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Although in the decentralized blockchain world, the concepts and business models of many new projects are quite different from those of the traditional Internet and the physical field, but I think that in the DeFi field, there will not only be a batch of innovations that are extremely innovative. Many scenes that people cannot understand at first glance (such as AMPL), there will also be a large number of scenes that have been verified in the traditional financial field and are very likely to be moved to the blockchain world, such as mortgage (MakerDAO), lending (Aave) , Compound), Transaction (Uniswap), etc.
This gives us as investors a lot of room and space to discover new gems and the next unicorn in the DeFi field.
Let’s follow the simplest way of thinking to see which application scenarios already exist in the financial field, and then compare and look at the current DeFi field. What are there, but not yet. We will find that in the DeFi field, traditional finance There are still a large number of application scenarios in the field that have not yet been implemented in the DeFi field or even if they are implemented, they are still in the bud.
For example, in the futures leveraged trading market, although there have been some projects (such as Hegic, dydx, perp, etc.), these projects are only temporarily leading, and there is no single dominant situation.
For another example, in the insurance market, none of the currently only projects are particularly leading projects. As the temporarily leading NXM has serious problems in my opinion, the beautiful COVER was accidentally attacked a while ago, and NSURE is still groping until now.
If we broaden our horizons and look back at history, we can discover more scenes.
Let’s just talk about the 2008 global financial crisis that was not far away from us. The financial derivatives that triggered the crisis are called subprime loans CDS, which are financial derivatives produced after various packages by financial institutions. Financial institutions sell to investors regardless of risk for profit. When the interest rate rises, the risk of this derivative is completely detonated, causing the market capital chain to break and liquidity to dry up, which triggers the risk to spread to the entire market and eventually collapse.
Derivatives like this are completely absent in DeFi today. I believe that due to the greed and curiosity of human nature, there will definitely be a creative team that is wondering how to introduce thousands of CDS and various derivatives in the traditional financial market into this completely unregulated and arbitrary gallop. In the world. And such derivatives rely on more other underlying financial products, and many of these underlying financial products also don’t exist in the current DeFi.
I believe these products will eventually be created.
How many star projects will be born in this process? How many hundred times currency, thousand times currency or even ten thousand times currency?
If these products are created, the value of various derivatives they produce is also very likely to be comparable to the value of various financial products in the traditional financial market.
In 2018 alone, the scale of global financial derivatives reached nearly 700 trillion US dollars. If derivatives in the DeFi field gradually mature in the future, will this scale also reach hundreds of billions of dollars?
And now, as of the time of writing, the total value of the top 60 projects with locked-up value added up is only more than 20 billion U.S. dollars. The imagination space in this is as high as ten thousand times.
Many opinions in the circle believe that the total market value of all DeFi project tokens combined is still relatively low, and that a more reasonable market value is 50% or more of Ethereum’s, but I think that if you benchmark traditional finance, DeFi projects The total market value of tokens is entirely possible to exceed Ethereum.
why? Because purely from the logic of financial business, there is not much difference between off-chain and on-chain. Off-chain businesses can be moved to on-chain. Therefore, off-chain financial scenarios are completely possible to be implemented on-chain. , And the efficiency on the chain is higher, the imagination space will be greater.
Therefore, for a long time in the future, we should all pay great attention to DeFi, and there will be more projects like YFI and UNI.