DeFi Industry Research Report: The entry of assets outside the circle is the key development direction in the future


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Bisheng Capital continues to pay attention to the frontier development of blockchain. In this article, we will analyze the blockchain DeFi industry from four sections: DeFi overall market overview, lending market, DEX market, and conclusion.

1. DeFi overall market overview

2018 is the first year of the development of the DeFi industry, but until 19 years, the core indicator TVL basically has no major trend. It is not until 2020 that the DeFi industry has ushered in a huge explosion. In this context, “liquidity mining” The rise of “mines” is indispensable.

2020 is the year of the outbreak of the DeFi market. Since the launch of the “liquid mining” on the Compound platform in June, major DeFi projects have launched similar liquid mining models, with the total lock-up volume (excluding the part of repeated pledges). ) From $1.8 billion on June 20, 2020, to $11.9 billion on October 22, it achieved a 6.6-fold increase in 4 months. Among them, Uniswap contributes 23% to the overall DeFi TVL.

The development of the DeFi market is also evident in the number of participating users. From January to June 2020, the number of transaction users participating in the DeFi market has increased from 100,000 to 200,000; and after the liquidity mining started in June, the number of market participants Rapid growth, the number of users increased to 650,000 in 4 months.

Market value performance

After the market value of DeFi projects experienced a surge in July and August, the market began to calm down again. According to the DeFi Pulse Index established by DeFi Pulse, since its establishment on September 10, the index price has now fallen. Go to 36.3%; after that, DeFi will go through a period of development and regain its power.

Reasons for innovation

The reason behind the rise of this wave of DeFi lies in the innovation of the automatic market maker AMM mechanism, which gave birth to liquid mining, which binds the interests of early seed users through liquid mining distribution project tokens. Thus detonating the entire DeFi industry.

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With the increasing development of the DEFI ecosystem, innovative cryptocurrency assets such as YFI and AMPL have emerged, which has driven the development of DEFI 2.0. High-quality projects such as YFI have also improved the pace of the entire DEFI ecosystem from the perspective of improving capital utilization efficiency.

Head DeFi Project

At present, DeFi projects are mainly divided into four major tracks: DEX, lending, oracles, and derivatives. Among them, DEX and lending products account for the highest proportion of locked positions. Among the top ten DeFi projects, DEX accounts for 37% of TVL. And loan products accounted for 33%.

Currently locked assets mainly include: ETH, WBTC, USDC, LINK, EOS, TUSD, DAI, renBTC, ZRX, MKR, etc. ETH is currently the largest locked asset in the DeFi market, valued at 3.6 billion US dollars, accounting for 39.6%; WBTC The lock-up value of the company has reached 1.3 billion US dollars, accounting for 14.3%; the remaining assets also occupy a certain market share.

In the DeFi market value ranking, LINK is the dominant player in the oracle track. Accounted for 41%.

2. DEX market

Decentralized exchange (DEX) is a peer-to-peer free trading market. The DEX before 2020 is basically a thin order market, with poor liquidity and poor user experience. However, the automatic market maker algorithm launched around 2020 has injected new souls into DEX and has to attract the attention of centralized exchange giants .

Since September, the monthly lock-up amount of DEX has increased exponentially, with Uniswap accounting for the largest proportion.

On October 22, the total trading volume of DEX reached $650 million, of which Uniswap’s trading volume reached $250 million, accounting for 38%. The stablecoin trading platform Curve followed closely behind, accounting for 22%.

Uniswap’s seven-day active trading users are 91467, Sushiswap’s seven-day active trading users are 2032, and Kyber is 1,752.

Trends in the number of daily active users

Uniswap’s trading users are far away from other DeFi products, and the user moat has obvious advantages.

But the overall DeFi industry is still at a stage where the level of active users is low.

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Currently, the number of liquidity trading pairs on Uniswap has exceeded 16,000, with more than 50,000 liquidity providers, more than 23,000 daily active users, and an average daily transaction volume of 200 million US dollars.

Objectively speaking, the rise of DEFI in June should basically be attributed to the popularity of liquid mining. It has brought a lot of funds to the entire DEFI ecosystem and built the foundation of financial Lego. DEX has solved some problems in the DEFI ecosystem and gained some status, such as achieving independent currency listing, using AMM to solve market-making problems, and no KYC simplification Transaction process.

However, there are still many problems with DEX, such as poor transaction depth and unaudited currency listings. The trading depth and experience of the traditional order book cannot be solved by the current DEX.

The breakthrough of DEX is still to optimize the slippage algorithm. Although the industry advocates handling fees, supervision and other issues, based on the current market acceptance, UNISWAP users still account for the majority. If the depth of the pool is not enough, the transaction slippage is particularly large, and it is indeed a lot of losses. The amount of transaction funds.

3. Lending market

In principle, the lending market from 2017 to 2019 took Maker as the big brother, but since June of this year, the market’s ranking has been rapidly subverted. Comp and Aave have both threatened Maker’s top position. As of October 21, the total borrowing volume of the six platforms reached 2.3 billion, and the market size of the top three has accounted for 99%. Without major innovations, it would be difficult for new products to emerge in the lending sector.

Among the current three lendings, Aave is a worthy project. Aave’s first lightning loan quickly swept the market. A lightning loan is a way to quickly borrow funds without collateral. After July and August this year, the transaction volume gradually increased. Of course, compared with the borrowing volume under other over-collateralization models, the lightning loan Loan is still very immature.

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The data shows that on October 21, the current total borrowing amount is $2.3 billion, of which 50% are from Compound.

From the perspective of the total capital scale, Comp accounted for 38% of the $5.5 billion loan industry, and the capital scale reached $2.1 billion.

Distribution of deposit assets:

Deposit assets are basically dominated by ETH, accounting for 45% of deposit assets, followed by DAI, accounting for 32%. Loan assets are basically DAI, accounting for 82%. DAI and USDC have become the most important lending stablecoins.

4. Conclusion

1. The development trend of Defi in the foreseeable future mainly lies in the introduction of privacy computing, breaking the current status of only over-collateralized loans, thereby increasing the growth space of the entire lenging field. Privacy computing is the underlying infrastructure for the development of credit loans. Our current DEFI loan field is the lack of personal identity information, account information related certification, a large part of the reason is that it is easy to reveal your identity privacy. After the exploration in the field of privacy computing is gradually improved, it is believed that DEFI will have a further explosive growth.

2. At present, most of DeFi is on Ethereum. BTC has slowly entered the ETH ecosystem through WBTC, increasing the scale of the entire ecosystem. There are currently US$1.43 billion worth of WBTC on the chain. In the future, more and more mainstream assets will enter the DEFI ecosystem in the form of WBTC for a series of decentralized financial activities.

3. Compared with the traditional financial market, the encrypted digital currency market is still very small in size. Capital never sleeps. Where there is capital gains, there will be flow. Large funds outside the circle are still investigating encrypted currencies and DEFI with a cautious attitude. Ecology. With the continuous improvement of the infrastructure in the circle and the improvement of cognition, the entry of assets outside the circle is the key development direction in the future.