DeFi is still fine, but don't act like it's a place where a lot of regular people have to put all their savings. V. Buterin, creator of Ethereum.
The purpose of DeFi, as I understand it, is to eliminate intermediaries and allow people to interact directly with each other. And, as a rule, the supervision of the financial system is built in such a way as to regulate intermediaries. H. Pierce, Commissioner of the SEC.
If the DeFi bubble bursts temporarily, it will benefit BTC and ETH as they receive a large influx of capital. The hype may die down, but only in the short term, as the benefits and potential of DeFi are too obvious to ignore. D. Hai, CEO of OKEx.
32% of cryptocurrency market participants admitted that they do not understand the basics of decentralized finance. Blockfolio survey data.
flooded the market DeFi is the new hype; DeFi - new ICOs; DeFi is something else: it is heard from all irons, monitors and other devices, sometimes completely not intended for this. For the 1001st time, I don’t want to talk about what blockchain is, tokens, and how all this can be used: the network is full of materials on the topic. Especially not the level of Habr - to teach the obvious. Another thing is that I want to compose the experience of the last 1.5 years in order to give the reader a more or less objective picture, removing the superfluous, both from the position of the detractor and the praiser, but leaving only the important - salt and own vision. Therefore, there will be many links, figures and graphs.
What do we have? And most importantly - why?
First, a huge number of unaudited or, worse, retroactively audited (on- No. 00 or on- No. 01 and . to it) projects. Secondly, an inexplicable number of scams of the most primitive level (more on that below). Thirdly, non-use and 1-10% of the potential of projects due to banal greed, which focuses all attention on two or three “quick and easy” money schemes.
I’ll fight three disclaimers so as not to discuss what has set me on edge (at least for me personally): in ICO scams, collected some and failed completely, less in percentage terms than in the VC segment or bank lending (on- No. 02). It was the successful ICO projects that formed the technical basis of today's DeFi hype: Ethereum in the first place, Tron next, Bancor, Kyber Network, Brave (via BAT) and others. Secondly, cryptocurrencies and blockchain are really in demand in the world: the Russian Federation is rather an exception, like Bangladesh or Turkmenistan, for example. Again, there are enough analytical reports on this subject. Third: what is happening now for 99.(9)% does not exist, although the number of users is growing: in Venezuela, India, Chile, Argentina, Ukraine, Russia, Belarus, even the taboo and many other places, including Japan, Switzerland/Liechtenstein, African countries and others. And all because illegal in cryptocurrency than fiat. And now - to the point.
In an effort to avoid fixing losses, some holders at the height of the crypto winter borrowed funds secured by digital assets, or deposited coins to receive a small, but passive income with minimal risk.
So different approaches were gradually created, which are described in detail , but in short it sounds like this for models: Fair launches, Programmatic decentralization, Growth marketing, Closer alignment, and ratioFactor, feeFactor, wrapFactor also go to this. On purpose, I don’t give translations and explanations (the author of the original source has good allegories with Uber), because the creators of DeFi products, and especially those who promote them for distribution to the masses, use a lot of unreasonable neologisms, which in most cases repeat old and not very kind receptions… banks.
And now here are the facts:
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Covid-19 has forced banks to print more and more dollars... Yes, this has been heard many times already, but gg. there were no alternatives: even (or see on ) and others like it were eventually tied to centralized agents. Now the situation is different and is not that since the beginning of the crisis in 2018, a coin from the $3200-$3500 range has approximately grown to $12 (by 800, that is, exactly to the open stage), but that 2020 btc == 1 btc, that is exactly , whatever you specifically understand by this, the main thing is to preserve not so much the price as the value.
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For the same reason btc, tokenization, increases its influence every day: this is the main advantage of the function, which I call Middle-of-Exchange. Come to the exchange and want to buy something? Then you need btc, eth or, for the riskier ones, usdt: the latest tool in 2020 gained momentum and outperformed btc precisely in connection with the DeFi hype.
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The same applies to unprecedentedly huge payments (remember about FATF and the madness of 115 Federal Laws in the Russian Federation, about which a lot has been written on Habré) with low commissions: many discuss the expensive GAS in Ethereum, but forget that the fee for protection against no one canceled, as well as for bandwidth in general. And with all this - low commissions, the absence of excessive control measures and the presence of deflationary models in a number of assets (btc is just No. 1 here, despite the loss in value to the same ) attract more and more users.
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And so on…
In the sense that there are too many such trifles: starting from on deposits, ending with statements about the taxation of everything and everything, including the same deposits in banks. But the main thing is still not this: since 2008, or rather, since 2010, when the trials on cases from the '08 crisis began, it became clear to everyone that offshore companies in their current form are no longer needed, more precisely, they do not fulfill their functions. The example of Cyprus (both from the point of view of the crisis of 2012-2013 and the position of taking away “golden passports”) is far from the only one, and Belize, the Bahamas, Maine and many others are forced to make concessions to the FATF. Actually, for this reason, it was they, as well as Estonia, Switzerland and other areas that earn on attracting foreign money, who realized quickly: cryptocurrencies are an offshore of the 2017st century! But it’s easier said than done: the ICO hype is the middle of 2018 - the beginning of 2013, the full cycle of 2018-2012. Then there was a timid attempt at IEO, but the laws for all this appeared much later: and it doesn’t matter whether we are talking about France, Thailand or the same Liechtenstein (I won’t say anything about the USA, China and the Russian Federation at all). Most of all, the absurdity of the situation is observed in the fact that in the United States they started talking about crypto assets already in 2014 (and after the world congress - everywhere and everywhere in the year XNUMX: what was left ), but by 2020 The SEC, senators, and other administrative dignitaries are arguing that clearer market rules are needed. And yes: the ETF is also not launched, let me remind you. Therefore, the legislators of India, South Africa, Australia and other jurisdictions are increasingly reminiscent of a legally blonde who comes to every party in the wrong outfit.
Or I’ll put it another way: DeFi is about flexibility, mobility, speed as such. But everything else has a number of negative qualities.
What are the downsides then?
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First, back in 2016-2018. scammers have realized that the similarity of tickers is a path to "success" that is not much different from the banal combination of "best" spam and phishing practices. Therefore, the popular exchange fake tokens and frank coins for theft. More examples: YFFI and YFII, which increased only on similarity with YFI. In addition, all this destroys airdrops in the bud: the tool - , but it is difficult for him to use it this way.
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Secondly, by and large experience (by the way, it was a DeFi product) didn’t teach anyone anything (immediately - ): projects , but they don’t even try to patch them (doesn’t it remind you of anything?). Moreover, users (liquidity providers and other participants) also know about the holes, and they use them anyway, pouring in more and more of their own funds (figures below).
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Third, technical problems are the first layer of real problems. Much deeper difficulties lie in economic models, both for the PoS families in general and for the DeFi segment in particular. Various specialists paid attention to them - even , but there is no sense so far: all the achievements of V. Buterin and many other teams (I'm talking about models , from Fairmint and others) for 2016-2020 are simply ignored and there are no decentralized escrows; no integration with payment channels (to reduce the cost of the same commissions) and everything else I’ll remind you about.
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Fourth: instead of working on bugs, unfair competition arises when shortcomings become rather than a reason to improve the entire ecosystem. The second corollary from here is debts and other nonsense (especially the collateral priority race), which the DeFi market was supposedly aimed at solving from the very beginning. First of all, we are talking about liquidations. , but not only (again - see below). Rarely does anyone manage to leave quietly and more or less honestly: the example of Paradigm Labs is not the only one, but it is not massive either.
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Fifth: the most frustrating thing is that stomping on the spot is perceived as the norm. Let's say, what did many ICO contributors do? They were purchased at closed rounds (presale and similar) at a discount of 10-25-50-75 percent and sold immediately after listing on the exchange. What we see in the example ? And exactly the same thing. Or baDAPProve from ZenGo: “some decentralized applications (DApps) request approval for a transaction for a certain amount, the user unwittingly gives access to the token for all available funds,” when there was no reaction. In some cases, still. Although tools for analysis / confrontation are available: No. 1 and No. 2. Or how do you like repeated repetition of experience through such "services" as: Pizza, HotDog, Kimchi, OnlyUp especially? If you suddenly don’t know, then these are Ponzi schemes, only accelerated by 1000 orders of magnitude, so that no one has time to come to their senses.
In this regard, there are several striking examples.
The most high-profile failures and / or scams
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— hacking and $8 - at a loss.
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- hack at 371.
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Asuka.Finance exit scam: no comment.
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- $20: I don't know, usually you want to take and check these numbers, but not this time.
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- $2: similar.
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(SYFI) - compared to others here "only" from $150 to $0. Although depending on what and with what to compare: - from $0,0009 to $5,28 and - downhill.
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- one of the "food" failed tokens, to which you can add HOTDOG and KIMCHI.
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OnlyUP - see above.
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- $600 without audit and collapse: “I'm sorry everyone. I failed. thanks for the crazy support today. I'm sick with grief." This is all that can be obtained with a careless attitude towards money.
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- Also about food and also $ 200 in blocking: without an audit! However, even when there is an audit, it does not help, because no one reads it or reads it diagonally: the clearest example is where the organizers falsified the results of the audits in order to embezzle investors' money. But you need to understand that according to Quantstamp, by July 2020, 2020 million were stolen. in MarkerDAO at the same time for one hack (you can read the analysis ) amounted to 8 forever dead presidents, although amounted to ... as much as 28 in the same portraits, that is, the numbers of frozen funds, funds withdrawn (stolen), etc. - different indicators, which does not negate the importance of those as a general overview.
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— unplanned release of tokens.
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- $ 15 ... Or else , , Bantiample - and many others. I hope this is enough to conceal the initial interest?
Armor and projectile
Despite the fact that I do not accept war, I consider the allegory of confrontation between armor and projectile to be one of the best in the history of mankind. So, the community as a whole still has tendencies for development:
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It has been four years since a unified monitoring system has existed btc that come and go from the darknet, steal, etc. (on the- No. 3 or crystalblockchain upon request). But self-cleaning does not end there: an example () and especially not my favorite SushiSwap - direct evidence that open and anonymous systems can exist in the presence of not a subjective, but a transactional reputation and the interaction of community members as a whole.
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Interaction at different levels: Paradigm and MakerDAO, creating tokenized bitcoin, Storj and Ethereum Classic enclave, helping white hats with hacks, or Huobi and Binance funds to create, maintain and grow DeFi startups, funding KeeperDAO and Polychain Capital with Three Arrows Capital, a story in itself BnkToTheFuture (the same Celsius received 18.8 million there) or a token and even lost funds in USDt, like many other things - it improves integration zones in different directions, although here too everything is happening incredibly slowly for such a turbulent market. Separately, I note that liquidity has also been positioned for the last 1.5 years as mutual assistance: and for this reason, aggregators , ranging from the little-known b2bx to the mastodons from 0x and others - a direct result of such synergy, no matter how it sounds to you exactly.
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However, more and more developers (VIZ, MakerDAO, Ethereum Classic, YML and others) strive to put everything in the hands of the community as quickly as possible in order to were on the right indicator, and not focused, which in itself is an oxymoron, market. This is not always possible and not immediately: say, - not the figure that we would like to strive for on a global scale, but the vector is correct.
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You need to understand that after BNB (then you can take Token Terminal, Bankless, UNI) the native tokens of the platforms have essentially become a joint distribution tool (and then voting/governance tokens), that is, distributed legal entities, which were discussed in 2017, are already a fact, albeit in a very primitive way.
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Perhaps the most amazing (for an outside observer) the case is exactly SushiSwap: first, the anonymous (!) owner will disperse the asset from ... to ..., then - takes offense at everyone and funds, from direct at the same time, he refuses, then he receives a class action lawsuit (apparently, against the grandfather’s village, given the anonymity of the creator), and then ... facilities! It also receives praise from 75-90% of the participants, although the development of the project has clearly slowed down. The most amazing thing is that everyone about the possibility of such an attack, but this did not bother anyone: until now to a fair, impartial tribunal?
Therefore, I am not a supporter of excuses, but the sphere is at least saturated with absurdity, simulacra and other tools for the mind. However, I will also offer tools for dissection:
Monitoring and analysis tools
Briefly, because the list can go on for a very, very long time. Took those who do not need advertising for sure:
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- the general state of the market, dynamics and so on.
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- nothing more: dry numbers (which you should not trust without additional checks).
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- alternative monitoring (however, there are plenty of them according to different parameters: https://loanscan.io).
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— how much btc is in… air?
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- if you haven't heard of it yet , then the time has definitely come: be extremely vigilant! (Alternative: ).
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- not really about DeFi, but the resource that allows (me) to look at the market more broadly (if you like it, I recommend looking in more and : one of the most important indicators of the DEX).
I will not give chats, video reviews and the like: here, Google. Trends say everything is in order anyway. The main rule is never trust absolute numbers: after centralized exchanges in the cryptosphere have increased from 90 to 99 percent even, it is better to study everything in dynamics and relative indicators.
The best confirmation of what has been said is the following chart:
Why is this example so important? Firstly, because it is extremely difficult to find exact numbers, and even those that match on different resources. Secondly, blocked funds are only one of the indicators, and even it can be 100% verified during a full audit of services, and, as mentioned above, this is not done in many cases. Thirdly, even if we allow an unreasonable $15 in reserves, we will still get the initial stage of development, which looks stunning only because in 000-000. everyone was busy not at all with DEX-exchanges, liquidity and tokenization of crypto-assets as such.
Therefore, another graph, but with average figures from different sources:
But most of all (again, for me personally) it upsets that 99. (9)% of projects are a repetition of different schemes from the fiat world: loans and loans (although formally in this industry they are one and the same thing) are . It is especially scary that people enter the derivatives market who can only spell this word correctly in half the cases. But still I will try to generalize, removing the subjective component again.
Market forecasts, or thinking out loud
“You can’t grasp the immensity,” Kozma Prutkov repeated and repeated, so here are a few theses that you can try to apply to the practical aspect, especially since the trends going were clear in 2017-2019. and now only revealed to those who do not follow the market closely:
Derivatives are bad, but they always - visible growth: I am against the repetition of bad stories under a different sauce. Synthetix (or Opyn, Aco, DYMMAX, Hegic, Opium, Pods) may very well be a remake of Bull & Bear Binance, and futures have already proven to be detrimental to a market where neophytes are always in short supply. Hence the urge to : and therefore stablecoins are visibility, not reality, while their influence , but in a psychological sense, rather than in a purely financial (economic) context. All this together (a link to liquidity, not a product projection (token); love for apparent calm (stablecoins); attacks due to ill-conceived models (vampire mining and the like)) give rise to reverse pyramid effect: say token capitalization it can easily exceed the same indicator of the ancestor, but without it they mean absolutely nothing; and this is also true because everything is multiplied by trading with and even more.
In this sense, the explosive mixture "CeFi + DeFi" (), and even in the era . (the example of BSC, again, is indicative), which should be multiplied by versatile attacks on the (D / L) PoS family, generate a whole chain of negative dependencies. Same vampire liquidity in itself is a bug, but when problems of the management system come to this (let me remind you again about : if you still do not understand why, then ), and then everything multiplies through exchange rate pegs (you can look at Ampleforth, Soft Yearn (SYFI), Bull / Bear Binance), there is no longer confusion, but intentional manipulations, the main of which is that STO will never become an ICO, A in order to always seem out of place, while earning, meanwhile, is not bad at all (another example: the opposition of Steem (Hive), Steemit & Tron community or BTC-e in all its glory long before the events described).
Whatever it was, but DeFi in the sense that is close to me, that is, as a full-fledged set of decentralized financial instruments, from the simplest btc to complex reputation collateral schemes, must develop. And that's why it's important that became the norm. Only in this case, a combination of DEX + DAO through Dapps of various orders (from Web 3.0 browsers and wallets to closed ecosystems) will create really interesting, innovative, and most importantly, promising models. In the meantime, I observe only the game on and with greed, as well as the departure from the main criterion of freedom - .
Knowing the experience of ICO and quite well, I will note one more thing: “approximately 49% of the leading decentralized finance (DeFi) startups are located in the USA. These data were published by analysts . Of the 73 industry firms tracked by experts, 12% are based in the UK, another 10% are based in Singapore. That is, decentralized finance is still decentralized only in words: in fact, they are still ordinary companies / firms, although DAO is an excellent automation tool and is certainly better suited for dividend distribution than a JSC or some LLC. But , and then regulators in other jurisdictions: I don’t know why “market participants” forgot about this.
But why exactly is this happening?
It’s simple: “DeFi ecosystem projects work : prediction markets; decentralized autonomous organizations (DAO); ; asset Management; derivatives; insurance; exchanges and liquidity providers; stablecoins; banking and payments; infrastructure; marketplaces; bitcoin tokenization. Not a word about tokenization as such, not anything that you might encounter in the world of classical finance. Nothing. Here are the top categories:
Hence the absurdity: let's use the adjusted amount of blocked funds (Adjusted TVL) or non-fungible tokens (NFTs) seem attractive (see the experience of WAX or Dapper Labs via Dr. Seuss), but all this does not change the main thing - the paradigm of thinking. Speculation does nothing for the market, I repeat for the fourth time in four years.
Instead of a conclusion
The feeling of DeFi in its current form is as follows: I came to a concert to listen to my favorite music, but they played something completely different for you: instead of Rachmaninoff’s technique and the well-coordinated playing of the orchestra, there is the inept jazz of local musicians, which for some reason they consider innovative, although everything like that was written back in the 1940s, in a smoky room and with terrible garbage, which for some reason is called food here, and you have to pay three prices for everything! Perhaps you just need a different hall, musicians, and not the mood at all? Perhaps that is why I tried to be objective and state not only what is clearly evil, but also what can at least be started to be investigated.
In any case, what was said : if for you, like me, p2p is about fairness (distribution), equality (initial conditions) and cooperation (through evolution), then the existing DeFi model clearly contradicts both what is said in the Bitcoin genesis block, and what is said about what Assange wrote and those who did enough for the development of cryptocurrencies and blockchain to be heard. However, anyone is free to think that DeFi is , which means it is already breaking stereotypes, the system, etc.: after all, in the end, why should I not be satisfied? DEX-segment, as desired, centralized counterparts; the number of users of cryptocurrencies and the DeFi resources themselves is growing (though so far we are talking about tens of thousands in the latter case, but this is already a small city in size); accelerating to version 2.0 and stuff, stuff, stuff. But everything is like in a joke with spoons, where they were found, but the sediment remained: can we not discuss this topic at all? Yes, but then the network will be filled with continuous praises before and another endless stream of complaints after: forewarned - armed, albeit intellectually. Exactly this - goal: move away from hype to numbers, facts and forecasts based on them, and not talk about bitcoin for $100 or the uselessness of all this (a line for those who read from the end).
Where to go?
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The same , which is worth reading if you want to understand a little more: I think English is not a problem for a long time, at least deepl will definitely do its job.
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As always, Twitter is a treasure trove of knowledge for the crypto industry: here , but there are much more of them and a simple hashtag search will give more than complex analytics for Russian-language search engines.
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But better : for some reason, many have lost sight of them, but there are plenty of important and interesting things there.
In the meantime - before!
PS
I didn’t talk about the risk of oracles, and sophisticated attacks, and much more, including non-trivial approaches to open data analytics, so if the Habr community shows interest, I will be happy to continue: especially since the 2018-2022 crisis is not over yet, which means that scammers will fish for funds, developers will look for projects, entrepreneurs will invent them: although the latter have nothing to do with the latter, the former still rule the ball...
To all those who believe that the article should be devoted to answering the question of what DeFi is - see the first paragraph after the quotes.
UPD. I would have known the buyback ... it came out after the publication of my article, but : a kind of response from banks towards DeFi.
Source: habr.com