(The picture comes from the Internet)
1
DEX
The native application of blockchain is cryptocurrency. In other words, there was the cryptocurrency Bitcoin first, and then the so-called blockchain. In the beginning, everyone tried to issue altcoins on the Bitcoin chain ledger. Later, a new chain was simply developed to make it easier to issue coins. The most successful of the latter so far is undoubtedly Ethereum. This goes from one coin to multiple coins in one chain, to multiple coins in multiple chains.
Suddenly, the increase of chains and coins gave birth to the most basic rigid demand, which is the exchange and transaction between coins and coins. One of the most successful products to meet this market demand is the Centralized Cryptocurrency Exchange (CEX). The centralized exchange imitates the stock trading system of the traditional securities market, adopts the order book's maker and taker's matching trading methods, and provides rich chart presentation (K-line, etc.), leveraged trading, and derivatives trading (Contracts, options, etc.), deposit and withdrawal services, and so-called OTC over-the-counter legal currency deposit and withdrawal services, etc.
However, the sword of Damocles hanging high above CEX has always worried some people, so there is an exploration of the so-called decentralized exchange (DEX). The earliest was the attempt made by Counterparty DEX on the Bitcoin chain in 2014. The counterparty DEX is built on the Bitcoin chain and uses the order book matching method for transactions.
Then, after the success of the Ethereum project, the DEX built on the Ethereum chain represented by IDEX is still the order book matching method. Although the block time of Ethereum has been greatly shortened, and Ethereum has been designed to support smart contracts to make it easier to write DEXs, the order book system generates a large number of fragmented transactions on the chain, which has led to difficulties and liquidity for market makers. Scarce.
During the 2017 ICO boom, a project called Bancor appeared. Automated formula pricing is its characteristic. People’s perception of it is that the Bancor protocol can be used to issue new tokens (that is, the smart contract interacts with the user, and the user transfers the base currency, then the number of coins to be minted is calculated according to the formula and the new token is minted to the user), in 2018 This method of token issuance is called IBO (Initial Bancor Offering). Since EOS was the hottest project at the time, everyone went to the EOS chain to try Bancor and IBO. The Bancor project later did cross-chain, wallet, and POA sidechains, and also engaged in some market activities such as the Kenyan community currency project. It was not until August 2019 that the Bancor project began to allow users to freely add liquidity on Ethereum and EOS.
Today, uniswap, which has achieved initial market success with the excellent PMF (Product-Market Fit), is not very noticeable throughout the 2017-2019 period. In fact, at the hottest time in the industry in 2018, DEX entrepreneurs generally chose an order book model that is more like a centralized exchange, and struggled and struggled with the on-chain experience for the next two years. This kind of distress brought them into the narrative of millions of TPS promoted by new public chains like EOS, thinking that the root cause of all troubles is simply because the performance of the blockchain is not good enough. Even Bancor is well known for its automated pricing and issuance (the biggest demand for the ICO boom at the end of 2017) and its appearance on the EOS chain.
As for the idea that originated from Vitalik in 2016, was developed by unemployed Hayden Adams in 2017, and was released on Ethereum at the end of 2018, uniswap, which has not had an ICO, is still in the state of "don't use the dragon." At the beginning of 2019, DeFi started to become popular in Europe and the United States (China is the so-called IEO engaged by CEX), and there is no uniswap in some of the most well-known projects that have received investment.
So what choices of uniswap led to the subsequent soaring? This article will talk about the three main, critical, and in fact successful strategic choices that uniswap insists on.
2
Focus on Ethereum
uniswap has been focusing on development within the Ethereum ecosystem. Did not issue coins, did not develop its own chain, did not run to some of the hottest competitive chains at the time, and insisted on doing it on Ethereum for three years.
Later facts proved that the competitive chain still could not do Ethereum. As the inventor of the smart contract platform concept, Ethereum has established an unshakable ecosystem with the highest degree of decentralization, the tool chain is mastered by the most people, the developer community, the largest number of users, and the most valuable assets.
Hayden Adams cited the philosophy of Ethereum as the enlightenment of uniswap:
It is censorship resistant. No one can stop it.
It is decentralized. No one controls it.
It does not require permission. Anyone can use it.
It is safe. Anyone can verify the implementation.
3
No order book
Uniswap's second option is to have no order book transactions, and it only provides minimal functions such as the exchange of two tokens.
In Hayden Adams' own blog review, he said that he watched EtherDelta in 2017. At the time, he knew the only DEX, and felt that the order book and candlestick trading system was too complicated and not intuitive. He thinks his swap interface feels better.
When most people, especially those with CEX experience, fall into thinking inertia and path dependence, this Hayden Adams, who accidentally hit and broke in due to unemployment, knew neither exchanges nor blockchain. But accidentally got rid of the old rules and regulations, and carried out a new review and thinking on the user experience of DEX.
Just like from the PC Internet to the mobile Internet, the changes in computing platforms have led to a change in application experience. People no longer use "search", but are accustomed to "personalized push." The rise of headlines, the decline of Baidu. From a centralized Internet architecture to a decentralized blockchain architecture, the changes in architecture will inevitably lead to a paradigm shift in trading experience. The experience design that is most suitable for centralized exchanges may not be the best design for DEX. DEX should have a completely different user experience.
4
Renren LP
LP (Liquidity Provider), also known as "liquidity provider", refers to the locking of idle funds in the so-called "liquidity pool" constructed by blockchain smart contracts, supported by the automatic market maker AMM (Automatic Market Maker) algorithm The behavior of the trader's trading needs.
uniswap has been open since its official launch, allowing everyone to do LP. The return is 0.3% transaction fee.
This changed the business logic of CEX.
CEX requires the project party to hire a market maker to run a complex robot system to place orders in the order book and track market prices. CEX's business model is to earn generous transaction fees.
The uniswap agreement allows everyone to be a market maker, and the introduction of AMM algorithm market-making technology allows market makers to only put in funds, no longer need to take up time and build technical systems, greatly reducing the threshold and making everyone LP possible. The uniswap protocol itself does not make money, it empowers LP to make money.
From CEX to uniswap, it is the difference between Amazon's self-operated and Taobao million seller market.
AMM is the technical foundation of Renren LP, and Renren LP makes the long-tail token market possible (of course, there is also an open token list and the credit of being able to trade without currency). The long tail token market is the vitality and success factor of uniswap.
(Statement of interest: UNI holder)
Off-topic: UNI scheduled investment record (data is normalized)
(Public account: Liu Jiaolian)