Why does defi not drive Ethereum
users in the defi ecosystem have complete control over the assets and participate in the defi with the help of P2P network and DAPP
advantages of defi
the popularity of defi is inseparable from its unique advantages. Defi mainly includes:
1. Open loan agreement
compared with the traditional credit structure, open and decentralized loans have many advantages, including integration of digital asset lending, digital asset mortgage, real-time transaction settlement and novel secured loan methods, no credit check, standardization and interoperability. The purpose of secured lending using open protocols such as maker and Dharma is to rece the risk of counterparties without intermediation by relying on the minimum amount of collateral provided by Ethereum
2. Issuance platform and investment
famous securities issuance platforms such as polymath and harbor provide the framework, tools and resources for issuers to issue marked securities on the blockchain. They have prepared their own standardized token contracts for securities (i.e. st-20 and r-token), which are unique in terms of automatic compliance and customizable transaction parameters and can meet regulatory requirements. Similarly, they are integrated with service providers (e.g., broker dealers, custodians, legal entities, etc.) to assist issuers in issuing
3. Decentralized forecasting market
decentralized forecasting market is one of the most attractive components of open finance, which is highly complex but has great potential. August launched the anti censorship forecast market last year, and other platforms like gnosis began to follow suit. Forecasting market has long been a popular financial tool for avoiding risks and speculating on world events, and decentralized forecasting market can also do this
4 exchanges and open markets
exchanges in open finance mainly consider decentralized exchange (DEX) protocol and P2P market. First of all, DEX is a P2P asset exchange between two parties on Ethereum, in which no third party acts as an intermediary, such as coinbase or other centralized exchanges. DEX also uses some highly innovative methods to exchange tokens, such as atomic exchange and other unmanaged methods, to exchange one asset for another with minimal settlement time or risk. The most popular DAPP in Ethereum is the decentralized exchange IDEX. Although many "DEX" claim that they are indeed decentralized or unmanaged, be careful before using them. The P2P market on Ethereum has great long-term potential, and may eventually cover the market of local digital assets and marked real-world assets
5. Stable currency
stable currency is booming in the digital asset market by issuing warrants, auditing its reserves and managing its price linked new model. Stable currency is just a token issued by the blockchain, which aims to keep a stable link with external assets (mainly US dollars, gold or other assets). The stable currency of encrypted mortgage includes Maker & # 39; S Dai, where the underlying asset (e.g., ETH) is over mortgaged relative to the borrowing asset (DAI) according to the current mortgage rate. So far, stable currencies backed by legal tender are the most popular because of regulatory compliance and no audit risk, such as tether, usdc and Gemini dollars
disadvantages of defi
on the one hand, the development of defi is restricted by the performance of the underlying public chain. The current defi project is mainly built on the Ethereum network. At present, the performance bottleneck of Ethereum is relatively prominent, and there is still a long way to go to break through the bottleneck. Under such a situation, those projects with high performance requirements will be in an embarrassing situation. On the other hand, compared with traditional financial procts, decentralized financial projects are much more difficult to use and have higher cognitive requirements for users, which will also greatly affect the development speed of defi. In addition, the roller coaster like ups and downs of defi projects (sushi, yam, yfii, etc.) also make people wary of its security. How to continuously accumulate user trust is also the focus of attention in the future.
almost every supporter of encryption start-ups has a trend, that is, to use the decentralized value of blockchain technology to sell their business fundamentals
in this paper, we will explain the differences between decentralized financial agreement business and traditional business:
we will mainly discuss two aspects:
1) what is the real meaning of defi
2) what are the types and main differences of defi platforms< Users of traditional financial systems often want to build a system that is easier to access, more transparent, lower transaction costs and less dependent on intermediaries. To build such a more equitable financial system, banks, loans and derivatives must undergo fundamental changes. In addition, a decentralized ecosystem, such as defi, is needed. It promotes P2P lending, eliminates centralized control, and provides users with financial freedom
recently, in the field of cryptocurrency, there are many discussions about defi. It provides financial services to the world: loans, derivatives and other procts. Moreover, the role of traditional financial intermediaries has weakened, or even failed to play a role. Proponents of a decentralized financial system see defi as a good alternative to traditional lending. Some have called it the future of borrowing
defi is built on public blockchains such as bitcoin network and Ethereum. It has become one of the "core drivers" on the Ethereum network. By using unlicensed distributed networks, the defi platform converts financial procts into untrusted protocols that can be accessed by anyone anywhere in the world. People who don't have an account in the bank can also use the defi solution to loan and borrow assets, as well as to trade with financial instruments
open source platforms provide users with great benefits, including transparency, cheap cross-border transactions, no credit checks and less censorship. Anyone can carry out financial activities because there is no geographical restriction<
the degree of decentralization of defi
in recent months, the introction of defi solutions has proliferated. They have different models and their degree of decentralization is also different. Compared with other models, some defi models have poor dispersion. This is because only a few of their components are decentralized, while the rest are still centrally controlled by the company
the establishment of agreement, non trust, price supply, determination of interest rate, provision of liquidity of margin call and start-up of margin call are the key components of defi agreement. They determine the degree of decentralization
if there are a large number of decentralized components, then the defi protocol is more decentralized than other models. Such a protocol will give users complete control over their digital assets and get rid of centralized control. So far, there is no single defi protocol that disperses all components
each defi protocol is assigned a category according to the number of distributed components:
centralized finance (cefi)
defi solutions are usually unmanaged, which means that users can control their funds and be responsible for their security. Instead, cefi is hosted. The central system is responsible for keeping the assets of users and ensuring the safety of users' funds
when it comes to loans or loans, users can't control any aspect of funds. The interest rate is determined by the central government, and the liquidity of margin call is provided by the central system or authorities. Cefi procts use centralized price supply, and it is also permitted to issue margin call.
With the expansion of the imagination boundary of the combination of blockchain technology and finance, the emergence of decentralized Finance (referred to as "defi") may bring some enlightenment. According to the latest data of 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 of the graph hosting service was 20 million to 30 million, but in June, the daily query volume reached 40 million to 60 million
according to the report of dapppreview, the information and analysis platform of dapps based on blockchain, in the second quarter of 2020, the total transaction volume of Ethereum profi increased by 403% compared with the same period last year, and the market value of several Ethereum profi projects more than doubled in the second quarter. Under the frenzied pursuit of capital, it needs cold thinking to treat defi
defi
defi is still in its infancy, facing three major challenges:
first of all, code loopholes. Programmable finance represents the power of science and technology, but the loopholes after code stacking are always difficult to avoid
the second is the systemic risk. Whether it is traditional finance or programmable finance, we must consider the systemic risk, such as whether the defi ecosystem can carry it in the face of extreme market fluctuations
the third is the asset on the chain. The complexity and uncertainty of the asset on the chain is a great challenge for the whole defi instry, which needs to be tried by the pioneers
the defi application faces the risk of hacker attack. According to media reports, only from February to march in 2020, there were six security incidents in the field of defi, with a loss of more than $1.5 million
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secondly, the noise of bitcoin miner is very loud, with 90 decibels. A single miner can kill a family. If you play at home, unless you do sound insulation treatment
thirdly, the use of bitcoin mining machine needs to connect the ore pool to set up, etc., and it must have some professional operation knowledge, which is difficult for ordinary people to learn
Fourth, the running status of bitcoin miner needs to be monitored and monitored for 24 hours
fifthly, bitcoin miner will generate a lot of heat in the process of operation, so it is not cost-effective to use air conditioning at home
sixth, cluster mining, single miner output will be higher!
More and more people want to steal money by attacking smart contracts. They are taking advantage of the loopholes when smart contracts are combined
in 2020, the total amount of embezzlement or theft in the attack on defi has reached 36 million US dollars. But because dforce attackers returned the stolen $25 million, the actual amount was about $11 million
compared with the early days of Ethereum, the average loss value of each hacker attack has decreased significantly. Eight of the 10 attacks in 2020 are worth less than $1 million
defi
in the early days of Ethereum, most attacks were based on finding indivial vulnerabilities, which enabled attackers to freeze or exhaust smart contracts. This was the case with the notorious Dao hacking incident in 2016, in which $160 million eth was stolen and Ethereum finally forked out. Similarly, the multi signature attack of parity in 2017 caused hackers to steal $30 million, and $150 million in parity's wallet was frozen, all of which were the consequences of such vulnerabilities
the loopholes of such smart contracts are still exploited from time to time. Recently, an attacker succeeded in stealing all Veth from token contracts, making a profit of $900000 just by exhausting the veth-eth uniswap pool. But this is a simple mistake caused by Veth, because there is a logical error in the way Veth modifies the erc20 token standard
generally speaking, the security has been improved, especially for the projects with high attention. Their security improvement is driven by the user's expectation of audit and the improvement of testing tools. Recently, the biggest security problem in defi is that dforce's $25 million digital assets have been stolen from the lending market. However, the funds were withdrawn because the attacker's IP address was found and shared with the Singapore police
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Defi is the abbreviation of decentralized finance, which refers to rebuilding the ecosystem of protocols, platforms, applications and tools of traditional financial procts outside the traditional financial system
the defi solution is not provided by banks, but is built using open source software and non censored networks. As a result, the defi proct is essentially transparent and open to anyone who can connect to the Internet. Defi procts enable the world to participate in financial activities (such as consumption, borrowing, lending, gambling and trading) in a point-to-point manner without relying on intermediaries such as banks and governments
the value of growth in the field of defi is more than 675 million US dollars, which is locked in the defi agreement. In the past 12 months, many people have been closely following the development of this field. Defi is becoming a parallel financial system with the traditional central bank, Santander bank, Deutsche Bank and pension funds
almost all the defi solutions are built on Ethereum, which is an open blockchain platform and the best in terms of development and active users
the defi solution is supported by blockchain technology, using the most powerful features of the technology: programmable digital assets, such as bitcoin (BTC) and Ethereum (ETH). These digital assets have monetary value, mainly because of the value storage characteristics. Because these assets are programmable, we can lock them into smart contracts as collateral (similar to home mortgages)
using the blockchain technology, all transaction processes on the chain need the approval of each node in the network, and the whole process is transparent and open.