Why is DeFi up 700% in 2 months and a lot of people still don't get it?

Source: Colloquial blockchain

原标题：《 DeFi 总市值 2 个月涨 700%，但仍有不少人表示：看不见，看不起，看不懂，跟不上 》

作者： JackyLHH

Since the halving of the bitcoin block award in May, we have seen the entire encryption industry shift its focus to ETH 2.0, IPFS, and DeFi.

With cryptocurrency trading generally "flat", tokens from many DeFi projects have done exceptionally well, with price increases of between two and four times. Decentralized loan platform Compound has become a more recent star, adding about $850 million to the total value of its crypto-assets lent through a 'loan-to-mine' approach in just a few weeks. Its Token COMP price hit a high of $372.27 on June 21.

Graph: Compound  Token  COMP price Action, source: CoinGecko

Meanwhile, the current total Market value of the DeFi project is over $7.4 billion, up from less than $1 billion two months ago, according to DeFi Market Cap. In other words, in just over 2 months, the DeFi project's total market value jumped by more than 700%. In addition, lockup funding on the DeFi project has exploded and now exceeds $2.08 billion.

On April 14, DeFi had a total market value of $1 billion;
DeFi's total market value reached $2 billion on June 9;
On June 16, COMP started the DeFi boom by digging mines.
On June 25, DeFi's total market value exceeded $6 billion;
On July 4, DeFi had a total market value of $6.6 billion;
On July 5, DeFi had a combined market capitalisation of $7bn.

Whether it is the total market capitalization, the size of the lockup, or the Token price, the DeFi project has shown explosive growth. Is spring coming to DeFi? How will the future develop and affect our lives? Today, we're going to talk about these topics.

& have spent

DeFi VS CeFi 01

Before we dive into DeFi, it's worth looking at what DeFi is and its main advantages and disadvantages.

DeFi is expressed as opposed to CeFi, which is the abbreviation for Centralized Finance. Although the term CeFi was coined in recent years, it is by no means a new thing. The existing traditional financial system can be called CeFi, such as traditional Banks, stock exchanges, various financial institutions and so on.

DeFi is an abbreviation of Decentralized Finance, also referred to as Open Finance. DeFi USES blockchain technology and smart contract technology to build a transparent and open financial system with decentralized protocols instead of traditional trust based on people or third-party institutions.

In simple terms, CeFi requires you to trust intermediaries (people or agencies), and DeFi requires you to trust protocols (code).

After hundreds of years of development, CeFi has a mature product and a good user experience. However, its defects are relatively closed and can only be used under license. In many underdeveloped parts of Africa, a large number of people still do not have access to the services provided by financial institutions such as Banks.

One of the great advantages of DeFi is that it is open and transparent, requires no license, and can be used by anyone in the world, with no limiting thresholds. For example, anyone can pledge ETH assets to the DeFi project MakerDAO or Compound and lend out DAI encrypted assets anchored at $1:1. Of course, DeFi has a lot of flaws at the moment, such as poor user experience, high learning bar, immature product, and so on.

& have spent

02 DeFi's current state of development and major representative of the project

In terms of market capitalization, the current total market capitalization of THE DeFi project has exceeded $7.4 billion, and the size of crypto assets in the lock-up has exceeded $2.08 billion, showing a spurt of development. DeFi has become a force to be reckoned with in the blockchain industry.

Let's look at the current DeFi in terms of user growth. DeFi had about 240,000 users as of July 8, according to Dune Analytics, and at the beginning of 2018, the number was below 100. You can also see from the figure below how fast the DeFi user population is growing.

Figure: User growth for DeFi, source: Dune Analytics

DeFi was born after the emergence of programmable Ethereum blockchain. From the perspective of distribution, most of the current DeFi projects focus on ethereum blockchain, followed by EOS, TRON and other public chains.

In terms of product form, the current DeFi already includes decentralized wallet, KYC and identity authentication, decentralized trading platform, decentralized debit, Staking, stability currency and other infrastructure, and the whole ecology is constantly improving.

Figure: The ecological product of DeFi, source: DefiPrime

Below, we present a few representative DeFi products:

1. DeFi Dark Horse: Compound

The Compound is a decentralised platform for borrowing over Ethereum, and in a matter of weeks it attracted a large number of investors using it for collateral and borrowing, thanks to the "borrow is mine" Token distribution principle.

To date, there are more than 30,000 Compound users and more than $1.57 billion of total cryptographic assets available for lending, with nearly $900 million of cryptographic assets loaned, making IT DeFi, the largest total borrower of decentralized platforms. The top three cryptographic assets in Compound mortgaging and lending are DAI, USDC, and ETH, both of which are $1:1 anchored stabilizations.

Figure: Library data on Compound, source: Compond website & NBSP;

Figure: Composition of total borrowings for DeFi project, source :DeBank

2. Stable currency bar: MakerDAO

MakerDAO, the old decentralized debit platform on the Eum blockchain, had long topped the DeFi list (recently overtaken by Compound) in market cap, and ITS DAI stability currency has been seen as the biggest competitor to USDT.

According to its website, makerdaos are now embedded in more than 400 Dapps, with more than $623 million in encrypted lockers, making it the no.2 decentralizing platform category (no. 1 is Compound at $685 million). The mortgage assets supported by MakerDAO have been transformed from a single ETH to support a variety of encrypted assets, including BAT, USDC, WBTC, TUSD, KNC and ZRX, among which USDC, WBTC and TUSD are all stable currency assets.

DeFi: Uniswap, most users

Uniswap is a decentralized trading platform on the Ethereum blockchain, primarily ETH and ERC-20& NBSP; Token provides liquidity services and is by far the largest DeFi application by number of users.

Uniswap has 92,000 users, 38.61% of DeFi's total, according to Dune Analytics. Uniswap accounted for 36.971 percent of DEX transactions on Ethereum, according to the Ethereum browser.

4. DeFi: Brave browser, the most used Token

Founded by Brendan Eich, the father of JavaScript, Brave's browser focuses on privacy protection, with the biggest feature being the introduction of Token economic incentives. Brave's native Token, called BAT, was the most used Token in DeFi in the second quarter, with $931 million in trade, more than ETH and DAI combined.

The above is only the tip of the iceberg of DeFi ecology, and there are many widely familiar applications, such as the web version of MetaMask, stakeholder of Staking, WBTC, Infrastructure Bancor, 0X, etc. Limited by the paper's extensive coverage, I won't do much introduction.

& have spent

The impact of 03 DeFi and future prospects

DeFi's ecology is becoming more and more prosperous, with more and more excellent projects emerging. What impact will these projects have on our lives?

On July 1 of this year, Ethereum founder V Shin tweeted eight times about DeFi. 'A lot of the glitz is very exciting, but it's short-term; In the long run, the reality is that DeFi's interest rate cannot be more than one percentage point higher than the best rate for conventional finance.

As we mentioned above, traditional centralized finance (CeFi) requires permission to enter the market, thus shutting out many people. There are a large number of people around the world who cannot enjoy the services provided by financial institutions, and DeFi can compensate for this. DeFi has all the advantages of a decentralized application. With no barriers to entry, anyone in the world can use DeFi applications on the chain at any time, completely breaking the geographical and temporal constraints. Now DeFi has evolved into a complete financial ecosystem that can perform a variety of operations, including payment, borrowing, borrowing, saving, trading, investing, yield, management, hedging, margin trading, and more.

DeFi has a number of other advantages, but we can't ignore the many drawbacks of the current phase, such as a user experience that is not as good as traditional centralized finance, high learning barriers, a product that is not mature enough, and frequent hacking incidents (such as the recent Balancer loan attack).

For the foreseeable future, DeFi and CeFi will borrow from each other, and the line between the two will become increasingly blurred. The application of DeFi will be more and more convenient in the usage experience like CeFi, and some underlying services of CeFi will be gradually connected to the blockchain, and use the blockchain technology to improve the transparency and convenience of its services. For users, a product that is secure and meets their needs is a good product, regardless of whether it is CeFi or DeFi.

DeFi and CeFi compete, not in black and white, but in a long-term co-existence that supports a broader financial market.

& have spent

04 epilogue

DeFi is a promising development and an important part of the future of the entire world financial system. The spring has come for DeFi, but there are many who believe that DeFi is overhyped at the moment and that there is a risk of "taking over" this intervention. Perhaps DeFi still has a long way to go before it reaches its highlight moment?

The original link: https://mp.weixin.qq.com/s/M1aep5kDlx8U-zE7gStdwA

Welcome to join the official BlockBeats community:

Telegram Subscription Group: https://t.me/theblockbeats

Telegram Discussion Group: https://t.me/BlockBeats_App

Official Twitter Account: https://twitter.com/BlockBeatsAsia