At the end of August, when DeFi was most popular, the NEO Foundation announced the investment and incubation of the NEO-based DeFi platform Flamingo.finance. One month later, the DeFi coin plummeted. As soon as Flamingo launched OK Binance, it opened the curtain of a fall, from the highest $4.49 to the current $0.18, a drop of 96%.
Why is such a project that looks high-quality, supported by well-known investors and big companies, and consumes a lot of market budget, has become the first domestic DeFi project, and many wallets and DeFi financial projects participate in it, but What are the reasons for not being sought after as expected, and even being “ridiculed” by overseas communities?
Poor launch time
The successful DeFi projects in this round have actually experienced 1-2 years of training. The DeFi projects launched after July this year are actually suspected of being hot spots. Flamingo set up the project when DeFi accelerated to catch up in August. According to the content of the white paper, its main components include cross-chain gateway, one-stop asset management center, DEX based on automatic market maker, etc., which mix the popular elements of current DeFi projects. The one-month project development time is indeed the common packaging time for Chinese currency circle projects.
However, “unfortunately”, the launch of Flamingo is still one step late after all. When it was officially launched in September, DeFi coin was facing a sharp correction, and its token FLM was unable to get out of the independent market after all.
Economic model faces the risk of losing control
Although it is mentioned in the white paper that FLM does not have any pre-sale, pre-mining and team allocation, Flamingo will be promoted by the Neo Foundation in the early stage, so it adopts the POA (Proof-of-Authority) mechanism and will gradually transition to DAO in the future . In addition, the total amount of FLM is not fixed. The white paper only gives the token release plan for the first thirteen weeks, and its long-term issuance mechanism will be decided by the DAO’s mid-proposal voting.
The key problem is that the vote rate of governance proposals for most blockchain projects is extremely low. As we mentioned before, even for the well-known DeFi project Compound, the voting rate of the proposal to launch a new coin is only 13%, and the top 10 addresses accounted for 96.7% of the total votes, so for the new generation like Flamingo For projects, the situation of distributed governance may be even less optimistic.
The unlimited setting of FLM coins poses the risk of additional issuance at will. The project party can change the platform parameters at any time to decide whether to issue additional FLM coins. In the end, the so-called “DAO” will become an unachievable pseudo-proposition and may lead to the economics of the project. The model is out of control and becomes a vassal controlled by the Neo Foundation.
DeFi on NEO is a pseudo demand
Neo is similar to Ethereum in that it can run Turing-complete smart contracts, but in terms of average daily transaction volume, the 24-hour transaction volume of ETH is US$10.5 billion, and the 24-hour transaction volume of NEO is only US$400 million. The two are not one. Magnitude.
At present, the top five assets on the Neo blockchain, GAS, NEO, and HNEO are all directly related to NEO, and Effect.AI has announced that it will abandon NEO and switch to EOS. DeepBrain has disappeared, with a market value of less than 2 million US dollars. In such an almost “self-operated” public chain ecology, do Neo users really have a demand for DeFi?
Users do not pay for Flamingo, this is directly reflected in the platform data. At present, there are only 7 tokens that can provide liquidity on the Flamingo platform. The liquidity market value is only about US$177 million, and the daily trading volume is less than US$2 million, which is a huge gap with Uniswap and other DeFi projects on Ethereum. On Ethereum, taking Uniswap as an example, its liquidity market value is about 3.19 billion U.S. dollars, and its 24-hour trading volume is about 230 million U.S. dollars, which forms an overwhelming advantage for Flamingo.
“Tunneling” project for digging and managing wealth
Today, most of the remaining users in the currency circle are old leeks who have experienced many battles. If it is during the bull market bubble, there may be investors who will bet on some new DeFi projects because of their enthusiasm. But when the market is depressed, users are more inclined to wait and see. At this time, the stability of the new project currency price depends more on whether the project party has a better market-making team and willingness to underwrite.
Obviously, we do not see the willingness to stabilize currency prices on FLM. According to the K-line feedback information, miners are more inclined to the operation mode of “digging, selling and lifting” and lack any “belief” in the project itself, which adds to the so-called DAO mode. In particular, FLM has registered a large number of DeFi mining wealth management products, which will be exchanged for stablecoins immediately after mining, which intensifies mining and sales.
Based on the total amount of 150 million FLM in the early stage of the project, the current market value of the Flamingo project is less than 30 million US dollars. What is worrying is that the continued decline may make FLM eventually fall into a “death spiral” and become a short-lived product of the currency circle.
From the Internet to the cryptocurrency industry, pixel-level imitation + user experience improvement + low-price competition are the methods for most Chinese projects. However, in the current wave of DeFi, this model has been largely rejected. Projects that cannot be innovated and cannot directly compete with overseas DeFi will be eliminated very quickly.
