DeFi Token is on fire, the fire is unreasonable, and the fire is a mess.
From Compound in June to YAM and CRV recently, DeFi currencies one after another have appeared in the public eye one after another, which is dizzying.
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The heat is not inferior to ICO, the DeFi army is coming
Since June this year, the DeFi product Compound has launched the loan mining model. Once launched, the price of COMP quickly rose from the initial USD 18.5 to around USD 380, an increase of 19 times.
As soon as the news came out, there was an uproar among the people, and people became very interested in this price monster, which ignited the fire of DeFi. Now, the fire is burning extremely vigorously.
At the beginning of 2020, the total market value of DeFi was about 800 to 900 million US dollars, but since May, DeFi suddenly seemed to be on a rocket, and the market value began to soar all the way, breaking through 2 billion US dollars, 4 billion US dollars, and then to The recent $12.878 billion.
On August 19, according to DeBank data, the total value of locked assets in the Ethereum DeFi protocol exceeded $7 billion.
Coincidentally, according to the latest data from The Graph, a blockchain data index company, the number of DeFi monthly queries exceeded 1 billion in June. In the previous few months, the daily query volume on The Graph hosting service was 20 million to 30 million, but in June, the daily query volume reached 40 million to 60 million.
With the popularity of the DeFi concept, centralized exchanges are of course not to be outdone, rushing to launch DeFi project tokens and contract products. In the past, COMP was listed on 52 exchanges in two months, and AMPL was favored by 17 exchanges one after another. YFI, which was established on July 27, went online on 26 exchanges in just one month, and even YFI’s derivative, YFII, went online on 9 centralized exchanges. In addition, recently, YAM was listed on 5 exchanges a day, and the three major exchanges of HBO coincidentally launched CRV at the same time.
DeFi is hot and scary. However, it is worth noting that although DeFi is so hot, compared with the entire cryptocurrency industry, it is still only active in a niche range, and the threshold for ordinary users is still high. Whats more, as a social experiment in the financial field, various products still have many problems and security risks.
Previously, Dforce was attacked by hackers, and later, YAM’s currency price collapsed due to contract code problems. Many users suffered heavy losses. In just a few hours, the lesson from 100,000 to 860 was extremely painful. Numerous bloody facts tell us as ordinary users that if we want to participate in it, we must at least know what we are playing.
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The star coins that are in the limelight
NXM
In 12 hours, USD 7.2 quickly soared to USD 25.2, and the market value of NXM exceeded 100 million. The rapid beating of the K line made the investors who were out of space sighed.
Nexus Mutual is an Ethereum mutual insurance that shares risks through carte blanche. It is somewhat similar to the Alipay Xiangxiangbao we are currently using. The users insurance premiums are concentrated in the fund pool. When encountering a claim, the user will be able to obtain a certain amount of compensation from the fund pool after the review is passed.
It is worth noting that after the price of NXM skyrocketed, there was a dramatic scene. Big investors kept smashing the market, early investors sold, and the price slowly fell back to $11. The reason why NXM experienced sharp rises and falls in a short period of time is closely related to its compensation capability ratio (MCR%) from a mechanical point of view.
In simple terms, the payout power ratio is the ratio of the reserve pool to the minimum payout fund. That is to say, the minimum amount of funds needed in the NXM reserve pool will not face the risk of not being able to pay compensation to customers.
In the short term, the currency price can be affected by manipulating the compensation ability ratio, but this method is not sustainable. With the shipment of large accounts, the compensation ability ratio will drop, and the price will soon follow suit. In the long run, it still depends on the growth of business to drive the price rise.
Therefore, the seemingly crazy NXM pump is actually just a false boom. In addition, it must be said that the biggest risk of NXM currently comes from the risk of its own system. There are always new vulnerabilities being discovered and exploited, even logic rather than code level vulnerabilities. Formal verification cannot fully expose contract loopholes, and logical loopholes cannot be detected.
Although NXM has become a hot topic in the short term, it is just market hype, but decentralized insurance is still worth exploring and trying. After all, security issues are always the sword of Damocles hanging over DeFi.
By the time of writing, the price of NXM has once again peaked at $57.98. Whether the reason is business growth or market hype, perhaps only time will tell us the correct answer.
YFI&YFII
YFI never disappoints. After experiencing the previous downturn, YFI took off again. On August 18, the price of YFI briefly broke through $12,821. This governance token, called air by the founder, rose from $3 to more than $4,500 in just a few days after it appeared, and then experienced a fork, a price drop, and was listed on Binance... Now it has officially surpassed Bitcoin price.
YFI is the governance token of the DeFi platform yearn. yearn is an aggregation platform that supports multiple DeFi protocols. It can automatically move positions between various DeFi protocols that provide liquidity mining, helping users obtain higher returns.
In addition, among the many projects that advertise decentralization, YFI is the one with the most Bitcoin temperament and blockchain spirit.
First of all, Andre, the founder of the project, built the project almost by himself; what is even more commendable is that after building the project, Andre chose to quit without hesitation and hand over the project to the community for governance; thirdly, the tokens of the project The total amount of YFI is limited to 30,000. There is no team share, no pre-mining, no public offering, and even the founders themselves have no token rewards. To obtain YFI, the only way is mining.
Where there are people, there are controversies and differences. Before it grew into Bitcoin, YFI faced the catastrophe of Bitcoin - a fork. Since the total amount of YFI is fixed at 30,000, it is simply not enough for players who are keen on mining. In addition, if there is no mining, a large amount of funds will be withdrawn from the pool, which may have an adverse impact on YFI.
At this time, some community members proposed an additional issuance plan to change the total number of 30,000 coins to 60,000. At the same time, it will be halved every week following the Bitcoin halving mechanism. This proposal is called Proposition 8. However, Proposition 8 received a support rate of more than 80%, but failed because the total vote rate did not meet the minimum requirement of 33%. It can be seen from the voting results that the large holders of currency did not participate in the voting at all.
This actually reflects the role of YFI as a governance token: it can be pledged to vote to determine the development direction of the project. So some members of the YFI community decided to fork the project. In the words of the YFII community: In order to ensure that Andres genius concept and system are not controlled by the previous giant whale account, we forked the YFI project, code-named YFII.
YFII, which was born out of YFI, was not favored at the beginning. In the eyes of many people, it is nothing more than a domestic counterfeit product. However, the subsequent skyrocketing price of YFII made many short-sellers shut their mouths and silently spit out two words: Its really fragrant. Coupled with the subsequent Balancer blocking incident, YFII immediately took off the cottage hat and became the DeFi domestic product in the mouth of players.
Like YFII, in order to obtain tokens, there is only one way to mine other than secondary market purchases. However, for YFI, mining is basically controlled by large investors, and the income of retail investors mining with small funds is not worth the handling fee. Although it is a decentralized product, it is not a fair game. Therefore, taking orders in the secondary market with strong FOMO sentiment has become the choice of more people.
Large households mine, the community shouts orders, retail investors take orders, you sell chips, I take them, and then sell them to him, gather popularity, and make the plate bigger... How about it, does this operation seem familiar?
Link and oracle series
As one of the most powerful altcoins in 2020, LINK has repeatedly broken the thighs of investors who have been short-lived. If you want to take stock of the most eye-catching currency in the past year, LINK is none other than LINK.
Since the second half of 2019, it has led the market many times. LINK is not only one of the first currencies to recover the decline after the 312 Black Swan, it has recently broken record highs, and its market value even exceeds that of the established mainstream currencies LTC and BSV, ranking sixth in the global market value. In contrast, the star coins of the same period The performance of XTZ and Atom is far behind LINK. It is not an exaggeration to use the word crazy to describe LINKs performance.
The skyrocketing price of LINK has allowed investors to see the markets demand for decentralized oracle machines. At present, this part of demand mainly comes from DeFi. So as long as the popularity of DeFi is still there, there will be demand in the oracle market. But LINK has risen so much, and its market value is the sixth in the world. Is it still not on this car? If you get in the car, you may be trapped, and if you dont get in the car, you may be stuck in the air all the time.
Therefore, smart investors set their sights on several other oracle projects with low market capitalization, such as Band Protocol, Nest Protocol, Tellor, etc. However, if we look at these decentralized oracle machines in a horizontal comparison, Chainlink obviously has the first-mover advantage and is in the leading position.
However, compared with other oracle projects, Chainlink also has its shortcomings and problems. For example, the price of prediction services provided by Chainlink is too high. In addition, with the increase of business scale, the potential benefits of node fraud are getting higher and higher, which will also reduce the security of Chainlink.
YAM
At 3 a.m. on August 13, a DeFi project called YAM appeared. After a short rise to $200, its price has remained at $109, and the amount of mortgage funds in the fund pool has reached as high as $600 million. The unit price of YAM fell from $109 to $0.9, a drop of more than 98%, and the fund pool shrank to $280 million. The cloud and mud change only happened within 36 hours, to be precise, it happened within one hour at 16:00 on August 13.
Yam Finance is an experimental protocol that is positioned as a liquidity mining aggregator.
Simply put, it is the YFI+AMPL model, which adopts YFI’s mining output method, but supports almost all mainstream DeFi tokens, and YAM is the same inflation-deflation model as AMPL.
The initial allocation of YAM adopts the YFI model, there is no pre-mining, and there is no investor share. At the same time, YAM has added a key supplementary mechanism based on the elastic supply model of the algorithmic stablecoin Ampleforth, that is, part of each supply expansion is used to purchase yCRV (high-yield USD stablecoin) and add it to the YAM repository , governed by the YAM community. The initial total supply of YAM is 5 million.
At 3 a.m. on August 12, the DeFi project Yam Finance conducted its first token distribution, among which 2 million initial tokens (YAM) were evenly distributed to 8 pledge pools, each with 250,000 tokens, and the initial tokens Assignment lasts 7 days.
The 8 pools are COMP, LEND, LINK, MKR, SNX, WETH, YFI, ETH/AMPL Uniswap v2 LP. The collapse of YAM has a lot to do with the mechanism design of adjusting the total amount. The total amount of YAM initial tokens is 5 million, and there will be a rebase period every 12 hours, that is, 4:00 a.m. and 16:00 p.m. Beijing time. Assuming that the user holds 1% of the total currency, it will still account for 1% after the rebase, but the amount has changed, and more/less YAM can be obtained.
Some community members said that this project is related to the loopholes in the elastic supply adjustment (rebase) contract. According to people familiar with the matter, it is because the YAM core developers deleted one 1E18 in the native code, and mixed up two variables in the native code, resulting in the calculation result of this line being 1E24 times larger than the product design.
In other words, after Reserve, YAM suddenly issued 24 orders of magnitude more tokens to the pool, which also caused the entire market to have too many YAMs and the price of the currency plummeted. Unfortunately, YAM failed. However, when YAM plummeted to a minimum of US$0.6, there were still users who chose to buy the bottom and sold it at a price of US$1.4 shortly after. One in and one out, they made a lot of money.
After the collapse of YAM, YAMs official blog posted: We will set up a Gitcoin grant campaign to coordinate community funding to complete the YAM contract audit. If the funding goal is met, after the audit is completed, we plan to migrate the original YAM contract. to support the launch of YAM 2.0.
However, YAM2.0 is still just a concept. I hope that after experiencing the YAM roller coaster, Farmer will keep the word risk in mind.
CRV
On August 14, the three major exchanges Binance, OKEx, and Huobi announced the simultaneous listing of CRV. The old leeks in the currency circle have never seen such a scene. The three giants of the exchange, who have always regarded themselves highly, even bent down and rushed to launch the same project.
Before everyone could react, another piece of heavy news hit: the price of CRV on Uniswap reached $30. According to this figure, the market value of CRV exceeded $90 billion, easily surpassing the market value of Ethereum. Even Zhao Changpeng, the founder of Binance, couldnt help tweeting: Now the market is crazy, everyone should be responsible for their investment behavior. The frenzied market made YAM, which collapsed in one day, quickly forgotten, and CRV became the new darling of DeFi.
I believe that investors who pay attention to the DEX track have more or less a certain understanding of Curve. It is a liquidity aggregation protocol built on Ethereum, similar to a decentralized exchange. Users can exchange stable coins such as DAI, USDC, USDT, TUSD, BUSD, and sUSD, as well as BTC-anchored coins on Ethereum on this platform. In other words, CRV is like a dedicated stablecoin exchange.
Compared with Uniswap, Curve has lower transaction fees and slippage through a special automated market maker (AMM) algorithm.
Although it is a DeFi project, Curve was still managed by a team in the early days and was relatively centralized. In order to achieve decentralization, Curve launched the decentralized organization Curve DAO. CRV is the governance token of Curve DAO.
The total amount of CRV tokens is 3.03 billion, and the initial issuance is 1.3 billion (accounting for 43% of the total). The specific distribution method is as follows: 62% is allocated to liquidity providers (of which the pre-mining round accounts for 5%, and it will be released linearly within one year. , the official round accounted for 57%); 30% is allocated to shareholders (team and early investors), locked for 2 years, and linearly unlocked in the next 2-4 years; 3% is allocated to employees, linearly unlocked within 2 years; 5 % allocated to the community reserve pool.
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In the DeFi wave, can retail investors have a name?
The above-mentioned currencies only account for a small part of the DeFi field. According to the statistics of the Feixiaohao platform, there are at least 30 active DeFi currencies at present.
However, careful readers have also discovered that the initial way to participate in the above-mentioned currencies is to mine on a decentralized platform, and even if many exchanges later launched DeFi trading pairs one after another, some exchanges even opened DeFi sector, but compared to the cost of mining, the price of buying DeFi currencies from the secondary market is often ridiculously high.
Some players even joked that buying DeFi in the secondary market can be equivalent to receiving orders at high prices. Because when the player gets the news of the skyrocketing, it is likely to be the insider information that has gone through seven hands from the DeFi KOLs Twitter to the WeChat group transmission path. When you enter the market at the same time as the Chinese aunt, it is inevitable I cant escape the fate of chasing high - quilt - cutting flesh.
So, is it a good choice to directly participate in the initial mining? Some people have calculated that if you want to make a profit in a series of DeFi mining activities, you must start with at least $100,000 in capital investment, otherwise the loss outweighs the gain. Because in liquidity mining, the profit ratio of players is closely related to the proportion of their own investment funds in the fund pool, so small-scale investment of retail investors can hardly make money in DeFi.
Coupled with the high amount of gas in Ethereum, the money that retail investors often earn cannot offset the expenditure of gas. In addition, DeFi itself is immature, and loopholes and risks are also elements that cannot be ignored.
All the gifts of fate have already been secretly priced. I paid the price for FOMO, entered the game of chasing ups and downs, admitting that I am the person in the middle of the picture, no shame.
In short, a thousand words can be summed up in one sentence, DeFi is risky, and you need to be cautious when entering the market, be cautious, and be more cautious.
