This article is from:This article is from:Lost fast chain diary (ID: slavetrader)A Crypto Theisis：Open Financial System, Compilation: Iron Fist Invincible Daxingxing, forwarded with authorization.
Table of contents
Table of contents
New Financial System Revolution
How to implement decentralized finance
How to invest in the field of decentralized finance
Summarize
Summarize
Joey Krug of Pantera Capital was sprayed miserably on Twitter last night. The reason for the spray came from Pantera Capital’s new article "Encryption Thoughts: Decentralized Financial Systems", which caused a lot of controversy about money And the slot, the paragraph marked in green is written like this:
"I think BEAM has a chance to make it happen: it's the only cryptocurrency I've seen so far that has a dynamic monetary policy designed to minimize volatility without going 1-1 with traditional currencies Pegging, anything that doesn’t work in terms of regular world currencies, I suspect will work in crypto. Anything that works in the normal world might work in crypto, and that’s what Beam is trying to do.”
Wait, BEAM? Isn't the total amount of BEAM fixed and deflationary? Joey Krug is afraid that it is a bad idea. BEAM has sought institutional financing, right? Pantera Capital has an affair with them? After some fierce online criticism, Pantera Capital came out to respond in time. It turned out that their editor had misplaced the project link. They are not referring to the anonymous coin BEAM-MW, nor Beamwallet, but a project called Beam Network. Halo, there are so many BEAMs, it is said that there is a fourth BEAM.
Although there are some small episodes that have been sprayed with blood, but in all fairness, Joey Krug's "Encryption Thoughts: Decentralized Financial System" is very well written, and it can be called the "Communist Manifesto" of decentralized finance. Some of the investment logic of Pantera Capital and Joey Krug revealed in it is very good, and there are many places worthy of reference.
Note: This article requires a basic understanding of blockchain, smart contracts, Bitcoin and Ethereum. If you're not already familiar, here's a quick recap: Bitcoin created the ability to send money around the world cheaply and easily, without third-party trust. Ethereum extends this idea with smart contracts, allowing you to programmatically control your money. Thus, a computer program can be created that takes and escrows funds from various participants and then redistributes the funds among those people based on certain criteria. For example, these conditions can implement options, futures, bonds or other financial agreements. The key part is that you can do all of this without having to trust anyone, and the contracts are automatically enforced because the program does all the work, and coordination becomes easier because these markets are open and public.
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New Financial System Revolution
Blockchain technology and cryptocurrencies are the foundation of a new financial infrastructure, just as the Internet is the foundation of a new information infrastructure. But it was neither, nor will it be, built overnight.
The first information revolution was the printing press, followed by the telegraph, telephone, radio, television, and of course the Internet. The interesting thing about the internet is that it brings all the other revolutions together: you can listen to sound, you can read text, you can watch video over the internet. You can even do it all in one place! The Internet has not only revolutionized access to content, but has democratized its creation.
The financial industry has not experienced this series of revolutions, and is not actually close to the level of free speech that the Internet did to society. At best, most transactions today are conducted electronically; financial infrastructure utilizes the Internet to communicate; and the speed of execution in the financial system has increased dramatically since the 1970s. However, the financial system has not undergone a critical shift, I don't think finance has even begun, we cannot create financial instruments ourselves, the financial system now is equivalent to the printing stage of the information revolution!
That sounds radical, like decades ago when people wanted to have their own websites.
By opening up opportunities for the democratization of new financial markets, society will benefit from the scale brought about by the information revolution in the past, but this time, it will transform value, money and finance.
Just as the internet effectively created a parallel information infrastructure, the cryptocurrency space will create a parallel financial infrastructure. This will not be built on a private chain, and the intranet will not breed the Internet revolution.
Blockchain is slow, expensive, and difficult to use today, just like the Internet was in 1992. But if you fast-forward a few years, it's fast, cheap, and easy to use. One of the benefits of the internet is that we have the internet to help us build cryptocurrencies faster, something that didn't exist in the early days of the internet. All of this will happen programmatically, rather than having to trust a centralized authority to do things in a fair, open and honest way.
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How to implement decentralized finance
For any financial system, you basically have two core components: the underlying component and the derived component.
Margin
lever
Margin
stable currency
stable currency
trading infrastructure
Issuance infrastructure for loans and equity
Leverage is easily plugged and encoded into the contract structure. Margins (and loans) require systems like Dharma, which allow people to borrow cryptocurrencies using other cryptocurrencies as collateral.
A good approach to stablecoins is to create something like Maker, their stablecoin DAI is a hard currency backed by crypto assets, the first decentralized stablecoin on the Ethereum blockchain. In effect, stablecoins are backed by over-collateralization of the system with other crypto assets.
As for transaction infrastructure, 0x is an open protocol for decentralized transactions on the Ethereum blockchain. 0x is building a lot of exchange infrastructure and developing protocols for trading.
The blockchain community today is building the foundation and infrastructure needed to host the toolsets needed for a well-functioning financial system. This technique is applicable to multilateral markets.
Traditional assets will gradually migrate to the blockchain, and security tokens are a good example. Harbor attempts to tokenize real-world assets and make them tradeable on Ethereum. The benefits of this are asset securitization and more global liquidity at lower costs.
For issuing bonds, the Dharma protocol is well suited and more private. For derivatives on underlying securities, you have projects like dYdX, an open source protocol for decentralized margin trading.While Bitcoin may become digital gold, I don't think it will be as successful as money: it's too volatile and doesn't have a dynamic monetary policy (which is why gold was abandoned as a social means of payment). I think BEAM has a chance to make this happen: it's the only cryptocurrency I've seen so far that has a dynamic monetary policy. Anything that doesn't work in terms of normal world currencies, I doubt it will work in crypto. Anything that works in the normal world may work in encryption, and that's what BEAM is trying to do (note: BEAM here is not the privacy coin BEAM-MW, but Beam Network).
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Barriers to the Development of Decentralized Financial Systems
Infrastructure is yet to develop
scalability
scalability
Legal currency entrance
In terms of infrastructure, building something in the cryptocurrency/blockchain space is as difficult as creating a simple website in the early days of the internet. On top of Ethereum, you can write smart contracts using Solidity. Solidity is a step above Bitcoin's scripting language, but has many limitations. Testing Solidity is also time consuming because there aren't any good testing frameworks for testing Solidity smart contracts.
scalability
scalability
The reason scalability is so important is that without it, these applications are neither fast, cheap, nor easy to use.
The performance expansion of the blockchain is mainly in the first layer and the second layer.
Layer 1 simply represents the underlying blockchain, such as Ethereum and Bitcoin. The main scalability challenges boil down to network, storage and computing power.
Some ideas for solving network problems are to compress data so that nodes only send a small amount of data. Another approach is to try to reduce the number of hops needed to let the entire network know about a piece of data by building an equivalent content delivery network (CDN) for the blockchain (what Bloxroute is doing).
Another attempt is to not require every computer on the network to know about every transaction, or to effectively "break down" things into shards and STARKS (another technical solution), which essentially solve All the scalability trilemmas.
There are also directed acyclic graphs (DAGs), which allow people to process and broadcast transactions in parallel, which may help solve network problems, the challenge is that no one has figured out how to achieve a global ordering of transactions in a DAG.
Two other big challenges are storage and computing power. Computing power is easier and almost always increasing, even my MacBookPro can do thousands of transactions per second. If we want to improve it even further, a lot can be done by switching to using Web Assembly, which is more optimized than EVM and executes as native code, while EVM is quite slow. Non-interactive transactions can also be processed in parallel by multiple processor cores/threads.
In terms of storage, there are two problems, one is that today's blockchain requires a lot of reading and writing: disk. This can also be parallelized, and work has already begun on Ethereum's 1.x plans.
Another problem is the large amount of storage capacity required to store the blockchain and the data associated with the blockchain.
There are two technologies that solve all layer 1 scalability issues: sharding and STARKS. Both sharding and STARK are promising. In my opinion, both are about three years away from mass production and use.
Status/Payment Channel
side chain
side chain
Plasma (such as Gluon Plasma and Arbitrum)
All three aspects support smart contracts, but each direction has different tradeoffs.
The state channel is through the capital mortgage contract, and then signs the transaction information to transfer the funds. The tradeoff in doing this is liquidity/capital lock-in. At least 2x the collateral required for transactions, so this technique is suitable for use cases such as payments.
Sidechains are connecting parallel systems to Ethereum and using these new networks as a performance scaling method. Things like Augur, Maker, and 0x may all run on their own sidechains in these systems. The problem is security, and connecting these sidechains together seamlessly, and Polkadot and Cosmos have made great strides in this regard. In a way, Plasma can also be considered a sidechain.
Legal currency entrance
Consumers are critical to the future of any decentralized application in the crypto space, and consumers need to be able to convert fiat to cryptocurrency cheaply and easily. If consumers want to enter in fiat currency, but exchanges charge 2-4% fees, then mainstream society will never adopt cryptocurrency.
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How to Invest in Decentralized Finance
As an investor, you mainly want to do three things:
Purchase assets and companies that best support your investment logic;
Hold them, buy more when prices drop or become cheaper overall;
Constantly re-evaluate #1 and #2, and your investment logic.
That sounds easier said than done. For each project, I look at the technology, economic model, team, market, product. And, after making an investment, keep reevaluating.
About technology: When looking for a project, the first thing I look at is technology. It is not because technology is useful, but because there are many young people in this industry, it is a consensus logic to fancy technology. Investing is a Keynesian beauty contest, choosing what everyone thinks is the most beautiful, not what you think is the most beautiful.
Regarding the economic model: Many participants in cryptocurrencies are anonymous. You have to believe in human nature, and the economic model analysis of the project requires a more in-depth game theory analysis.
About the team: It is critical that a team has past experience building communities and has experience with open source projects. The mentality is different between closed source and open source. Being able to build a developer community is also important.
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Summarize
Summarize
Some people ask if they should invest in tokens or equity. I think you should buy both. You make purchases at different stages and in different liquidity configurations, but the underlying assets you invest in all support the same investment logic.
Right now, the pricing of these assets is effectively a beauty contest based largely on branding. But predicting what a crowd thinks is very difficult. Therefore, it makes more sense to buy something with a strong mass base, as the market embraces them as scalability and fiat onramp barriers are lifted.
If you want to benefit from the disruption of this financial system, I think the best way is to buy projects that will benefit the most from these two barriers (scalability and fiat on-ramp).Your project may be vulnerable to short-term sudden manias in the market. But only because,
The current market is a beauty contest where pricing is based on brand rather than actual capability.
If you think technology will scale, it's time to jump in. Killer apps from decentralized/parallel financial system use cases already exist, they are just currently slow and expensive, they just need to scale and reduce fiat onboarding costs. And the current restrictions and obstacles often give the best time to invest.I think to make money in this market, your investment logic must be against some projects and companies. You can buy Bitcoin and hope that digital gold will be the ultimate goal of the blockchain.
