DeFi decentralized finance refers to those applications in various financial fields developed in the decentralized network of the open development system. The goal is to establish a multi-level financial system based on blockchain technology and cryptocurrency. Re-create and improve the existing financial system.
The core of DeFi decentralization is "de-custody", and the core of decentralized exchanges is "asset de-custody". In other words, in the process of trading, no one or a centralized organization can use your assets.
After introducing what is DeFi, what are we talking about liquid mining?
Most cryptocurrency protocols are designed to be decentralized. For basic-level networks (such as Bitcoin and Ethereum), this is achieved through proof of work. Anyone can become a miner and earn some BTC or ETH at the cost of helping to protect the security of the network. In this way, the distribution of network control rights is more or less democratic (for example, one vote per CPU
right).
But how can projects based on Ethereum achieve decentralization? One way is to transfer governance to the users of the agreement in the form of tokens, thereby effectively turning users into stakeholders. This is exactly what Compound (independent borrowing/loan agreement) pioneered. They are issuing $COMP tokens, which provide network users with the right to manage the Composite protocol and root
The tokens are distributed proportionally based on their use of the protocol.
At present, the liquidity mining of DeFi is mainly a product that occurs on the Ethereum blockchain. It gains revenue by providing liquidity for DeFi products on the Ethereum. In simple terms, mining can be done by depositing certain token assets. The reason why it is called mining is also the industry argument of Bitcoin mining. Liquidity mining on Compound is mainly done on it
Bank depositing tokens or lending tokens, etc., to obtain rewards of COMP governance tokens. The COMP token represents the governance right of the Compound protocol. COMP holders can vote to determine the development direction of the Compound protocol. If the Compound business has value, then COMP has natural governance value.
DeFi's technology itself has brought new value to the JR industry. For example, although the business model of DY borrowing D also exists in traditional JR, the transparency of DeFi's Chinese capital/gold pool prevents the moral wind X held by centralized institutions. Participants bring confidence, thus the size of the market will expand, bringing greater liquidity. The scale and liquidity of Z production are actually the essence of JR industry.
Therefore, DeFi's DY borrowing D platform is not only a technological innovation, but also a huge change in the market.
Product innovation: In DeFi, there are products that migrate existing products in CeFi, as well as new products created independently, such as smart contract insurance/insurance, whose insurance/insurance is based on the security of smart contracts, which can protect market participation The person is protected from the loss caused by the attack of the host. This kind of insurance/risk in the stage of loss determination and settlement/claims can be accurately based on smart contracts.
Implementation and insurance certificates (that is, insurance policies) are tokenized, so they can be transferred to form a secondary insurance/insurance market. In this way, due to the emergence of the secondary market, the insurance/insurance industry will also have the effect of scale expansion and enhanced liquidity. At the same time, the secondary market will also provide more precise pricing for risk/insurance, which will fundamentally affect the insurance/insurance industry. Insurance industry.
Model change: Based on technology and products, DeFi has achieved the market, agreement, and Z production levels. Like Lego blocks, this ecological model is difficult to achieve in CeFi, because CeFi’s market is basically Independent of each other, Z products are relatively isolated. Later, we will discuss the value created by DeFi from these three perspectives.
The product of the decentralized zone/blockchain world through DeFi. With the further improvement of the infrastructure, the implementation of the public chain will get better and better, and it will be divided into four stages: the first step is to open the prologue of the public chain implementation by DeFi; the second step is to move the DeFi protocol to DAO; third The first step is to usher in the landing of Dapp after the basic performance reaches a certain level; the fourth step is the comprehensive DAO
Landing. DeFi will not be a flash in the pan, it opened the first step in the implementation of the public chain.