Will Defi have a second spring in the short term? Ethereum 2.0 security becomes the biggest concern

With a wave of market rebound, many people are paying more attention to DeFi, which had fallen sharply in the previous period. Because in this wave of rise, the DeFi token has increased significantly, so it has also attracted the attention of many people. Some people even say that DeFi is about to usher in a second spring. Is this really the case?

First of all, when we look at DeFi, we cannot simply judge it by the rise or fall of DeFi-related tokens. If it rises, it is a bull market, and if it falls, it is a bear market. There is an essential difference here. The bull market requires a kind of external motivation. Simply put, more funds flow in, while in a bear market, more funds flow out.

If funds are transferred from one coin to another over a period of time, is this a bull market?

Obviously not, because such funding is not sustainable and can only be passed around, which naturally cannot be sustained.

The previous locked-up of DeFi tokens has been increasing, which actually means that part of the funds have actually entered DeFi, so we call it incremental funds. Driven by incremental funds, DeFi tokens naturally rise, and DeFi becomes active.

But what about this period? Defi tokens have not seen much growth and have been falling. The increase in funds participating in Defi has also been shrinking. In other words, Defi is still in a cooling period and is unlikely to usher in a second wave of outbreak.

Secondly, we need to look at the new ways of playing that DeFi is currently generating, which is the intrinsic driving force behind the growth of DeFi.

We knew before that when DeFi exploded overnight, it was mainly due to Compound's deposit, loan and coin-giving functions. Later, when Uniswap became popular, we all knew that currency exchange and liquidity market making were hot. Later, liquidity market making came up with new ways of playing, which was also quite interesting. Up to now, the combination of liquidity market making and NFT has been a lukewarm situation.

What we need to pay attention to here is the liquidity market making of DeFi. In fact, no matter how the gameplay changes, it is still liquidity market making. This has not changed. Only the details have changed. For example, before, two currencies were deposited, but now there is liquidity market making with only one currency. Before, there were single currency returns, but now there are various nesting doll returns. Before, it was just simple liquidity market making, but now there are various gameplays combined with NFT.

In the future development, although innovation can continue, it is only in the details and the general direction remains unchanged.

Another point is that DeFi has almost moved the functions of the traditional financial market. In other words, there has not been much innovation in the functions of the traditional financial market in recent years, and future innovations in DeFi may be more difficult.

Of course, after moving here, the primary task of the DeFi ecosystem is to make the market accept its existence and let users get used to it. This is the key. Only when users are willing to use it can DeFi bring incremental funds. If no one uses it, it will not bring about an obvious bull market.

At the same time, we also observed that there is actually a key point in the current DeFi, that is, after the short-term bull market, the market actually needs a cooling period. On the one hand, innovation is unlikely to come in the short term, that is, it is unlikely that a blockbuster application will appear in the short term to bring market heat. On the other hand, we must observe that the bubble in the current DeFi market has just burst, and many people, especially those who have been cut off before, may have prejudices against DeFi, so they are not very willing to participate in DeFi.

To put it simply, the sickle has just finished cutting and needs to rest, otherwise you will end up losing more than you gain.

From this perspective, DeFi is indeed not yet at the point of another explosion. Even if some coins may nearly double, it is unlikely.

So will Ethereum 2.0 and Layer2, which have attracted much attention in the market recently, bring more room for imagination to DeFi?

In fact, we all know that the deposit contract of Ethereum 2.0 has come out, and many people are anxious to deposit coins, but I personally do not advocate this. Generally speaking, the complexity and security of the system are basically inversely proportional. Ethereum 2.0 is a relatively complex and large system, so before it is officially improved, we need to remain cautious, because code security is the most fundamental core key of blockchain, but Ethereum is currently anxious to solve problems such as tps, so it will be more cautious in code security.

In this case, we should maintain a cautious attitude and not rush to participate, because even if nothing goes wrong, we will not get rich by hitting 32 coins, but once a problem occurs, no one knows what will happen.

Some people may think that Ethereum has a test network, and it was launched only after it was tested and found to have no problems. However, the test network is only used for testing. Once it is launched, more people will use it, and everyone’s situation is very complicated, so it is impossible to cover all aspects. In this regard, Ethereum can actually learn from Polkadot.

There are multiple pilot networks in the Polkadot ecosystem. Simply put, they serve as test networks, but they are real main networks. The development progress of the pilot network is four times that of the Polkadot main network. In this way, the technology can be truly tested in a real environment to see if there are any loopholes. Similarly, Bitcoin and Litecoin have a similar relationship. We can simply think that Litecoin is the pilot network of Bitcoin.

Therefore, if Ethereum wants to develop better in the future, it can actually consider the Pioneer Network. Although it may not be able to completely avoid problems, it at least still has many uses.

Of course, Ethereum 2.0 is not the most urgent thing now. The most urgent thing is actually layer 2, because layer 2 is actually also to solve the tps problem, but it is a transitional solution, so to some extent, it may carry a lot of functions in the short term.

Of course, in the direction of layer2, defi may usher in a second spring. After all, layer2 can indeed solve the handling fee and transaction speed problems mentioned earlier. In this way, swap may become the main force like dex, and this is the key link for the current defi.

Ultimately, users may not pay much attention to technical issues, as long as the operation method is simple and reliable. Although many people think decentralization is necessary, it is only a guarantee in the case of market chaos. If the market is relatively stable, many people will definitely prefer CEX. After all, DeFi and DEX still need oracles to anchor the currency price!