Opinion: DeFi is a one-way road to transparency and fairness

Opinion: DeFi is a one-way road to transparency and fairness

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In the confrontation between retail investors and traditional financial institutions, the concept of DeFi may be forced out of the circle and into everyone’s field of vision.

Original title: “DeFi is a one-way street worth looking forward to”
Written by: peijie

This article attempts to understand the market changes in 2020-2021 from the perspective of DeFi and provides a new perspective.

From the beginning of 2020 to now, many major events have happened in the world we live in. The epidemic has caused the global economy to slump. In order to stimulate the economy, central banks of various countries have initiated monetary easing policies. Among them, the Federal Reserve is the most impressive. Since the beginning of the epidemic, it has released about 6 trillion US dollars, far exceeding the size of the 2008 financial crisis rescue funds and equivalent to the United States in 2020. 28.6% of GDP. These banknotes issued out of thin air have triggered a widespread sentiment of selling the US dollar, and almost all assets except the US dollar are increasing.

And how does this relate to the blockchain industry and various digital asset holders?

Bitcoin’s decentralized gene

This starts with the birth of Bitcoin. Satoshi Nakamoto released the Bitcoin white paper in November 2008 and wrote down on the genesis block of the Bitcoin network in January the following year:

The Times 03/Jan/2009 Chancellor on brink of second bailout for banks

The Times: 2009/01/03, the British Chancellor of the Exchequer is preparing for the second round of bank rescue

Bitcoin’s genes naturally carry dissatisfaction with the unlimited printing of money by currency issuers to rob the poor and help the rich.

Twelve years later, facing the Fed’s more frenzied release, it alarmed Bitcoin’s DNA! As a new hedging banner “digital gold”, Bitcoin will fully outperform traditional assets in 2020, and it is generally believed that it will continue to maintain its momentum in 2021.

This is probably the first stage of the story.

DeFi cold start, smooth and difficult

In mid-2020, DeFi began to exert its strength, initially starting with Compound’s liquidity mining. At that time, I did not expect that from this moment, the DeFi boom was already surging under the sea, and then waves of DeFi liquid mining projects emerged on the sea.

Although almost all people come for high profits, more importantly, DeFi has spread widely during this period. In just three months, the seeds of DeFi have been sown among the blockchain crowd, and a large number of users have completed it in practice. The first lesson in decentralized finance.

The DeFi products at this stage are relatively limited, but the product categories are basically complete: basic lending agreements, currency exchange services, derivatives markets, asset management tools, and financial products.

Opinion: DeFi is a one-way road to transparency and fairnessMapping of traditional finance and decentralized financial products

DeFi is trying to move traditional financial products to a decentralized network, but the environment has changed and problems will follow. The original intention of DeFi is to smooth the threshold of financial services and realize inclusive finance. But what is sad is that the Ethereum network at that time could not meet the performance requirements of financial services. Inclusive finance has become a large-scale financial institution. The congested network makes miners’ fees high, and ordinary users often cannot make ends meet.

Even so, DeFi has started. Although the road is bumpy, the direction is firm.

Opinion: DeFi is a one-way road to transparency and fairnessIn one year, the scale of DeFi lockup increased by 30 times, reaching 30 billion US dollars

This is the second stage when decentralized finance has begun to enter the public view of blockchain.

Level the road, repair the road and refuel

On the one hand, users have a huge demand for the Ethereum network, and on the other hand, it is the performance bottleneck of Ethereum. At this stage, Layer 2 and Eth2, as solutions to performance problems, will become the most frequently reported topics in blockchain media at the end of 2020.

Eth2 is a major upgrade of the Ethereum network. The first step has been successfully launched the beacon chain, and everything is proceeding step by step.

The Layer 2 network expansion plan has also become clearer in practice and iteration, and the op rollup and zk rollup are basically settled. Taking the zk rollup solution as an example, it is expected that the performance of the Ethereum network can be increased by 100 times to 1500+TPS. Accordingly, the value that the Ethereum network can carry and its own value will also be significantly improved. However, 1500+TPS is still lagging behind the traditional financial network, but for current Ethereum network and DeFi users, a hundredfold performance improvement is worth looking forward to.

At present, the DeFi project of the head has basically selected the Layer 2 solution adopted by each. Synthetix has adopted the op rollup, and the Uniswap V3 upgrade will also introduce the Layer 2 solution.

This is the third stage. Layer2 and Eth2 solve network performance problems and smooth the bumpy road of DeFi.

DeFi is coming out soon?

In stark contrast to the booming DeFi, American retail investors at this time are forming groups against hedge funds.

After Reddit WSB forum retail investors jointly repelled short-selling hedge funds on GME stocks, they are planning to target the silver futures market that has been short-selling for the next time. During the period, Robinhood (a foreign brokerage platform) restricted retail trading, and the WSB forum was temporarily blocked. This movement even began to spread, with the Korean version of WSB and the Indian version of WSB appearing one after another.

The Federal Reserve released a lot of water and retail investors held groups to fight against institutional funds, like the scene where Bitcoin was born in 2008, but the protagonist has changed. Satoshi Nakamoto was dissatisfied with the central bank’s robbery of the poor and the rich during the crisis; users of the Reddit WSB forum were dissatisfied with financially unfair, large and unfailing companies, and institutions that do whatever they want. As a forum user’s confession said, the 2008 financial crisis was silently borne by countless ordinary people like him, and this time, he can finally speak to the institution holding the sickle.

Blockchain has made the decentralization of finance no longer a castle in the air, and more and more people need decentralized finance. DeFi is inclusive finance. It can not only provide financial services for people in underdeveloped areas, but also allow people in developed areas to experience more transparent and fair finance.

This is the fourth stage I want to talk about. In the confrontation between retail investors and traditional financial institutions, the concept of DeFi may be forced out of the circle and into everyone’s field of vision.

How to view the future of DeFi? DeFi is a one-way street, and people will not compromise on the need for transparency and fairness.

Disclaimer: As a blockchain information platform, the articles published on this site only represent the author’s personal views and have nothing to do with ChainNews’ position. The information, opinions, etc. in the article are for reference only, and are not intended as or regarded as actual investment advice.

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