Domestic DeFi, trapped in the price of currency

“It may only take a moment for DeFi to rise to fame and be pulled down from the altar by domestic copycats.” An investor once predicted, but his words did not come true.

Flamingo, a DeFi ecological project under NEO, was originally scheduled to go online at 9 pm on September 25. Due to wallet failure, a large number of users were unable to pledge their assets smoothly, so they had to announce the suspension of "MintRush". The official explanation given was related problems with NeoLine.

"Millions of coins have been mined, but not a single retail investor has entered." An investor said on Weibo that the big investors were working hard to mine, the node service was disconnected, and no one else could get in, "even scientists couldn't do science."

As of press time, Flamingo has been "paused" twice, and BTM's cross-chain DeFi project SUP has also been "paused" twice, being jokingly called a "pausable blockchain." "(Domestic public chains) claim to surpass Ethereum's TPS and stability, but they can't even copy homework well."

Are domestic projects really that bad?

“I was cut off by a domestic project again”

“Forget about domestic products, none of them are reliable.” Investor Ceylon told TechFlow that in the world of cryptocurrency, domestic projects are at the bottom of the contempt chain.

He introduced that after experiencing the chaos of air coins in 2018, now in the currency circle, whenever domestic projects are mentioned, it means scams, money-cutting and unreliability.

In this DeFi wave, domestic projects have also failed to turn around and change the public's perception.

"I was cut off by a domestic project again." Xiaoyun entered the cryptocurrency circle in early 2018 and invested in a domestic public chain project and was trapped at a high point. This year, liquidity mining has emerged, and she did not catch up with the first wave of well-known projects, so she bought a project known as the "light of domestic DeFi". As a result, the price of the currency fell sharply and she was deeply trapped again. "If you are not careful, you will be trapped for thousands of years in domestic projects."

In the DeFi world, there is a new word called "Tugou". Tu means domestic, and Tugou specifically refers to domestic project coins on Uniswap. Later, it came to refer to all domestic DeFi projects.

Domestic originally referred to things produced in a country. With the deepening of economic globalization, the concept of domestic has changed. In the mobile phone and automobile industries, domestic refers to products that are independently developed, produced and manufactured in China, or products with more than half of their components domestically produced.

In the eyes of many people, domestically produced means slightly inferior quality, for example, domestic cars are not as good as German or Japanese cars.

In the blockchain world, not only do investors/consumers look down on domestic projects, but even domestic projects themselves look down on themselves and deliberately disguise themselves as foreign projects.

The experience of Weibo blogger "FeiXfei" illustrates this point. He found a vulnerability in Soda on September 20 and told the development team immediately. The other party started to speak English to him, but after the vulnerability was confirmed, the development team hurriedly asked him in Chinese.

It is not an isolated case that domestic projects pretend to be foreign teams. A practitioner once shared at an offline event how to package domestic projects as foreign projects: in addition to supporting Twitter, official website, and Discord, you must also try to invite foreign/international security audit teams, and hide team information in promotional materials to create the illusion of decentralization.

Why must domestic projects imitate foreign projects? Why are domestic projects stigmatized to this extent? What exactly is the difference between domestic projects?

Chinese DeFi, learning from others

This wave of DeFi fever came from abroad. In mid-June, Compound took the lead in liquidity mining, and Coinbase fueled the trend, setting off the market.

However, it was not until mid-August, when the total locked value of DeFi approached US$9 billion and increased tenfold in three months, that several major domestic public chains came to their senses and announced their layout in the DeFi field one after another.

On August 10, Nebulas Chain (ANS) released its R&D roadmap for the second half of 2020, with DeFi services as the focus.

On August 11, GXC announced that it will launch a forecast machine and cross-chain concept-related products, officially entering the DeFi track.

On August 16, Quantum Chain announced that it had completed the design and development of the decentralized exchange Qiswap and achieved compatibility with the Ethereum virtual machine.

…

On August 27, NEO announced the DeFi ecosystem project Flamingo, which is expected to be officially launched in mid-September.

Entering September, just as domestic public chains were gearing up and eager to try, the heat of DeFi gradually declined , and the DeFi market sentiment focused on Uniswap's coin issuance, while other heat was taken away by NFT and other things.

“It’s very difficult for domestic public chains. If you mess up DeFi, you’ll be criticized. If you don’t do DeFi, you’ll also be criticized.” Xiaoyun said, “Many of these domestic public chains are also forced to develop DeFi. Otherwise, if the currency price does not improve, investors will pursue repayment.”

After DeFi on Ethereum became popular, the price of Ethereum broke through the new high of $439 since July 2018. At this time, most of the tokens of domestic public chain projects were still dormant.

As mentioned in TechFlow’s previous article “DeFi Can’t Escape Ethereum”, due to reasons such as asset type sedimentation, performance transfer, and centralization, other public chains besides Ethereum still have a long way to go in doing DeFi.

There are only 4 active Dapps on NEO

Faced with the gap that cannot be caught up in time, domestic DeFis have started the "Copy to China" mode.

Blockchain blogger "Xiongxionghui" summarized the essence of domestic DeFi in two points: one is to migrate Ethereum's existing DeFi model to the public chain, and the other is to build the public chain's own basic DeFi protocol, but basically they are DEX or full-stack protocols.

“It almost completely copied the various gameplays of ERC-style DeFi, without any innovation, and it is basically coin deposit mining + liquidity mining.”

In addition to the DeFi on the domestic public chain mentioned above, at the application level, domestic DeFi also has no products that can match foreign products. In the Debank lock-up ranking, there is no domestic DeFi in the top 10. dForce Shengcaibao, DODO, YFII, HBTC, ForTube Bank V2 ranked 12th, 21st, 24th, 23rd, and 26th, but the total lock-up volume is less than that of SushiSwap, which ranks 10th.

Looking back at the above-mentioned DeFi applications, they are still "followers" after the rise of foreign projects. The track has been dominated by overseas projects. Whether it is the Internet or blockchain, there is a "head effect", which naturally forms a barrier to funds and traffic. If you simply imitate and follow, it is difficult to "overtake on the curve."

This wave of DeFi rise, whether it is the rise of DEX under AMM automatic market makers, liquidity mining, aggregate mining, and vampire attacks, are all first initiated by foreign projects, and domestic projects are "learning from others".

In addition to the lack of innovation, domestic DeFi faces a more serious and urgent problem: the coin price trap .

Due to the overall pullback of the DeFi market, incentive mechanisms, and insider trading, the tokens DF and FOR of dForce and Fortube fell by 81.7% and 67% from their highest points within a month, and many members threatened to call the police. The price of the currency has become a heavy burden for the project party. Is the project party responsible for the product or the price of the currency? This is a question.

Domestic DeFi, trapped in the price of currency

In 2017, Feng Xiaogang, the outspoken young actor, pointed the finger at the audience for China's production of junk movies.

"The production of a lot of rubbish movies is what the audience likes to say the most. Is it because there are so many rubbish audiences that so many rubbish movies are produced?"

Based on this logic, could the difficulties faced by domestic DeFi be related to the atmosphere of the domestic cryptocurrency trading community?

Analyst Li Feng believes that most domestic investors only care about the price of the currency, and simply measure the quality of the project based on the rise and fall of the currency price, which is not conducive to the long-term development of domestic projects.

"A project that pushes up the price is a good project, and a falling price is a scam. The price trap of cryptocurrency speculation not only kidnaps investors, but also kidnaps project parties," said Li Feng.

According to normal logic, the rise and fall of currency prices will fluctuate with the overall market conditions and the fundamentals of the project itself, but such a cycle is too long. Both investors and project parties want to quickly increase the price and realize cash quickly.

When the project parties start to serve purely for the price of the currency, then it is obviously more cost-effective to design an economic model for the increase in the price of the currency, cooperate with the community to call for orders, and even many project parties choose to cooperate with Ponzi schemes and MLM teams.

The result of accelerating the rise in the short term and detaching from fundamentals is to overdraw the vitality of the project and turn it into a pure chip game. "The more it rises, the harder it falls" has become a true portrayal of most domestic projects.

Investor Zhang Bin divides project parties into four levels: "If they are doing something, the coin price will go up; if they are not doing anything, the coin price will go up; if they are doing something, the coin price will not go up; if they are not doing anything, the coin price will not go up." He believes that most domestic projects belong to the latter two categories.

Compared with the communities of foreign projects, a significant difference is that the topics in the domestic project communities are mainly focused on "the rise and fall of currency prices" and "when to pull up the market", while the communities of foreign projects usually prohibit discussing currency prices and transactions, and focus on technological development and product progress.

Taking this year's star project Chainlink as an example, Philip, the director of Chainlink's Chinese community, has repeatedly stated in the community that it is forbidden to talk about prices, and this has also become a community consensus.

“Not talking about the price of the currency” brings a relatively relaxed atmosphere to the community, and also allows project owners to really “do things.”

Take the DeFi leader, lending protocol AAVE, as an example. Shortly after its token was launched, it fell 80% from its high and fell below the issue price. In the following two years, it has been hovering at the bottom of the price. Many people even believe that the project is on the verge of death.

Until 2020, DeFi ushered in a boom, and the locked value of AAVE increased 1,500 times from US$1 million in early January to US$1.5 billion today. As a response to the fundamentals, its token Lend has increased more than 100 times since the beginning of the year.

The price of a currency is like a double-edged sword. The more enthusiastic the praise and pursuit when it rises, the more miserable the abuse and curses will be when it falls . If you are trapped in the currency price trap, then the investors and project parties who should have achieved mutual success will undoubtedly end up in a lose-lose situation.

Once upon a time, Made in China was synonymous with counterfeiting and inferior quality, but now, whether it is mobile phones, 5G communications, engineering manufacturing, high-speed rail... domestic products have gone from imitation to leadership, and are gradually recognized by the world.

In the field of blockchain, the Chinese once dominated Bitcoin mining and centralized exchange businesses, but they lag behind foreign countries in terms of specific protocol and application layers?

Just as Chinese fans have mixed feelings about Chinese football, we still look forward to the rise of domestic DeFi, no longer following the trend and imitating, but truly leading . We hope that investors will have more patience and project parties will have more long-term persistence and innovation.