2020 is a year for the development of DeFi. Although there are many conceptual sectors this year, such as cross-chain, storage, and NFT, the development momentum is very strong, but the headlines must belong to DeFi. Looking back on 2020, DeFi has become an important force to promote the development of the blockchain industry; looking forward to 2021, it is expected that DeFi will play a more influential role than in 2020.
The beginning of DeFi is considered to be the creation of Ethereum-based protocol MakerDAO in December 2017, but the real rise of DeFi is the sudden wealth effect brought about by Compound liquidity mining in June last year. After more than half a year of rapid development, DeFi has become the third application scenario that has been proven and tested by the market after Ethereum.
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1) Scalability
Ethereum is the main platform where DeFi is currently active. DeFi on Ethereum was the first to develop and has accumulated the most DeFi developers. However, the high gas cost of the Ethereum network is often dozens of U, which seriously hits the enthusiasm of users to participate in DeFi, and keeps some retail investors with small capital out of the door.
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2) Security
As an open source protocol, DeFi will definitely face the possibility of being hacked as long as it is a program. An excellent project generally has a process like smart contract auditing. Smart contract auditing reduces the risk of contract code vulnerabilities to a certain extent, but it should be noted that the contract cannot be completely guaranteed to be safe after passing the audit. Risks should be carefully assessed. DeFi protocols are attacked from time to time.
Recently, Cover, a rookie in the DeFi insurance industry, was attacked twice in a short period of time by hackers using the project’s own code logic loopholes, resulting in the issuance of more than one trillion tokens, which directly caused the price of Cover tokens to plummet by more than 99% from $800.
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3) Single asset
The current cross-chain technology is not mature enough, and the mutual circulation of high-quality assets in different mainstream blockchain networks is still a problem. For example, in the loan and transaction scenarios, if you want to realize the convenient transfer between different assets such as BTC, ETH, XRP, you need to realize the intercommunication between chains. However, due to the immaturity of cross-chain technology, many high-quality assets cannot interact, which also limits the development of DeFi.
At present, we have also seen that many teams in the industry are making attempts in this regard. The most mainstream solution is to map different types of assets on a specific blockchain network through locking, such as imBTC, RBTC, etc. It is through 1:1 Anchoring the Ethereum Token issued by BTC, holders can freely transfer, redeem, and exchange.
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4) Compliance
DeFi is a subversion of the traditional financial industry. Although DeFi is not enough to pose a real threat, it still shows enough potential due to its low trust cost and low transaction cost. Any subversive change will cause Traditional blocking, DeFi is no exception.
DeFis anti-censorship and unstoppable operation on the chain will become an uncontrollable factor for the authorities, so there will be a negative attitude to hinder the development of DeFi.
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5) Experiential
For the currency circle, experience has always been a problem that needs to be solved, and DeFi is a product that is more difficult to understand and operate.
Users using cryptocurrencies to participate in DeFi are different from simple behaviors such as purchases and transactions on exchanges. This requires users to know how to create wallets, manage private keys, and perform signatures. Tokens and other concepts have a very clear understanding and understanding, and the operation is very cumbersome for beginners.
Of course, there are also congested networks and high transaction fees, all of which have a very negative impact on the user experience of Shattered Feather.
Fortunately, we have seen that some changes are also taking place. Many projects have launched cloud projects, so that some users who are new to the currency circle can easily participate in it. But this kind of centralized operation is not what we want. We still look forward to a simpler, more usable, and more convenient decentralized way to join DeFi.
At present, DeFi still has some problems, but these problems will only become a stepping stone for the development of DeFi. The development of DeFi and the wealth effect it brings will never stop. In 2021, DeFi will gradually mature and become easier to use, with lower fees and higher security, which will allow more people to participate in this field. In 2021, DeFi will still be the most noteworthy and most worthwhile investment field in the encryption field.
