Can retail investors really make money on the DeFi wave?

Original title: "Can Retail Investors Really Make money from DeFi Coin Wave?"

Originally written by Wang Yye, Odaily Planet Daily & NBSP;

Three months ago, DeFi's public products were in the midst of a collective crisis of confidence: a run on the coinage after the 3.12 crash, a chain reaction of liquidations, a jammed Ethereum network, the DeFi protocol that was hacked one after another...

Unexpectedly, only three months later, with a decentralized lending agreement, Compound  On-line management token & NBSP; COMP, launched the "lending mining" model, COMP  18.4 from pricing & have spent The dollar rose as high as 326.81 NBSP; The dollar, nearly 20& NBSP; Multiply the increase by NBSP; The DeFi track had its first ever highlight moment. (The Compound team put 2000ETH / 25,000comP trading pair on Uniswap on the first day of the COMP excavation, which was priced at 1 COMP= 0.08 ETH, or $18.4 at the time of the ETH).

On June 24, Balancer, a decentralized trading platform, took over the Compound and deployed its governance BAL in Ethereum. The BAL price went from $0.60 to $22 in seed round, a nearly 40-fold increase.

Since Compound and Balancer began, more and more DeFi projects have been going the money route.

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DeFi project starts coin wave, puddles blow into new blue sea & NBSP;

On July 1st, Curve, a decentralized stable currency trading platform, announced the allocation mechanism for treating token CRV, and the draft of CurveDAO, a decentralized autonomous organization. Curve Finance is a division of decentralized trading platform Uniswap that specializes in efficient stability currency trading.

CurveDAO was created based on the Aragon framework of decentralized autonomous organization management platform. The previous governance mechanism was an ANT (Aragon native currency) and it could have one vote. Now, Curve changed the governance mechanism, and the new voting governance adopted the time weighting mechanism based on CRV. It is important to note, however, that accounts with locked tokens cannot be smart contracts (because they can be traded and/or tagged) unless they are whiteled-list smart contracts (for example, the widely used multi-signature wallet).

According to the Curve scrip distribution model, published on Github by the developer, Curve initially plans to issue 1 billion CRV tokens, with inflation gradually rising to 3.30 billion. √2, with an initial inflation rate of 59.5%, is attractive to early participants.

Moreover, only Minter smart contracts can mint CRVS, and only within the inflation rate, which signals the start of a new mining boom whenever inflation changes.

CRV scrip inflation model

Like the Compound, Curve USES the same flow-mining model, with CRV tokens being distributed to the flow-mining providers. Note that users need to lock in LP tokens to claim the inflation bonus (note: Users can only get LP tokens if they deposit in the sUSD or sBTC pool on Curve; the more deposits they make, the more LP tokens they will get, which represents their interest in Curve).

The draft also suggested that Curve should reassign the agreement fee to CurveDAO, and then it could be used to destroy the CRV token.

CurveDAO Draft, decentralized autonomous organization (Picture from Twitter)

The exact timing of the ALLOCATION of CRV tokens has not yet been announced, and many of the Wool party's ammunition is waiting in the wings. After the annualized drop in Compound and Balancer, Curve has become the next DeFi project the market is looking forward to.

In addition to the power sources, Balancer, and Curve, there are some less-glamorous DeFi projects that are also tapping into the craze for money raising.

On June 22, DeFi Money Market Agreement DMM issued a governance token DMG, 1570& NBSP; Ten thousand DMG were sold. DMM is a DeFi lending platform for USDC, DAI and ETH backed by real asset (car) mortgages. After the public offering, DMM earned $6.8 million. Well-known venture capitalist Tim Draper joined the centralized autonomous organization DMM DAO behind the agreement by purchasing DMM's governance token.

On June 8th, Oikos, a synthetic asset platform based on wave field initiated by sun Yuchen, founder of wave field, was officially launched, and OKS, a currency token, is about to conduct IEO. According to the official website of Oikos, a synthetic asset platform based on wave field, Oikos Swap was launched on June 8th.

At the end of May, MakerDAO governance token MKR jumped 25%. The rally that triggered the DeFi scrip has heralded the start of the DeFi coin wave, and COMP's lending and mining boom has given more and more developers hope in the bear market, directly accelerating the DeFi scrip process.

But some DeFi projects decided not to issue COINS, arguing that tokens might only complicate the agreement or introduce a bunch of speculative traders. Legal issues also play a role, with some tokens easily defined as securities.

For example, Uniswap, dYdX and other protocols, their smart contracts also carry money and seem to prove that building useful products and COINS in the blockchain is not a necessary and sufficient condition.

So when are tokens needed? The obvious examples are networks that are large enough, such as ETH for ICO, DeFi for collateral, and universal fuels. These are all examples of how ether supports the Ethereum network.

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How does COMP mine income calculate? & have spent

For individual investors, they obviously care more about whether tokens are worth investing than whether tokens are needed for a project.

For individual investors who did not participate in COMP's early private placement, in addition to mining, can only buy in the secondary market. Would it be a good choice for retail investors to participate in mining?

Next, let's calculate the current COMP mining revenue, mining so far has released a total of 54,332 COMPs, distributed among 2890& NBSP;; The number of users increased to $624 million from $90 million.

According to Uniswap data, 1 COMP=187.96 USDT, then the COMP income generated by each dollar invested is: 54332*187.96/(624 million to 90 million)= $0.019. In addition, the recent "borrowing and mining" boom has caused the GAS fees of Ethereum network to soar.

According to PeckShield Situation Awareness platform data, eether Lane GAS consumption saturation has been above 90 for the past two months. In addition to MMM and Easy Club, which have been in the front of the GAS consumption list, DeFi related platforms such as Unisiwap, 1inch and Kyber are also listed.

And there's been a slight decline in Compound lock sizes:

In addition, the Odaily Planet found, based on data from the chain, that many of the comPs that the miners dug up had gone to the Uniswap and FTX exchanges. It wasn't immediately clear whether it was a deal or not, but a major source told Odaily planet that two hacker attacks in Balancer in the last two days had made him a little nervous about the security of Balancer, and that he had to refer money to Uniswap or some other CEX for reassurance.

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"Lending mining" behind more for "giant whale" arbitrage, this is healthy? & have spent

Since COMP mines less "sexy" than it thinks, who on earth is digging these DeFi tokens? What have they done with the DeFi tokens they poached and are they really participating in the community governance of the DeFi project?

For Compound, for example, about $340 million went in and out of the Compound pool over about two weeks, according to TokenTerminal. Interestingly, most of the demand side (borrowers) seems to be institutional participants. Look at the distribution of this user type across the platform. COMP's launch attracted only about 800 borrowers and 5,000 NBSP; Multiple new depositors.

What's more, the COMP from mining is concentrated in the hands of the whales, with about 20 addresses receiving half of the COMP prize, according to TokenTerminal, while the median number of tokens deposited in wallets is just 0.07 COMP, worth about $20.

Centralized platforms like NEXO have gone into Compound arbitrage themselves.

On June 18, NEXO put $20 million into Compound, according to DeBank; On 19 June, NEXO added 28 million USDT to the Compound; Later, funds were deposited into the Compound for mining arbitrage, with a total deposit of about 6,000 RMB. USDT.

In addition, a week ago, big BAT companies had a near-monopoly on COMP mining. Seven big BAT companies initially put $170 million worth of BAT into the Compound. These seven big BAT companies account for 70% of BAT's total deposit. The higher the deposit rate, the more efficient COMP's mining.

Unilateral increase in the deposit scale of BAT cannot increase the interest rate. The direct factor affecting the interest rate is the lending ratio. Big BAT households deposit other assets in their accounts and keep increasing the scale of collateral until they can lend out all the BAT deposits. The first large BAT 0 x3ba21b6477f48273f41d241aa3722ffb9e07e247 in the $50 million worth of BAT, borrow an equal BAT again at the same time. The left hand pays interest, and the right hand earns interest. As a result, BAT's capital utilization in Compound reached an astonishing 88.71%.

When large BAT companies monopolized the Compound lending market, mainstream assets were marginalized and didn't get the incentives they deserved. With the help of Compound's imperfect operation mechanism, BAT large companies further monopolized the distribution of COMP. An experiment in decentralised finance, so vulnerable to manipulation by a big family, may be NBSP; The DeFi's annoyance.

The community began to face up to the problem of "centralization of token governance"

Above, we mentioned the problem of MONOPOLY of COMP mining by BAT large enterprises. The issue of COMP tokens is beneficial to those large enterprises with large assets, and those large players with large resources will earn most of COMP, which will plant a time bomb for decentralized governance.

What's more, the majority of the COMP is still owned by the founding team and the founding team. Non-micro shows that nearly 40% of the COMP is currently owned by the founding team and the founding team. On the Compound website, the top 10 power sources were mainly early-stage Compound investors and founders.

Compound community developers are aware of the problem of centralized COMP, on July 1, Compound community passed a patch that is designed for tokens, market allocation mechanism proposed governance proposals (011) suggested that removing the COMP borrowing rates in effect COMP distribution of weight, and reduce the risk of malicious damage (griefing), the key to solve two problems that exist in the COMP distribution:

Users may temporarily reduce COMP allocations across markets with "flash loans" and upgrade to require an externally owned account (rather than a smart contract) to refresh allocations across each market.
The user will always want to farm in the market where they can pay the most interest, and the upgrade will determine the rate of distribution based on the size of the market loan. Before the second directly involved in the distribution of the COMP, is according to the lending market (ETH, USDC, DAI, etc.) to pay $how much interest to reward the COMP, after the upgrade is based on how much each market borrowing dollars to allocate COMP, which can help eliminate the market into the motivation of extreme interest rates, and eliminate the user in the motivation of the single market (BAT).

Digital Renaissance Foundation managing Director Cao Yin on Compound & NBSP; "Excellent governance proposal," commented the 011 proposal. "COMP token incentives will be awarded to real users at both ends of the balance sheet, rather than to the wool party of high-risk and high-interest assets. COMP distribution will be fairer, more dispersed, and there will be less selling pressure from newly excavated COMP."

Block chain security company PeckShield brand director hao days of Odaily daily planet, said: "the market is strong contagion effect, when the Compound governance tokens after taste, is bound to have a lot of imitators later rushed into governance issue tokens of the boom. And lock up mechanism of Compound and new implementation & have spent 011 governance proposals will be on later want to issuing DeFi project warning and exemplary role."

In addition, Hao tian believes that expectations for DeFi market are somewhat contradictory, fearing that it will not grow, but also fear that it will grow out of control. As all DeFi products run on the Ethereum chain, too many DeFi products on the chain at the same time will inevitably cause congestion in the Ethereum network, thus affecting the use experience of the Ethereum network. FOMO3D game and FairWin fund disk in that year are examples.

In 2018, the cryptocurrency market experienced the magic of 1CO. In 2019, we saw the fanfare of IEO, 2020& NBSP; This may be the beginning of an IDO (D=DEX) craze this year. ICO stimulated the market to bring an unprecedented mad cow, AND IEO also led the market to launch a surge of calves from the bear market. So what will IDO bring and how long will IDO last? The Odaily Planet will continue to follow.

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