Since June this year, the DeFi market has been booming. The term DeFi has seen a surge in discussions in various communities.
How exaggerated?
In just a few months, DeFi star projects and others have generated dozens or even hundreds of times of revenue, including Aave, YFI, Link and so on. Looking at Link, which is leading the increase in the concept of DeFi, the digital currency data platform IntoTheBlock issued an article saying that the bull market of Chainlink (LINK) has created an abnormal situation: that is, all its supply addresses are currently profitable.
With the emergence of multiple new DeFi concept projects, high returns also mean higher risks.
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Where is the money going?
In 2019, the total market value of DeFi was close to 150 million US dollars, and in June 2020, the total market value of DeFi products reached 2 billion US dollars. By August, this value had jumped to US$5 billion. On August 10, as Chainlink continued to hit record highs, the market value of DeFi exceeded US$11 billion. The degree of enthusiasm made the community call I saw the shadow of the ICO in 2017.
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(Data update: 2020-08-11)
According to the analysis of Coinbase, an American digital currency exchange, the current income and risks have shown synchronization. Although the current DeFi market is still relatively small, the excessively high yield highlights the additional risks in the market. These risks mainly include:
1. Smart contract risks: DeFi smart contracts are easily exploited by hackers, and several examples have appeared in 2020, such as bZx, Curve, and Lendf.me. The explosive growth of the DeFi industry has led to a large amount of funds being injected into nascent protocols, and attackers can easily find loopholes in these immature protocols;
2. System design risk: Many DeFi protocols have not been in operation for a long time, but they provide a large number of incentives, such as Balancer. With just a simple loophole, FTX can obtain more than 50% of the income;
3. Liquidation risk: The encrypted collateral in the DeFi protocol is easily affected by market fluctuations, and there is a risk of debt positions being under-collateralized during market fluctuations, which in turn induces a liquidation mechanism and causes users to suffer further losses.
4. Bubble risk: The price dynamics of some underlying network tokens (such as COMP) will be reflexive (relexive), because the expected future price is usually related to the popularity and application of the network, and the network usage is incentivized by the network. price impact.
And money is fluid.
On the other hand, it has been observed that on mainstream trading platforms, the trend of increasing the trading volume of mainstream coins is becoming more and more obvious. As BTC hit a new high in the past year, ETH continued to break through, XRP, BCH, BSV, EOS and other currencies all had good gains, and the mainstream currency market may have started.
The most obvious feature of the big cycle of the bull market is that there is incremental capital coming in. No matter whether Bitcoin is rising or falling, there is always a certain sectors currency that is rising, Weibo big V Lan Shao said.
Synthesizing and sorting out the analysts’ opinions, at present, the following phenomena have generally appeared in the DeFi sector:
1. The old people in the currency circle who shouted I dont understand in the early stage have invested heavily in the layout, and even participated in forking popular projects.
2. Small exchanges export to domestic sales, issue coins on DEX themselves, and then introduce CEX, and even promise to protect capital.
3. Driven by the wealth effect, DeFi projects that have not issued coins try their best to issue coins on the exchange. A large number of projects are moving closer to DeFi concept coins. The number of DeFi sections has increased sharply, and most of them are domestic currencies that have just launched.
4. Forked coins began to appear
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Whos next?
The construction of DeFi is not a matter of a day or two. To a certain extent, there will be bottlenecks. The trend in the encryption field changes periodically. Today is DeFi, and tomorrow may be public chain or storage, or Layer2, or NFT or DAO... ..., analyst Lan Hu said.
Whether the DeFi hype has the possibility of hot spread is a topic that investors are very concerned about recently.
Will funds spread from DeFi to NFT or DAO, the most vocal community?
NFT
NFT means non-fungible tokens, also known as non-homogeneous tokens. Non-fungible tokens are unique, and NFT is based on the private property of the blockchain, which cannot be replaced, replaced, or divided. Games, collectibles, artworks, domain names, identities and other unique applications have become the main battlefield of NFT.
Statistics show that the current total market value of non-homogeneous tokens (NFT) is not large, and transactions of about 100 million US dollars have been realized in its current life cycle. By most accounts, the NFT market expanded with the launch of CryptoKitties in December 2017.
Recently, Binance’s long-suspended IEO has released new news. The latest round of project Sand has changed from the concept of DeFi to the concept of NFT. The news of the NFT star project THE SANDBOX has added fire to the concept of NFT. You know, before this, Binance launched the old currency MANA with the NFT concept, and it has gone through a good trend. Last week, with the help of Binance IEO news, MANA rose sharply. At the same time, ENJ, a currency with the same concept, also rose by more than 7%, leading the entire sector to a good market.
The veteran currency MANA is a distributed shared virtual game platform, and it was once the largest circulating market capitalization project in the blockchain game category. As of August 11, its increase has reached 115.84% in the past week.
Another coin mentioned, ENJ, is a multifunctional blockchain game development platform launched in 2009. Enjin Coin adds virtual goods to players, content creators and game publishers and provides value to games and communities. In the past three months, the increase has reached 31.39%.
Some NFT project data compiled by Feixiaohao are as follows:
DAO
An investor who entered the industry in 2017 analyzed in the community: The leader of NFT has not yet been born. In contrast, the hype momentum of DAO has begun to accumulate.
Some analysts believe that the DeFi liquidity mining that emerged some time ago just fits one of the characteristics of governance tokens: helping the protocol cold start and quickly injecting liquidity into DeFi applications. Compound liquidity mining has brought a good case to the market, and more projects have been released one after another. Among them, some start decentralized governance by issuing governance tokens, such as Compound; some establish DAOs based on existing DAO incubation platforms, such as Curve plans to establish Curve DAO based on Aragon.
Supporters in the community have optimistic expectations: the continued wave of DeFi projects will create a large demand for governance tools, and the community needs to manage community governance proposals in a safe and democratic way. Therefore, after DeFi, the market The next big thing will be the DAO.
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more views
Market conditions are attracting more investors to enter the market. At the same time, various concepts and hotspots are emerging one after another, and investors are also quickly digesting new concepts:
In the past two days, I have seen NFT, oracle machines and cross-chains are also on fire.
After DeFi, oracles, and NFT, the next concept may be DAO.
Recently everyone is talking about the relay sector of the DeFi sector is NFT
At the same time, some investors are reminding the risks:
Various husband chains have begun to enter the market to catch DeFi hotspots, which also shows that DeFi has been played badly, and the DeFi market is coming to an end. Decentralized finance has a long way to go.
The Nebulas NAS is so popular, (the circle of friends posted) DeFi is wrong, and it still pulls more than 30 points. The market has entered the stupid stage.
Now the Fomo sentiment in the entire market has risen, so we must pay attention to risks.
These emotions can be shown from some data. According to a report by the data analysis platform Glassnode, recently, the number of Bitcoin addresses holding a small amount of BTC has increased, and more retail investors are entering the Bitcoin market. Data from IntoTheBlock echoes a similar sentiment, with on-chain data showing that the number of new addresses is approaching 2017 levels. When discussing the next hot spot, in addition to looking forward to the innovation and development of the market, we must also pay attention to the risks associated with the fierce market fluctuations.
