With the widespread application of ChainLINK in DeFi, on July 13, the price of LINK token broke through $8, hitting a new high, with a 24-hour increase of more than 30%.
In fact, since June, due to the prosperity of the DeFi market, cryptocurrencies like LINK are everywhere with skyrocketing prices. For a while, people in the currency circle seemed to be dreaming back to 2017, that unforgettable crazy bull market.
At present, the total market value of DeFi tokens has exceeded 8 billion U.S. dollars, and the total locked funds of DeFi projects have also exceeded 2.5 billion U.S. dollars, and this number is still growing.
As a new decentralized financial model, DeFi can solve many pain points in the traditional financial market, and its prospects are promising in the industry. However, there are still many problems that need to be solved urgently at the current stage.
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The DeFi track continues to be hot, and the market value exceeds 8 billion US dollars
Under the upsurge of liquidity mining, the DeFi track continues to be hot, and DEX and DeFi tokens also ushered in crazy performances.
DeFi, Decentralized Finance, decentralized finance, also known as open finance. It mainly refers to encrypted assets, financial smart contracts and agreements built on smart contract platforms (such as Ethereum).
DeFi is currently mainly built on the Ethereum network, and well-known applications such as MakerDAO and Compound have appeared.
According to the data on DeBank, as of July 13, the total locked funds of DeFi projects have exceeded 2.5 billion US dollars, reaching as high as 2.558 billion US dollars.
In addition, DeFi Market Cap data shows that as of July 12, the total market value of DeFi tokens has exceeded US$8 billion, reporting approximately US$8.13 billion. Two months ago, the total market value of DeFi was less than US$1 billion, an increase of more than 700%.
The popularity of DeFi has caused the prices of DeFi project tokens such as COMP, BAL, LEND, KAVA, and MKR to skyrocket.
On June 16, the governance token COMP of the centralized lending agreement Compound was launched, which directly detonated the DeFi ecosystem. The price of COMP rose from $18.4 to $362.13, an increase of nearly 20 times. Currently, the price of COMP is around $173.
On June 24, the decentralized trading platform Balancer took over from Compound and deployed its governance token BAL on Ethereum. The price of BAL rose from $0.6 in the seed round to $22, an increase of nearly 40 times. The current price of BAL is maintained at Around $10.
LEND, the native token of the Aave lending protocol, rose from around $0.05 in early June to around $0.235 today, an increase of more than 350%. In fact, LEND has grown by a record 1,127% since January of this year.
MakerDao’s governance token, MKR, was still around $300 in May, and rose to $694 in June; Kava’s equity and management token KAVA also rose from $0.45 to the current $1.8 in June , an increase of more than 300%.
In addition, the prices of tokens such as SNX, KNC, LRC, and REN have also performed well, with an increase of 220% to 280% in the first half of this year.
The surge in currency prices has directly led to a surge in the trading volume of decentralized exchanges (DEX). According to data from Dune Analytics, the trading volume of DEX in June hit a record high of US$1.52 billion, an increase of 70% from May.
A large number of users have also been attracted. According to Dune Analytics data, the total number of DeFi users currently reaches 238,400, an increase of more than 23% from the beginning of June.
DeFi is sought after, and public chains other than Ethereum are also ready to move. BTM, ONT, LAMB, OKChain, etc. have followed suit and launched various DeFi services.
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Why DeFi is booming？
In fact, DeFi has only been around for two years, but its development momentum is very rapid. The recent sudden explosion of DeFi is also related to many factors.
First, DeFi, as a new decentralized financial model, does have value and is a better blockchain application. DeFi reduces the organizational role of centralized institutions, eliminates geographical restrictions, and can solve many pain points in the current financial market in a targeted manner.
The decentralized financial model of DeFi enables users to have more independent rights in terms of participation threshold and asset management. As codes replace manual labor, machine trust replaces organization and manual trust, providing users with a more transparent, safe and credible Investment Environment.
Correspondingly, DEX is also different from centralized exchanges. DEX has different compliance frameworks and structures, such as no geographical barriers, no KYC, diversified products, and diversified trading markets. Therefore, the future imagination space and transaction capacity are huge.
Chen Xiaohai, co-founder of Hufu, believes that the popularity of DeFi stems from its inherent possibility of integrating with the entire blockchain technology or the future market.
Second, investors in the currency circle have real financial needs. At present, DeFi products mainly focus on decentralized lending, and lending is the core demand of finance. When the bull market has not yet arrived and there is a lack of new funds to enter the market, the emergence of lending platforms can revitalize the existing stock funds and attract a lot of incremental funds.
Defi Labs has said from generation to generation: "Defi will not be just a hot spot for a while, and there are real usage needs behind it. There will be more innovations in the defi field in the future, and current projects will also receive more attention from the market and funds for long-term development. However, it is very likely that this year there will be a wave of small bubbles in the secondary market. After the FOMO period, defi will continue to develop for a long time.”
Third, the influx of a large number of speculators and wool parties has also boosted the popularity of DeFi projects. According to the interest rate data of debank, the 30-day average deposit rate of BAT on compound can reach 17.26%. For those who have been hoarding BAT for a long time, it is not a small profit to deposit the currency to earn interest.
However, the high-yield interest rate only temporarily retains users. When the wool party makes a profit and withdraws, the token market of the DeFi protocol will inevitably return to rationality.
Fourth, excessive hype in the currency circle. Cai Kailong, a senior researcher at the Institute of Financial Technology of Renmin University of China, told Tiantian Lianxun that a large part of the current popularity of DeFi is due to the concept hype in the currency circle.
The currency circle is used to hype concepts and create explosions. 2017 is ICO, 2018 is trading mining and DAPP, 2019 is IEO and model currency, and this year is DeFi.
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Will DeFi bring a big bull market?
The currency market has been silent for two years, and finally ushered in the outbreak of DeFi. Old friends should remember that the current surge of DeFi tokens is very similar to the ICO project in 2017. It seems that the big bull market is coming again.
V God also pointed out that the development of DeFi may bring about the next bull market. "More and more people are using blockchain and DeFi applications, and more and more businesses are starting to build these applications. If the bull market is coming, I think DeFi can help achieve it, but the current high interest rate that DeFi promises Be very careful."
At present, in the DeFi industry, "liquidity mining" represented by Compound is very prominent. Compounds encourages borrowers and lenders to enter the token pool, and users will be rewarded with Compound tokens for borrowing/loaning assets, which means that Compound pays people to use them. The product.
V God believes that in the long run, it is impossible to find the reason why the DeFi interest rate is higher than the traditional financial interest rate, so this is not sustainable, and it is not the right path to focus only on high returns. What he hopes more is that DeFi will be smoother, more stable, and more useful in two to four years than it is now.
Looking back at the 10-year history of the blockchain, it is always inseparable from the price performance. The so-called blockchain 1.0, that is, Bitcoin, has risen from 0 to the current price of about 9,000 US dollars. It has not only popularized the concept of blockchain to the world, but also created most of the infrastructure in the current industry, such as large exchanges, large Mining company.
Blockchain 2.0 is the smart contract brought by Ethereum. In terms of price, it also created a climax of currency issuance in 2017, and the entire industry fell into a frenzy. Lawrence Lessig (code is law), a large number of projects, public chains, and applications have risen in the industry.
So is DeFi the representative of blockchain 3.0? The jury is still out, and the vision of financial inclusion that provides financial services to the unbanked is far off. However, there are signs that DeFi is very similar to the previous two bands, with both the sudden wealth effect and innovation in technology and applications.
It can be said with certainty that the big bull market brought by DeFi can still be expected, but there are two variable factors.
First, whether traditional institutions or even traditional funds agree with DeFi. Because any skyrocketing price is driven by funds, whether the huge external funds are willing to come in determines the scale of DeFi and the increase in token prices.
Both blockchain 1.0 and blockchain 2.0 have attracted a large amount of external funds, thus creating a big bull market. If it is just a game of stock funds in the currency circle and there is no running water, then DeFi is water without a source.
Second, whether DeFi will develop to be universally applicable, simple and operable. To be honest, the application threshold in the blockchain field is too high, and the learning cost for new users is too high. DeFi currently has only more than 200,000 users, and they are basically old people in the industry.
As V God said, if DeFi can solve the above two problems and be more stable, stable, and useful, then the big bull market brought about by blockchain 3.0 is not impossible.
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