Boiling 2020: Why China is "silent" amid the DeFi craze: An inventory of local DeFi projects

Preface: 2020 was a boiling year. From the 312 crash to the new high of Bitcoin, from the DeFi craze to the launch of Filecoin. "One bull market can make 10 years of money", but some people also suffered contract losses and caused tragedies. As we usher in 2021 amidst the clamor, don't forget that the freedom of choice is ultimately in our own hands.

The following is the last article of Wu's blockchain year-end review "Boiling 2020":

In early August 2020, DeFi oracle projects represented by BAND and LINK pulled out a big positive line. At this time, a large number of domestic practitioners were still asking what DeFi was, and countless people missed out. Overnight, the cryptocurrency circle split into the "classical school" that hoarded mainstream coins such as BTC/ETH, and the "emerging school" that speculated on DeFi coins such as YFI/LINK/YAM.

This wave of DeFi that has spread from abroad to China actually had signs of happening a long time ago.

ETH locked-up volume is high, Coinbase ignites the secondary market

Since the beginning of 2020, the amount of ETH locked in DeFi smart contracts has remained stable at a high level of more than 2 million, with a locked value of about US$1 billion, and both volume and price have been rising. The real turning point was on June 11, when Coinbase announced that it was considering listing some new crypto assets. Of the 18 announced, 1/3 belonged to the DeFi category. On July 31, Coinbase announced another 19 asset listing evaluation plans, of which more than 40% of the assets belonged to the DeFi category.

Now, there are more than 10 DeFi concepts ranked in the top 50 by market capitalization on CoinmarketCap, and all of these coins were initiated by foreign teams.

At the beginning, in the entire DeFi ecosystem, the lending platforms Aave/Compound/Maker ignited the core demand for users' mortgage loans, while decentralized exchanges Uniswap/Sushiswap provided zero-threshold listing for community tokens. Driven by the flood of funds and new mining models, the aggregator yearn.finance, as a DeFi project purely originated from the community, provided its early users with astonishing returns of tens of thousands of times.

Data source: Feixiaohao, CoinmarketCap (as of December 24 )

So, in this DeFi market dominated by foreign communities and investment institutions, how do domestic DeFi projects perform? Will there be any potential stocks emerging in the future?

1. Republic Protocol (REN/renBTC)

As the overseas Chinese DeFi project with the highest market value, Republic Protocol strictly speaking did not originate in China. Its two founders, Taiyang Zhang and Loong Wang, have been studying and starting businesses abroad.

Initially, the project focused on providing decentralized dark pool trading services. Through the "Shamir Secret Sharing Scheme" algorithm, trading orders are broken down into order fragments and matched by dark nodes. Compared with traditional trading platforms, it is more private. However, according to the latest roadmap, the development focus of Republic Protocol has shifted to RenVM and renBTC, and the focus will be on the transfer of cross-chain assets in the future.

According to Defipulse data, the amount of BTC locked in RenVM has reached 14,000, with a value of more than 300 million US dollars, making renBTC the second largest anchored asset after WBTC. Interestingly, BitGo, Kyber and Republic Protocol are the main partners of the WBTC project, which means that the affiliated group controls more than 130,000 Bitcoin anchored assets on Ethereum. A previous investigation by Wanchain showed that the renBTC liquidity bridge stores user funds in wallets controlled by the team, which poses a centralization risk.

2. Nest Protocol (NEST)

Although NEST oracle is an anonymous project and the developers are relatively low-key, many people know that the project is supported by a domestic team and Huobi. NEST focuses on quotation mining and has designed an arbitrage penalty mechanism for quotation deviation. The team does not pre-mine. Before the DeFi boom, NEST had been tepid until Huobi announced the launch of NEST coin, and the price of the coin rose by 300% within three days.

Since participation in NEST mining requires pledging an equal amount of quoted assets, there is a certain threshold for participation for ordinary people. Therefore, for a long time, the project is likely to be mainly mined by the team, and the monthly gas fees are not cheap. Sometimes the expenditure may even exceed the mining income. Then the pressure on miners' funds will create a certain selling pressure on the tokens, causing the price of the currency to fall into a vicious cycle. However, in the latest version to be released soon, NEST has added a mining condition, that is, NEST must be pledged when quoting and when a new quotation is made after taking the order. The reduction in the circulation of NEST may have a certain positive effect on the currency price.

Nest was born in the bear market of 2018-2019, with plenty of time for preparation. Therefore, we can find that the project is more self-consistent in algorithm mechanism and overall logic compared with some domestic DeFi projects that were hastily launched this year. Nest also incubated Cofix, nHBTC, NYFI, etc. Cofix received investment from Coinbase, Huobi, Dragonfly, etc., and the ecological layout is gradually unfolding.

However, in the past month, the price of NEST has suddenly plummeted for unknown reasons, and various speculations have arisen.

3. DODO (DODO)

DODO provides a very necessary solution - using oracles as price feed solutions, and solving the impermanent loss problem in DEX through the active market maker (PMM) algorithm. Once this problem is solved, multiple market making strategies can be put on the chain, reducing transaction slippage and greatly improving on-chain liquidity. From an application perspective, DODO can be regarded as a strong opponent of Uniswap, whose automated market maker (AMM) solution has been criticized for its impermanent loss problem.

DODO can be said to be a superstar among DeFi projects this year. It was once favored by investors in the circle. In summary, it is "an old-fashioned development team that has worked on relatively well-known projects", "luxury investors - Binance led the investment of US$5 million, and there are countless other investment institutions and individuals", but "bad luck - it has been falling since it was launched on Matcha in October, and only four exchanges can trade DODO coins so far". According to Defipulse data, DODO's current TVL is only about US$13.8 million.

4. Wing Project (WING)

WING is the first DeFi cross-chain platform based on Ontology that integrates credit elements, and it uses Ontology's decentralized identity and scoring system. Similar to the Flamingo project under NEO that we have previously reported, WING was incubated by the ONT team and launched in mid-September. Affected by Huobi's WING mining rule adjustment and rumors of ONG's control, most retail miners participated only out of speculation. The project has caused great controversy in the community and has rarely been seen in the media since September. However, the official website shows that the amount of assets locked on Wing has now exceeded 60 million US dollars.

5. dForce(DF)

dForce is an old DeFi project. It started to layout in the bear market, so its ecological scope is relatively wide, covering product lines such as stable assets, liquidity protocols, lending markets and derivatives markets. It has launched a basket of stablecoins USDx, decentralized lending protocols Lendf.Me and Shengcaibao and other products. Among them, the hacking incident of Lendf.Me in 2019 once cast a shadow on dForce. As the governance coin of the dForce platform, the price of DF depends largely on the development of application scenarios and user growth. dForce now has a TVL of more than 39 million US dollars. Like DODO, dForce has also been sought after by institutions, including well-known institutions such as Multicoin Capital, Huobi Capital and CMB Capital.

6. ForTube (FOR/KUN)

Fortube (Force Protocol) is also one of the earliest DeFi projects in China. In the early ForTube1.0, it was positioned as an open financial platform, mainly providing decentralized encrypted digital bond issuance and clearing and settlement services to open bond financing channels for blockchain projects. However, in ForTube2.0, which was launched in September, the project gradually transformed into a lending platform, and at the same time launched the decentralized stablecoin protocol QIAN (governance coin KUN). Now, ForTube's locked-up value exceeds US$17 million, and QIAN's locked-up value exceeds US$5 million, while the locked-up amounts of similar foreign lending platforms Maker, Compound and Aave have all exceeded US$1 billion.

7. Moonswap(MOON)

Moonswap is a controversial DEX that competes with Uniswap and SushiSwap. The project team hopes to establish a liquidity pool in MoonSwap and migrate the collateral assets across chains to Conflux. When it was first launched in September, many big Vs questioned the project's "pre-mining" and "no timelock" issues. At the same time, although Conflux once clarified that Moon is an independent Defi project, judging from the support of Conflux, the two are highly correlated.

Since the reputation of the community is difficult to restore, MOON has also fallen for a long time after its launch, and the team seems to have given up market making and continued listing on exchanges. One detail is that Moon also gave airdrop rewards to community users of the above two projects DF and FOR, and the trend of domestic projects forming a group is obvious.

In addition to the above projects, YFII, HBTC and other projects are barely good local projects. The price of Flamingo, which was incubated by NEO and has the most momentum, is close to zero. In addition, it is expected that a large number of DeFi imitations will appear in the public chains of the three major exchanges in the future.

Project quality determines the price of the currency

We can see that most domestic DeFi projects are controversial now. They follow foreign models, lack original ecological innovation, and focus on routines instead of word of mouth, so it is difficult to become a leading project. The market votes with its feet, and the market value has repeatedly declined. In addition, except for a few teams that have already laid out in 2018-2019, most other projects were launched in batches during the DeFi boom in August and September this year. At this time, the DeFi market has come to an end, and retail investors do not buy it, so the subsequent coin price trend is quite ugly.

As shown in the figure, except for the pseudo-domestic project Republic Protocol, other local DeFis have not really opened up the situation.

Data source: Feixiaohao (as of December 24 )

2020 can be said to be the first year of DeFi projects. From our inventory, we can see that there are very few local projects that have really come out. Although the market value of cryptocurrencies is often virtual, their high and low rankings can still express the market attitude to a certain extent. Regardless of whether these domestic DeFis are short-lived or long-term bullish, the DeFi field is currently the largest application scenario of blockchain, and this marathon competition has just begun. It is difficult for old leeks in the current currency circle to pay for routines. Project quality has become the only criterion for determining future currency prices.

Unlike 2017, China's cryptocurrency environment has changed dramatically. On the one hand, there is a severe crackdown by regulators; on the other hand, DeFi's innovation-driven, geeky, community-based, small and flexible characteristics are incompatible with Chinese cryptocurrency entrepreneurs. The Chinese-controlled TRON and the public chains of the three major exchanges have attracted Chinese developers to create imitations for their own traffic, but to some extent have lost the space to compete with mainstream projects. Despite this, we still look forward to the emergence of projects with certain competitiveness on the world stage in 2021. (Special author: miaohash Editor: Wu said blockchain)

(Note: The year-end review did not receive any form of sponsorship and is based on independent analysis and judgment by the author and team of Wu Says Blockchain)