If you choose a few keywords for the currency circle in 2020, DeFi must be in the top five. DeFi didnt start until 2020, but 2020 is the first year of DeFis outbreak.
DeFi, decentralized finance, is a financial application ecosystem based on the decentralized blockchain protocol. At present, the main application cases of DeFi include lending, spot trading, derivatives trading, stable currency, asset management, prediction market and creation of synthetic assets, etc. DeFi has also formed its own leading products in various fields.
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The rise of DeFi stems from the sudden wealth effect, intrinsic value and innovation
As early as December 2017, the Ethereum-based protocol MakerDAO was established, and then Compound Finance and Uniswap were launched in September and November 2018. But the real rise of DeFi came when Compound Finance proposed the concept of loan mining in June. Its governance token COMP skyrocketed by 500% in 3 days, and distributed its own governance tokens to users through liquidity mining, which can easily get more user. After that, liquidity mining exploded, and DeFi began to rise. Afterwards, the sudden wealth effect of the Uniswap listing, the value of the token airdrop exceeded 10,000 yuan, and DeFi really rose.
DeFi is relative to the traditional financial CeFi (centralized finance). DeFi has some characteristics that are obviously superior to traditional finance. There are three key factors:
Follow smart contracts to write rules and execute operations to reduce human intervention
Transparent open-source audit of smart contracts and transactions on the blockchain
Participate in the creation, use, modification or combination of various projects without access conditions;
The rise of DeFi is a financial innovation driven by technology and products.Compound innovatively introduces governance tokens, and both borrowers and lenders can obtain governance tokens by providing lending assets and borrowing assets; Uniswap innovatively proposes a constant product model, users can directly exchange tokens in the exchange pool, completely changing Yearn.Finance is also extremely financially innovative, as a go-to A centralized financial platform, covering complex functions such as aggregated liquidity pools, leveraged trading platforms, and automatic market making.
DeFi is valuable. It allows anyone anywhere in the world to obtain financial services provided on the blockchain through the network. It is completely disintermediated and greatly reduces the barriers to entry for userssecondary title
The security of DeFi needs to be improved
DeFi is a smart contract with a specific code. The smart contract code is immutable and operates completely in accordance with the specified method, which also ensures the decentralization, fairness and transparency of the DeFi project. But it is for this reason,If a smart contract has man-made or non-man-made vulnerabilities, it can be exploited without being irreversible, which is what we call being hacked. Of course getting hacked is not common, but they do happen and they happen all the time.
Of course, an excellent project generally has a process such as smart contract audit. Smart contract audit reduces the risk of loopholes in the contract code to a certain extent. Risks should be carefully assessed beforehand. Therefore, a DeFi project that has not been audited by a smart contract is not easy to touch, and a project that has undergone a smart contract audit cannot guarantee complete security.
Recently, Cover, a rookie in the DeFi insurance industry, was attacked twice in a short period of time by hackers using the projects own code logic loopholes, resulting in the issuance of more than one trillion tokens, which caused the price of Cover to halve. Hackers successively cashed out on SuShiSwap, Uniswap and other DEXs, which directly caused the price of the token Cover to plummet by more than 99% from $800. Of course, Cover also launched new tokens afterwards, and also gave excessive compensation to users who suffered losses caused by the hacker attack. However, for the moment, the integrity of the Cover contract code should still be given attention.epilogue
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In 2020, DeFi has demonstrated to the encryption field of the blockchain industry that innovation is still possible, and new projects can still guide liquidity, capital and participation in novel ways, in a more convenient and faster way. The development of DeFi is rapid. Now the total lock-up volume of DeFi is about 24 billion US dollars. It once reached 26 billion US dollars. A year ago, the total lock-up volume of the DeFi market was only 777 million US dollars. DeFi users have also reached 1.2 million.
DeFi is still a key area worthy of attention in the currency circle, especially under the premise of the current bull market. DeFi is currently the field with the most innovative core and the most opportunity to achieve breakthroughs in application landing. The new round of bull market will no longer be a simple one-ten thousand coins flying together. Only high-quality projects can get real opportunities. DeFi high-quality projects are the most Noteworthy.
The current DeFi field is still a new field, and there is still such a broad space for development. We look forward to DeFi bringing us a more different encryption world.
