View: Brief analysis of the overall expansion status of DEFI

Celer Network, together with Aave, Chainlink and Synthetix, hosted an offline Meetup called "Defi Afternoon Tea" in Chengdu on April 16. During the activity, Qi Chao, the person in charge of CELER Network China, shared the overall capacity expansion status of DEFI and the Layer2.Finace capacity expansion plan of CELER Network just launched.

The following is a summary of the contents shared by Qi Chao:

Defi has been on the rise since last summer, but according to the data (which is currently on the chain), the overall number of Defi users peaked last summer, and the growth has slowed since the third quarter, even with some agreements adding fewer new users per day.

Image courtesy of Celer Network

The entire Defi ecosystem is currently around 40,000 active days, which is roughly equal to the number of casual games in the top 500 on Apple's App Store in the US (not counting Google).

DEFI is still in its very early stages.

How many blockchain users are there? How many users have heard of DeFi? Why hasn't DEFI been able to grow as exponentially as we would like to see, and why hasn't DEFI been able to get out of the loop as quickly? What's a good solution?

To solve these problems, Qi Chao first used a metaphor to explain what DEFI was. The whole DEFI ecology is like a city. In this city, your home is your wallet. Defi is a great city because it has all kinds of "moneymaking shops" where you can earn a fixed return 100 times higher than a bank. These stores are the familiar DEFI protocols: Yearn, Curve, Compound, Cream, Sushi Swap, Uniswap, Aave, Synthetix, and Alchemix.

But in this city, you don't have any other means of transportation except a private car. For example, visit a Compound, a money-making store that offers a steady annualized rate of around 10%, but costs $250 for a ride to and from the store.

This special car Fee for one person and one car is the high Gas Fee on Ethereum today.

What's the problem with such a high fee? Two examples: Xiaohua is a millionaire. She takes $1 million with her to the Compound, spends $250 on the car, and deposits the money in the Compound, enjoying 10% annualized profit. How long will it take her to earn back the bus fare? The answer is just a day.

But in Defi City, the fee has nothing to do with how much money you want to deposit at the money-making store. As for Xiao Ming, he only has 2000 dollars, but he needs to pay the same amount of car fare as Xiao Hua, 250 dollars. According to the 10% annualized income, Xiao Ming's annualized income is 175 dollars, excluding the special car fee 250 dollars, a net loss of 75 dollars a year.

This is the core reason why Defi can't really get out of the loop and grow users quickly. Because most users are like "Xiaoming" when they come into contact with Defi and interact with it, they want to try out some money first, see how it works, and then invest more when they have enough confidence. Even more users, like Xiaomingthemselves, don't have that many assets and expect Defi to offer a more stable and lucrative income guarantee than the local banking and financial system. However, the high fees limit the large-scale use of Defi.

What are the hallmarks of a modern city? A well-developed and sound public transport system. Can we build such a bus system in Defi city? The answer is yes, and that's what Layer 2.Finance does: Defi City's "Bus Head Office".

What exactly does "bus head office" mean? Explain several of the steps in Layer 2.Finance using our transit process.

First you need to buy a "bus pass". This essentially transfers your money from Layer1 to Layer 2. Finance's Layer 2 rollup chain. There is a cost to this step, but the cost is very low. It is similar to a normal transfer at Layer 1, and is much less costly than interacting directly with the Compound DeFi protocol.

The next step, in real life, is to go to the platform and wait for the train. In Layer 2.Finance, you express your allocation needs at Layer 2. OK, now I have 2000 RMB in Layer 2.Finance, and I want to put 1000 RMB in the Compound, and the other 1000 RMB in AVE. This is your requirement. At the same time, there may be many users who share the same demand with you. For example, if another user wants to put 500 RMB in the Compound, and another user wants to put 200 RMB in the Compound, then the "demand aggregation" of 1000, 500 and 200 will be started on Layer 2. Package operation.

At a certain point, demand converges, the trains and subways come and you get on. Once on the bus, all users' individual requirements are aggregated into a single requirement, and such aggregated requests are returned to Layer 1 via the Rollup architecture. In this way, instead of saving 100, 1000 and 50 RMB separately, everyone's needs are aggregated on Layer 2 and then bridged back to Layer 1 through the method of "no trust". Everyone pays a fee together.

For the on-chain costs, if you have 100 people on the bus that you're aggregating with, you're going back and forth through the DEFI protocol and allocating the money, you're going to have a 100-fold reduction in the cost of the exclusive ride.

If you want to switch from this DeFi protocol to another protocol, the same thing, you get on the bus from this station, you aggregate with other users, and you go somewhere else. This is the analogy of the current Layer 2.Finance image: the public transport system in the DeFi city.

So how do we make sure drivers don't kidnap passengers on a whim? Layer 2. Is Finance a centralized aggregation? How about security?

This is where the core technologies of Celer and Layer2 Rollup come into play. Without going into too much technical detail here, this layer-2 scaling technique enables 100% decentralized hosting. Bus companies, even bad guys, have no way of getting or spending your money. In theory, the worst-case scenario is that the train could stop and you'd have to make your own journey, but that's almost never going to happen, because Bus Head Office is not a single entity, but the entire decentralized Celer-like State Guardian Network.

Qi Chao said that Layer2.Finance may start with some commonly used Defi protocols, and then it will continue to access new high-yield Defi protocols. As liquidity in layer2. Finance grows, the new DeFi protocol turns around hoping to attract this precious liquidity and proactively build an adapter to layer2. Finance.

The key point is that Layer 2.Finance is not only a platform for reducing fees, it is also a very useful aggregator. From the user's point of view, learning to use the various DEFI protocols with so many DeFi protocols and platforms is a complex operation that takes time to research. But on Layer 2.Finance, all the interactions are very simple. The user only needs to choose a strategy on Layer 2.Finance to receive fixed income, and the rest of the work is left to Layer 2.Finance to execute.

Cheap, easy to use and secure, that's what Layer 2.Finance really brings to the user and Defi ecosystem.

In addition, Qi Chao also emphasized that Layer 2.Finance not only has a single chain architecture, but the current first version integrates various DeFi protocols on Layer 1. Then for other Layer 2 even DeFi protocols on other Layer1, from a native user's point of view, they don't need to move their tokens from one chain to another. Everything can still be done on Layer 2.Finance through very simple interactions. Just put the token on Layer2 and go wherever you want, which is the "global DeFi bus network" Celer eventually hopes to build, connecting multiple DeFi through a single portal.

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