what is your opinion about DeFi?

[Qiqutimes]

DeFi (Decentralized Finance) is a system of open, unlicensed and interconnected financial products. In fact, DeFi is a decentralized network based on Ethereum's dapp and smart contracts, focusing on financial applications such as borrowing , Financial derivatives, exchanges, transactions, etc. The purpose of this is to enable anyone with access to the Internet to conduct lending business without the need for an intermediary. DeFi is recognized as one of the fastest growing areas in the blockchain and decentralized Internet.

[JiaMiShiDai]

The goal of various financial applications developed in an open decentralized network is to establish a multi-layered financial system, based on blockchain technology and cryptocurrency, to recreate and improve the existing financial system. Distributed, decentralized, transparent, no access required, anti-censorship

[ccc888]

Defi is in a very special position. Traditional finance includes financial technology, one of which is blockchain. There is digital currency in blockchain, and defi is only a very small branch of blockchain digital currency. But this branch is very hot recently. As long as it is in the coin circle, it is impossible not to know defi. But many people have only heard of defi and don't know what is the really good project of defi.

The definition of defi is very simple. In a distributed system, that is, blockchain system, DAPP is used to provide a decentralized financial ecosystem. Defi is an ecology, not a single coin or project.

The particularity of defi lies in decentralized distributed finance. The corresponding is the centralized finance.

1、 Definition and advantages of defi There are many functions in centralized finance. For example: (1) Legal, compliance, KYC, AML, accountants, law firms; (2) The stock exchange, China Securities Regulatory Commission and China Banking Regulatory Commission will supervise the stock exchange. What the exchange and SFC do is match trading and audit trading, settlement and supervision; (3) Banks and brokers. Do trusteeship, payment and loan. (4) The central bank. Provide currency. These functions are realized in the centralized finance. Although it works well, it has many disadvantages. These shortcomings can be supplemented by defi. For example, there is no need for central bank in defi, because it has its own digital currency, and bitcoin, Ethereum, EOS, usdt and usdc can be used as the underlying means of payment; there is smart contract in defi, and in Ethereum, code is the law. Therefore, we don't need legal affairs and judges. As long as there is a smart contract, we can judge which contract can be executed. We also don't need a contract. We just need to write a smart contract and execute it automatically when it expires. There is no contract dispute. Because it is built on the blockchain, the contract will not be tampered with, and the contract does not need to be kept in the notary office and safe. All transactions can be traced back , transparent and fair; defi is born borderless and disintermediated. These characteristics of defi can make up for the shortcomings of centralized finance. For example, centralized finance is difficult to be inclusive. Its transaction cost is very high, the transaction is complex and the transaction speed is slow, and there are banks, exchanges, securities dealers, accountants, lawyers and other intermediaries, who all charge service fees. Defi is a supplement to the future of centralized finance. We can't say that defi can subvert centralized finance, which is unlikely, just as ants can't shake elephants. But it's a very good compensation and try. We can make up for what central finance can't do well in defi.

2、 The significance of defi and the realization of Inclusive Finance In traditional finance, a quarter of the world's population, about 1.7 billion people, have no bank accounts. It may be that the bank does not open branches in the region, that it needs a lot of documents and information to open an account, and that there is also a management fee for opening an account, which leads to some people's unwillingness or inability to open an account. However, 80% of the people without bank accounts in the world have mobile phones and can connect to the Internet. These people may be able to enjoy financial services, that is, defi. Only decentralized distributed finance can minimize the cost and realize the popularization of finance through mobile phones and the Internet. The practical significance of Inclusive Finance is "universal" and "preferential". "Pu" means that everyone can participate, "Hui" means that the cost is low. Goldman Sachs, the investment bank, may charge tens or millions of fees. I've worked in an investment bank before, and the salary of the senior management of the investment bank comes from the handling fee and service fee. The benefits of doing Inclusive Finance with defi:

1. The entry threshold is very low. Only mobile phones, connected to the Internet, can borrow, pay, do derivatives, insurance;
2. Reliable. All written into the code;
3. Transparent, open and open. Defi's rivals, even investment banks, are equal. No one has an advantage. No information, position advantage, no lower rate, faster efficiency. It can't be done in traditional finance;
4. No rival risk. In the past, if the other party defaulted, the P2P company could only rely on the P2P company to recover the debt. If the P2P company ran away and the other party did not repay the money, the money would be gone. In defi, the form of pawn or mortgage is strictly used to ensure that the other party can pay and repay the debt. At the same time, the smart contract is used for lending. As long as the time is up, add the oracle and the link, and it will be executed immediately. There is no need for any mechanism. Can minimize the risk of counterparties;
5. Reduce the risk of intermediaries. Defi has no intermediaries, only smart contracts. The cost will also be reduced because of the absence of intermediaries;
6. Composability. For example, UMA and synthetix can be used as derivatives, as bets and contracts. Anyone can create a contract. Like Lego.

3、 The ecology and development trend of defi

1. The scale of defi In October last year, defi's locked warehouse was only US $50 million, reaching US $100 million at the beginning of the year. In February and March, it hit US $1 billion, and now it is US $6.7 billion. Lock is an important parameter of defi. I don't know who the other party is in defi, so I must mortgage and lock up. Volume is just a parameter. Which market and product can increase 100 times in volume in a year, only defi has.
2. The ecology of defi First of all, there should be a public chain at the bottom. The public chain of defi is mainly Ethereum, and 95% of defi uses Ethereum, as well as EOS and bitcoin. Ethereum has smart contracts, and they are widely used. Bitcoin's smart contract capability is very poor, although it belongs to the leader of cryptocurrency; The second is payment, which is in stable currency. Defi has its own stable currency, such as Dai, which is the stable currency specially used by marker for payment; The third is lending, followed by trading, which is divided into normal trading and derivatives trading; In addition, there are wallets and brokers, exchanges, prophecy machines (insurance) and gambling. Oracle provides data interface to connect the real world data to financial products of defi; Finally, asset management and financial management. The other is the relatively small number of analysis tools, collection tools and aggregators. Defi is now on the rise, the trend is greater than the risk, and defi is going out of the circle. In fact, derivatives exchange is a tool to go out of the circle, which can link all the assets under the chain to the chain and make derivatives. Defi can serve the real economy. We have always said that the coin circle is a zero sum game, but if defi can connect real assets, it can produce real value, and it will not want to cut leeks purely by ICO. Defi has real projects, whether it's liquidity mining or its own currency. The volume of defi is very large, and volume means everything. When the volume reaches 6 billion, it is estimated that it will continue to rise; Defi is more and more involved in the underlying knowledge of Finance and technology. If you don't understand, just do storage and lending, and less touch derivatives. It's better to have professional knowledge to do professional things, not aii in what you don't understand, in case of liquidity risk. When you see those who make money, you should also know that they make money by taking the above risks. Higher risk means higher income. For developers, it is necessary to make user-friendly applications. This year, defi has become relatively convenient. But the transaction fee is still very high. Although the project side does not charge very much, the gas of Ethereum can't stand it. On the exchange, derivatives contracts, wallets, assets and spot transactions of classical exchanges will be affected by defi.