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 Whenever the New York Consensus Conference, a major event in the cryptocurrency industry, is held, the price of Bitcoin must rise, and this year does not disappoint. During the conference last week, Bitcoin rose by up to 20%, and confidence in the entire industry increased significantly. But what few people have noticed is that Ethereum is this year’s dark horse, with an increase of up to 50% in the same period. In the past two months, Bitcoin has led the recovery and led to the recovery of the cryptocurrency market, but the market for Ethereum has been relatively sluggish. The situation turned around last week, when Ethereum staged a sharp compensatory rise during the Consensus Conference in New York. Within a week after the opening of the conference on May 13, Bitcoin rose from approximately US$6,900 to a maximum of US$8,300, and Ethereum rose from approximately US$180 to a maximum of US$270, an increase that far exceeded that of Bitcoin. Not only that, since the low of $80 in December last year, Ethereum has rebounded by more than 230%, surpassing Bitcoin by about 130%. There are many reasons for Ethereum's compensatory increase, but "DeFi", which runs throughout New York Blockchain Week, is the main reason worth mentioning. This can be said to be one of the biggest talking points among global cryptocurrency investors and practitioners among dozens of large and small events this year. With the rapid growth of DeFi projects in the past year, more and more people are now expecting DeFi to become the next main development line of Ethereum after ICO.  Figure | New York Blockchain Week (Source: DeepTech) “ "DeFi" is the abbreviation of "Decentralized Finance", which is decentralized finance. The basic concept is to remove traditional financial institutions or third-party intermediaries, allowing individuals to directly serve each other's financial needs through the blockchain. Taking MakerDAO, the largest DeFi project at present, as an example, it allows users to directly mortgage cryptocurrency and lend out stablecoin Dai. The entire process is managed by Ethereum smart contracts. This is to use the decentralized nature of the blockchain to realize lending behavior without a centralized bank or lending service provider. In addition to lending, possible applications of DeFi also include decentralized insurance, banking, and even venture capital. In the past, the most active development direction of Ethereum was undoubtedly the issuance and fundraising of various tokens, especially ICO (Initial Coin Offering). However, at a time when ICO data is frequently hitting new lows and has shrunk by more than 99% compared to its peak, DeFi, although still small in scale, is showing quite rapid growth. According to defipulse data, as of now, MakerDAO, which accounts for more than half of the entire DeFi ecosystem, has a lock-up scale (an indicator of project size) of US$470 million, an increase of nearly 60% in three months. BlockFi, another well-known DeFi project crypto lending company, said in an interview with Bloomberg earlier this year that its revenue and number of customers have increased 10 times since June last year.  Figure | Changes in MakerDAO lock-up scale (Source: defipulse ) Ryan Selkis, co-founder and CEO of Messari, a cryptocurrency data and information platform, said at the Consensys Ethereal Summit that he is optimistic that Ethereum will eventually become a "DeFi Chain." He analyzed that if Ethereum is regarded as a programmable currency that can be used as fuel for DeFi applications, then Ethereum can be used as a clearing layer for decentralized financial transactions, which has the potential to replace the entire global financial system. Research published by Consensys, a blockchain software development company, earlier this year also pointed out that DeFi is one of the most active development areas of the blockchain in 2019, and the Ethereum project has taken the lead in the entire ecosystem, with more than 100 projects invested in developing decentralized financial applications, including stablecoins, payments, DEX (decentralized exchanges), investments, KYC & identity authentication, derivatives, loans, etc. Consensys researchers said that on the one hand, open financial platforms allow individuals around the world to participate in this new and reshaped financial system.； On the other hand, decentralized financial solutions are also changing existing traditional institutions. “What we are seeing in front of us is a new industry in its early stages. ”  Figure | Ethereum DeFi Ecosystem (Source: Block Genesis, DAppChaser) In addition, according to defipulse data, 9 of the current top 10 DeFi applications are developed based on Ethereum, which can also prove that Ethereum is more important in the DeFi field than other public chain platforms.  Figure | Top 10 DeFi applications (source: defipulse ) And from the fact that several of Ethereum’s old enemies have rushed in, we can also see how promising the future of DeFi is. Daniel Larimer, the founder of the famous public chain EOS, suddenly criticized Ethereum's DeFi on Twitter before his debut at the Consensus Conference and said that the future of DeFi lies in EOSIO. He emphasized that BitShares, which he founded, was the earliest DeFi platform, and now the most representative DeFi application MakerDAO, whose team was also a member of the BitShares development team at the time, criticized Ethereum's performance as being difficult to meet the needs of various DeFi applications. Only EOSIO can achieve "speed, low latency, ordered indexing, floating point and C++, etc."  (Source: Twitter ) Justin Sun, the founder of Tron, also posted photos of the scene on Twitter during the Consensus Conference, tagging Tron and BitTorrent, expressing his desire to "dare DeFi."  (Source: Twitter ) “"DeFi" has become the current common term for decentralized financial applications in the cryptocurrency industry, but "DeFi" is not only "Decentralized Finance", but can also be called "Open Finance" and "Transparent Finance", both of which are to highlight the characteristics of openness (no access required), distribution, and transparency of decentralized finance. Nadav Hollander, co-founder and CEO of the crypto lending company Dharma, said at the "Defining DeFi" forum at the Consensus Conference that he believes DeFi can be divided into three levels. The narrowest level is to use smart contracts to remove financial intermediaries and reduce transaction costs. Furthermore, new forms of financial products can be created to create a more competitive financial system in an open, open source, permissionless blockchain ecological environment. In the broadest sense, it is expected to break away from the imagination of the modern financial system and create a financial system that does not need to be closely integrated with politics. Sean Lippel, head of the investment team of FinTech Collective, a financial services technology venture capital company, previously wrote in Medium that "decentralized finance is a continuity concept." From the perspective of blockchain technology development and application, DeFi is more sustainable than any other direction seen before, and financial services have entered a new era of network-based finance. He further pointed out that the significance of DeFi can be viewed from developed markets and emerging markets respectively. In developed markets, DeFi can provide consumers with better choices, cut costs from the traditional financial system, and bring more liquidity and product innovation to capital markets. In emerging or frontier markets, DeFi can store value more securely, allowing the world's 1.7 billion adult population who are not accepted by any formal financial system to receive bank-style services. According to FinTech Collective research, existing DeFi projects have developed four major categories of investment themes. The first category is banking, lending, and payments (such as remittances, micropayments, stablecoins, and crypto-collateralized lending).； The second category is wealth and asset management (such as custody, investment, tokenization platforms) ； The third category is the capital market (such as: derivatives, asset trading platforms, post-trade clearing) ； The fourth category is insurance (such as secondary transactions, intermediaries and reinsurance).   Figure | Four major investment themes in DeFi (Source: FinTech Collective) However, regarding the future prospects of DeFi and whether Ethereum should focus on developing towards DeFi, from the Consensys Ethereal Summit to CoinDesk’s Consensus Conference, industry insiders also have considerable objections. Brian Flynn of Dapper Labs, the developer of CryptoKitties, believes that DeFi will only be popular for a while if you find the solution first and then find the problem. It’s just that CryptoKitties was popular last year, and DeFi’s MakerDao is popular this year. Preston Byrne, a partner at Byrne & Storm, a law firm specializing in blockchain, also said that finance is very complex, more complex and difficult than many very smart but inexperienced developers think. For example, he said that he assisted Deutsche Bank in 2015 to build a corporate bond application. After adding all economic-related elements and user interface design, he ended up writing a total of 50,000 lines of code. "You cannot put such a thing on the Ethereum public chain." Coindesk Advisory Board Chairman Michael J Casey in the 2019 CoinDesk Consensus Conference Proceedings Consensus MagazineOn the Internet, an article was published under the title "From Crypto Winter to DeFi", pointing out that "DeFi" and "staking as a service" are shaping an unknown new currency system based on the existing basic cryptocurrency infrastructure. This is expected to bring about a new financial model, but it may also undoubtedly cause risks, just like the systemic crisis that may occur in traditional finance. In fact, DeFi is still a fairly new field. If it wants to become the future of Ethereum or the encryption industry, it must at least overcome the following major problems. First, DeFi is still small. According to different statistics, the current total locked-up scale of DeFi projects ranges from approximately US$500 million to US$1 billion, which is very insignificant compared to the market value of the overall cryptocurrency of more than US$200 billion, not to mention the scale of the traditional financial industry that is often in the trillions of US dollars. Second, DeFi infrastructure is insufficient. Infrastructure is a necessary prerequisite for the development of financial services. If DeFi wants to gain more adoption, it must first improve the infrastructure, including various development tools and APIs, financial data, identity authentication, and even the performance of the underlying public chain system. Third, the degree of risk in DeFi is difficult to assess. The 2008 financial tsunami originated from the failure to correctly assess in advance the risk levels of financial derivatives such as subprime mortgages, mortgage-backed bonds, and credit default swaps. The crypto market has a very short history, and DeFi project risk assessments lack verification. For example, what should the mortgage ratio of crypto lending be to be truly safe? If DeFi projects continue to grow and expand in scale, what impact will it have on the overall encryption market? Fourth, DeFi has yet to prove its business model. Although the DeFi field has grown rapidly recently, the vast majority of projects are currently in the pre-profit stage. There is no clear reference basis for the size of DeFi's target market, how much room for growth there is, and who the core users are. -End-  DeepTech Recruitment: Technology Editor/Reporter, Intern Coordinates: Beijing·Guomao Contact information: hr@mittrchina.com Please attach 3 previous works with your resume (excluding interns)  |
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