional capital market such as Moutai, Apple, and Berkshire , Amazon, Alibaba and other stocks, so that ordinary investors can also invest in these unattainable good companies. The scale of decentralized finance will also be magnified and expanded by truly anchoring or mirroring the target of physical value investment, out of the chaos of the current bubble.
(2) Asset allocation without borders helps ordinary investors embrace decentralized finance and realize value allocation.
As we analyzed above, the main reason for the changes in wealth in the United States after 90 years is the threshold of global asset allocation opportunities, which has further widened the gap between rich and poor. How can we break this threshold so that ordinary people can also have global asset allocation opportunities?
Decentralized finance is obviously a good way. Decentralized finance relies on the security of the blockchain, the pre-discussion mechanism of smart contracts and the automatic execution mechanism afterwards, and the oracles can open up the mapping between online value and value on the chain. As well as the real-time nature of the blockchain, the currency exchange changes between countries are extremely convenient, and the frictional cost of differences in legal mechanisms between countries is minimized, which allows an ordinary investor to allocate stocks and bonds in other countries and regions. , Financial derivatives and even equity have become possible.
Let’s imagine again, if blockchain technology, artificial intelligence and other science and technology develop to a certain degree, currency will no longer be an intermediate anchor for value exchange, and different values will be automatically matched and calculated through intelligent calculations. The account completes the value exchange. Then society will truly return to fairness, value contributors will receive value rewards as they should, and evildoers have nowhere to hide. Of course, this is a very distant future, and we may not be able to meet them in our lifetime.
But decentralized finance is tearing down the threshold of value exchange and value investment and shattering the physical margin. This may be the gospel for ordinary investors to change their destiny, but Jesus has just begun to preach, and we have a long way to go.
(3) Helping innovation and creativity and writing a more creative future
As we mentioned in the capital market criticism of centralized finance above, centralized finance has a very high threshold for companies to go public and raise funds. Early entrepreneurs must let market buyers prove the success of their products and models before they can get capital market financing. Tickets. And many good ideas, innovative technologies are likely to die halfway without financing support due to many practical problems, and halfway through this, it is likely that the entrepreneurial team has already spent huge energy, time and a certain amount of capital costs. Even if they are a good entrepreneurial team and have put a lot of effort into it, traditional VC and PE institutions are reluctant to take risks due to their worries about exit expectations, so many innovative and creative opportunities have fallen short of capital thresholds and financial market barriers. in.
If these teams can combine blockchain technology to map their equity into a token, and output through DeFi value mapping, they can obtain investment funds for changing directions. Then it can map the future dividend rights of equity to the token of decentralized finance without shaking its equity compliance, and complete the financing of these innovative ideas, ordinary investors can also complete the VC and PE stages. The allocation of investment targets.
Here we are not analyzing the significance of DeFi’s innovation promotion for artworks. Its logic and investment in early creative companies are like withdrawing.
To sum up, the value of DeFi, the real-world value mapping and the value mapping of the traditional financial capital market, are enough to make DeFi the largest market for value transactions, not to mention that technological development and market consensus have made the physical margin and investment borders hot. The value exchange market after peace.
Regarding the meaning of DeFi, it may be the front field for the completion of value mapping and value transfer from the physical physical world to the digital virtual world, and this may be the end point of the traditional financial market. But before this end comes, we will see the long-term symbiosis and mutual promotion of the centralized financial market and the ever-developing decentralized finance, until the boundaries of the physical world and the digital world become blurred and indistinguishable.
Polkadot’s significance for DeFi
Some people may be curious, since the Ethereum ecology has pushed DeFi to a good position, why should we consider the layout of other ecology? This can be seen through the development bottleneck of Ethereum. On the one hand, there is a large amount of demand. , On the other hand, it is still congested and still expensive. Therefore, people urgently need to find a more suitable ecosystem for expanding DeFi, and Polkadot, as an important infrastructure of the public chain, has naturally become the next steamed bun.
Of course, we also need to see what changes will be brought to DeFi based on the Polkadot ecology, and in this part we will try to disassemble Polkadot’s significance for the development of DeFi from a more macro perspective.
1 Let DeFi “reducing costs and increasing efficiency”
First of all, starting from the most intuitive point of view, Polkadot will bring a significant “cost reduction and efficiency increase” effect to DeFi. Therefore, it is not an exaggeration to call Polkadot the next “ideal hometown” of DeFi.
As we all know, due to Polkadot’s unique architecture settings, Polkadot has good scalability, which will greatly expand the capacity of its operations on the chain, and is no longer limited to Bitcoin processing 7 transactions in 1 second, or Ethereum Only about 20 transactions can be processed in one second. With the setting of the Polkadot parachain, this number may be a hundredfold increase, so the DeFi transfer problem will naturally be solved.
Not only that, the increase in Polkadot’s transaction volume will not increase the cost of users using DeFi, but will greatly reduce the cost of gas. After all, a transfer will cost a few dollars, which makes people unable to participate in DeFi friendly, and wait until On the day Polkadot’s DeFi was born, this “expensive admission fee” may disappear.
Therefore, Polkadot has brought a veritable “cost reduction and efficiency increase” to DeFi, which has improved efficiency and reduced costs. This is also one of the barriers for users to enter DeFi. We believe that with the prosperity of DeFi in the Polkadot ecosystem, the future It will definitely be effectively improved.
2Customized DeFi
The meaning we mentioned in the previous point may be more intuitive, but for Polkadot, it is not just about reducing costs and increasing efficiency. In fact, due to Polkadot’s “one-click chain” function, building DeFi on the Polkadot ecology is instead It becomes simpler, and it can even be independently developed into a chain for a certain function of DeFi.
After all, the Substrate framework is too easy to build a chain, and it has rich functions and strong scalability. Even some test costs for DeFi can be ignored, and even one chain and one DApp can be achieved. This is in the current DeFi It seems unimaginable in the ecology, but Polkadot can accomplish such a feat.
Because of this, we have seen the Polkadot ecosystem gradually emerge the same DeFi products in Ethereum, such as stablecoins, oracles, lending, insurance, DEX and other projects. With the improvement of Polkadot’s own functions, there will be more More customized DeFi products appeared.
3 DeFi market expands again
Finally, it is also the picture that Polkadot’s ecological DeFi may eventually show. As more DeFi projects and related products flood into the Polkadot ecosystem, those originally isolated DeFi product markets will be further enlarged, because Polkadot is not an isolated system, but a A more developed and inclusive ecosystem, which coincides with DeFi’s own “open” positioning.
If the original ceiling of DeFi is the Ethereum ecosystem, then the DeFi in the Polkadot ecosystem in the future may be the entire cryptocurrency industry itself. Why? After all, what Polkadot can access is not only the same consensus project with the parachain function, but also the Bitcoin and Ethereum ecology brought by the transfer bridge function. In other words, Polkadot’s DeFi will be greatly expanded, and the market capacity will naturally also Will be improved.
Imagine what is the concept of getting bigger and bigger on Ethereum, which is equivalent to a store becoming bigger and bigger in a city, and getting bigger and bigger on Polkadot, it is equivalent to having its own chain stores in each city. Therefore, Polkadot The market capacity it brings is incomparable to the Ethereum ecosystem. In proportion to conversion, if the current market value of DeFi remains above 13 billion U.S. dollars, then with the development of DeFi in the Polkadot ecosystem, it is conservatively estimated that this goal has at least doubled room for growth.
Of course, all of this is due to Polkadot’s own architecture and design, which is also a show of advantages, which naturally seems to be a matter of course.
Overview of Polkadot Transition Bridge Ecological Project
Note: In this section, we just briefly sorted out the current DeFi projects in the Polkadot ecosystem from the perspective of ecological niche. It may not be fully included and does not represent any investment advice. It is worth mentioning that some of these projects are used as an application, and some projects are made into a chain positioned on the DeFi platform. This needs to be distinguished. DeFi itself is a big ecology. This time we will disassemble the big DeFi ecology into small niches to observe how DeFi in the Polkadot ecology is now developing, so as to better understand the development of the entire Polkadot ecology.
1 asset class
1.1 Stablecoin
In this DeFi boom, in addition to various DeFi projects, stablecoins are also quietly sitting on the top of the hill. Although some teams map Bitcoin to Ethereum in different ways, and add more than 2 billion U.S. dollars of BTC to the DeFi ecosystem, the two largest cryptocurrencies, BTC and ETH, still account for less than DeFi. Half of the total locked up volume, most of which are stablecoins. For now, DeFi is an application dominated by stablecoins.
The total market value of USDT has exceeded US$19 billion, and the supply of DAI has also exceeded US$1 billion. MakerDAO’s locked assets have long occupied the top position in DeFi locked positions. The stablecoin such as Rizhongtian is also a battleground in the Polkadot ecosystem. Will it be the first to seize this commanding height, or is the market large enough to form multi-party competition? It depends on the operational strength of each company.
There are three ideas here. One is to directly build a transfer bridge for mature stablecoin projects, such as connecting USDT to Polkadot; the other is to build an algorithmic stable currency on Polkadot, similar to DAI on Polkadot; and the third is to use a center. Issuance on Polkadot is similar to issuing a USDT on Polkadot.
Currently, among the Polkadot ecological projects, stablecoins have been issued: Acala, Equilibrium, and Bandot.
Acala aims to become the financial center of Polkadot, providing key financial tools, including decentralized stablecoins, betting derivatives and DEX, and providing support for DeFi applications on Polkadot and other platforms.
Equilibrium is introducing a cross-chain asset market that will combine lending and the generation and trading of synthetic assets.
Bandot is Polkadot’s first stable currency credit system, which mainly provides cross-chain smart token exchange, unsecured credit, and liquidity pool.
1.2 Other assets
In addition to stablecoins, many BTC-mapped assets led by wBTC have also shined in the DeFi application on Ethereum. In January this year, its market value was still hovering around 4 million US dollars, and its market value today It has exceeded 2 billion US dollars. It can be said that DeFi is thirsty for BTC, and for similar assets in the Polkadot ecology, the focus is on the project of the transfer bridge. In the previous article “Polkadot Ecological Observation丨How to make hundreds of billions The ecology quickly enters Polkadot, watching the magic of the transfer bridge is explained in “, so I won’t introduce more here.
Currently, in the Polkadot ecological project, BTC cross-chain assets have been issued: Interlay’s PolkaBTC and ChainX’s XBTC.
2 DEX
2.1 Various Swap (DEX of AMM mechanism)
Compound this summer brought the gameplay of liquid mining to the DeFi field. Since then, it has been out of control. Various DeFi projects have tried to combine liquid mining. When liquid mining meets AMM (automatic market maker) At that time, the market was detonated again.
The DEX based on the AMM mechanism is a decentralized exchange that is different from the traditional order book form. It is based on algorithms and allows traders to trade with the system’s capital pool without worrying about no counterparty. In theory, it can provide unlimited liquidity. Sex.
Uniswap based on the AMM mechanism does not need to rely on the price information flow of the oracle. On the other hand, it does not charge currency listing fees, and its gas utilization rate is high, and the transaction cost is relatively low. Now Uniswap, the leader of AMM in DeFi, has a volume comparable to that of a centralized exchange. The top DEX is basically an AMM mechanism, which shows the potential of this type of DEX.
In the same way, such an excellent mechanism will not be missed in the Polkadot ecology. There are already some projects or applications of this kind. Currently, the projects with such applications in the Polkadot ecological project are: SORA, Sushiswap, Acala, Laminar.
SORA (made by Polkaswap): SORA is the world’s first Decentralized Autonomous Economy (Decentralized Autonomous Economy). It aims to become the world’s decentralized central bank and create a new type of economic system to improve social efficiency .
Laminar: An open financial platform that supports synthetic assets and margin trading.
2.2 Other algorithms
In addition to AMM mechanisms such as Swap, there are also other algorithmic DEXs. For example, Bancor uses different algorithms. We can see that the blockchain has broken the most mature order book mechanism in traditional finance, and a new transaction mechanism based on blockchain thinking and blockchain technology has been born. I believe that there will be more algorithmic DEXs in the future. .
Currently, there are no such projects in the Polkadot ecosystem.
2.3 Traditional order book
Although under the impact of the AMM mechanism DEX, the previous traditional order book DEX was eclipsed in this DeFi boom, but I believe that such a classic model also has other applicable scenarios. Some DEX on Ethereum also tried to use the AMM mechanism. Combine with the traditional order book model to create a hybrid DEX. Therefore, in the Polkadot ecology, the traditional order book DEX also occupies a niche.
Currently, among the Polkadot ecological projects, projects with such applications include: Zenlink and ChainX.
Zenlink is committed to building a new generation of cross-chain DEX network. By integrating the Zenlink DEX Module, parachains can quickly have DEX capabilities and share liquidity with other parachains; Zenlink DEX aggregator can link all DEX DApps on Polkadot .
3 Borrowing
Among the top 500 global companies, the top financial companies are banks, and the most basic business of banks is lending, which is also one of the most rigid needs in our daily lives. Therefore, in the DeFi ecosystem, although DEX has left lending far behind, lending will always have a place.
Currently, in the Polkadot ecological project, the lending direction projects are: Equilibrium, Akropolis, Acala, MANTRA DAO.
Akropolis is a financial protocol in a specific field. The protocol can create a distributed financial network composed of financial organizations owned by members. It aims to provide basic financial services (savings, investment, social insurance) through a distributed network without relying on it. In traditional financial institutions.
MANTRA DAO is a DeFi platform for community governance, focusing on staking, lending and governance.
4 derivatives
4.1 Futures/Options
Futures and options are important financial products, and richer financial products are more conducive to asset management. For example, when trading, the rational use of futures/option products can hedge risks and lock in returns.
Currently, there are no such projects in the Polkadot ecosystem.
4.2 Synthetic assets
For the blockchain, how to ensure the authenticity of data on the chain has always been a problem that needs to be solved. Therefore, how to decentralize real assets on the blockchain has always been a problem, until Synthetix introduced synthetic assets This problem can be solved easily.
For any asset that you want to anchor, whether it is a cross-chain BTC or a stock in the actual US stocks, you can over-collateralize certain digital assets and directly generate expressions on the blockchain The Token of these assets is copied and the price of the anchored asset is copied to realize on-chain transactions. In this way, a mechanism is used to circumvent the problem of authenticity on the chain, and it also brings more real assets to the entire DeFi. This greatly improves the development potential of DeFi.
Currently, among the Polkadot ecological projects, projects in the direction of synthetic assets include: Laminar, ChainX, Equilibrium, Centrifuge, and Coinversation Protocal.
Coinversation Protocal is a synthetic asset issuance agreement and contract trading platform based on the Polkadot contract chain.
5 Financial Services
5.1 Infrastructure
For some applications of DeFi, it is difficult to complete a product logic by itself, such as synthesizing some assets (such as synthesizing BTC’s Token by over-collateralization), or linking with real assets, which requires the price of corresponding assets. Match, which requires the oracle to feed the price.
Currently, in the Polkadot ecological project, the projects in the oracle direction are: Acala, Link (Link is intended to be linked to Polkadot).
5.2 Aggregation Service
Some projects themselves are not regarded as direct financial products, but are aggregated into new products, a bit like the traditional financial field with multiple target asset management products or wealth management products. The project is suitable for mining the situation where there is an optimal solution among homogeneous products.
Currently, in the Polkadot ecological project, the projects that are doing aggregation services include: StaFi, Bifrost, and Reef Finance.
StaFi allows anyone who holds mortgaged tokens to mortgage and obtain alternative tokens (rTokens) for immediate transactions and exchanges without waiting for the unbinding period to complete.
Bifrost allows users to deposit their mortgaged tokens and minting vToken to obtain a parachain of staking liquidity.
Reef Finance is an intelligent liquidity aggregator and revenue engine that enables transactions to obtain liquidity from CEX and DEX, while providing intelligent lending, lending, mortgage and mining through the personalized Reef Yield Engine driven by AI.
5.3 Providing services for specific financial activities
Just as there is margin trading and securities lending in the traditional financial market, there are also services such as margin trading in cryptocurrency.
Currently, in the Polkadot ecological project, projects that are doing similar services include: Laminar.
5.4 Staking
The mechanism of staking itself does not belong to the type of traditional finance, but from the actual situation, it is a bit like depositing coins and raising interest rates, the difference is that Staking will bear the risk of the currency price itself. Judging from the current prevalence of the PoS mechanism, staking will become a long-term mechanism.
Currently, in the Polkadot ecological project, projects that are doing similar services include: StaFi, Bifrost, SORA, and Keysians.
Keysians: A parachain that provides liquidity for Staking.
5.5 Featured projects based on Polkadot cross-chain
Polkadot’s own mechanism will bring some related financial service projects, such as some financial services based on parachain card slots, but there is no similar project at present, which is worth looking forward to.
DeFi6 other
In addition to the categories listed above, there are some ecological niches that have not yet been explored for mature projects, so I won’t start talking about them. So, what other directions can be considered for DeFi? We can look at the mature projects in reality, such as banking, insurance, trust, brokerage, financial leasing, futures, funds, fund subsidiaries, fund sales, third-party payment licenses, small loans, and pawns involved in financial licenses. If you wait for directions, or refer to some current asset management products, you can naturally see what opportunities there are.
summary:
DeFi is a large ecological niche, in which different small ecological niches can be subdivided, and we can see that there are already many projects in some popular ecological niches, but some are just needed but not so hot The ecological niche is still waiting for other teams to explore.
At present, 90% of DeFi projects are on Ethereum. After this round of DeFi boom, who is a mule and a horse can be clearly distinguished. Then the remaining well-run projects have their corresponding ecological niches. There should also be such a project on Polkadot. From this point of view, in a sense, Ethereum is a test field for Polkadot.
But the observation of DeFi on Polkadot should remain neutral. For niches with vacancies, for some new R&D teams, it is indeed possible to arbitrage by grabbing the niches, but this does not mean that such projects are necessarily high-quality; and for niches with fierce competition, neither It means that only one family can survive in the end. The success of the project still depends on the design, code (including technical security), and operational capabilities, each of which depends on its own ability.
Problems that may be encountered in the development of Polkadot ecological DeFi
1 Polkadot’s own risks
Although we can see that Polkadot and DeFi can be even more powerful, it is undeniable that Polkadot is still in the development process. We need to always pay attention to the development of Polkadot itself and whether its functions can operate normally. For example, Polkadot’s parachain testnet RococoV1 was released on December 17, and then there will be Kusama and Polkadot card slot auctions, and then the parachain will be officially opened, but whether the card slot auction is smooth and whether the parachain can operate normally, Polkadot Whether the cross-chain can be carried out normally, this is yet to be verified and requires continuous attention.
2 The risks of DeFi itself
The booming development of DeFi this time has also brought some problems. For example, the designer of the project has design flaws, which may be caused by the flaws in the mechanism design. For example, some projects are used to take advantage of the mechanism problems and take away a lot of wealth. , There are also some security issues. When a bug occurs, the project plummets. In addition, prosperous development will bring various good and bad projects. In addition to design and code problems, many projects may also have poor operational capabilities. The project will not end in the end. Such projects are extremely risky. If you rush to participate, you may lose money. No return.
In the same way, after the explosion of the DeFi ecosystem in Polkadot in the future, you will also encounter these problems with the DeFi project on Ethereum. Therefore, whether you are a DeFi project party or a participant, you should use this as a lesson.
postscript
This year seems to be a miracle year for digital finance. DeFi is booming this year, and traditional finance has also begun to vigorously increase cryptocurrency this year. The cryptocurrency policies of various countries have gradually relaxed, allowing traditional financial institutions to get involved in cryptocurrency related products. In addition, countries have also released this year. Or start to study the central bank digital currency CBDC. The wheel of history has accelerated this year, and it has also taken a big step forward in the progress of financial digitization.
And Polkadot also completed an important milestone this year-the mainnet launch. Near the end of the year, Polkadot’s parachain testnet is also available, and Polkadot’s cross-chain function will be officially launched next year.
Therefore, whether it is DeFi or Polkadot, it seems that there are good expectations for next year. Let us look forward to what kind of sparks DeFi+Polkadot can create next year.
