Filecoin's liquidity solution - DeFil

The launch of Filecoin’s mainnet is getting closer. Filecoin’s chain synchronization and algorithms are relatively stable. Although there are some areas worth discussing in terms of computing power maintenance, overall, there are no particularly big obstacles to the launch of the mainnet. According to the current pace, the space race is over, the effective storage problem is gradually advanced, and the ecological construction is gradually carried out, so the launch of the mainnet is a natural process.

In the Filecoin community, a question that has been asked all the time is: where does the initial mortgage come from, that is, the question of which comes first, the chicken or the egg. At present, it seems that the space race has partially solved this problem. The space race is divided into two phases. In the first phase, a total of more than 3.6 million FIL rewards are issued, and these rewards will be released linearly within 6 months. In other words, miners participating in the test can get about 20,000 coins for mortgage every day. The second phase of the space race has solved the problem of initial computing power. It has been announced that part of the computing power, mortgage and block rewards can be directly connected to the main network. In other words, as soon as the main network comes up, there will be a lot of computing power. If about 100PiB of computing power is transplanted to the main network, then this part of the initial computing power will solve the problem of issuing initial rewards on the one hand, and further solve the problem of the initial mortgage calculated at the beginning being too high. Because of the existence of the initial computing power, the initial pledge of each Sector will definitely be less than 1.0Fil, and it is estimated that it may be below 0.5FIL. This provides impetus for the initial computing power growth.

However, with the release of the new economic model and the community's deepening understanding of Filecoin, the mortgage issue is still a hanging stone in everyone's heart, and it cannot be put down. This is especially true for miners. Just a simple simulation will show that if miners continue to increase computing power, they will almost be investing in the first half of the year. There is a lot of profit on the books, but it is either mortgaged or locked, and it cannot be withdrawn. In the early days of the Filecoin network, the daily increase in computing power accounted for too high a proportion of the total computing power, which required a large amount of released currency to flow into the system and enter the pledge system. But this is more difficult. According to the traditional model, this will cause the scarcity of currency and the soaring price of currency. In this case, everyone's willingness to hold currency is stronger. Instead, it causes insufficient circulation. Is there a solution? Yes, this is DeFil - Decentralized finance of Filecoin.

One of the main goals of DeFil is to increase the liquidity of circulating coins . In other words, we must do everything we can to get people to take out their coins and enter the market, rather than just letting them sit in their personal wallets. One of the simplest incentives is to give interest. Going a step further, you can also do liquidity mining, which not only gives interest, but also other coins. If you make money, you will naturally take it out.

DeFil is the last cornerstone for the launch of the Filecoin mainnet. The entire system can be quickly established in the current DeFi system. This part is also one of the main issues currently being considered by Protocol Labs. So what preparations are needed to establish DeFil? In fact, the current DeFi ecosystem has made many attempts, and the existing system can be used. Let's briefly discuss several major aspects of DeFil construction:

• Fil’s platform token (eFIL) and credit-guaranteed exchange system

• Fil-related deposit and loan system

• Fil Trading Platform

Ethereum is currently the largest and most mature platform for DeFi. Filecoin and Ethereum are good friends. It is natural to implement DeFil on the Ethereum platform. Fil deposits, loans and transactions can be carried out on existing platforms on Ethereum, such as UniSwap and Compound, or new smart contracts can be developed specifically for Fil.

In order to realize DeFil, the most fundamental foundation is to have an exchange system for FIL tokens and real FIL on Ethereum. This can be formed by institutions or alliances in a centralized or decentralized manner, and freely exchanged peer-to-peer through a 1:1 reserve model or a certain proportion of reserve model. Models similar to USDT or USDC are feasible. It is not difficult to issue a token on Ethereum. The key is who does it. Such an organization needs considerable financial strength, that is, it needs to have enough FIL as a guarantee and redemption; it also needs to have enough credit. Since early miners actually did not have many coins in their hands, the first ones to have more coins were the team and the foundation. Therefore, such a redemption organization can be led by the Protocol Lab or by the foundation. The possibility of the foundation taking the lead is greater.

At the same time, since a certain handling fee can be charged for the exchange of tokens, if the transaction volume is large and the frequency is high, the income will be considerable. In this way, the foundation can also use part of the income to promote the development of the ecosystem and community.

For Fil to circulate, there needs to be an intermediary link, that is, a (virtual) bank, which gives interest to depositors and takes the interest difference between deposits and loans. With banks, money can flow fully into the market.

The typical example of a bank in the current DeFi market is Compound. DeFil can directly refer to Compound, and can also directly support FIL token transactions in Compound.

A key issue here is the exchange rate of tokens. This can be considered to be set and updated centrally, or to use oracles to link multiple centralized exchanges for global pricing; or to directly link to decentralized trading contracts. However, in the early days of FIL, there was not enough reference system, so how to consider the exchange rate. Its volatility may have a certain arbitrage space.

The deposit and loan system is a good choice for HODLers who are willing to think from the perspective of currency standard or willing to hoard coins. They can have a certain return with low risk while holding coins.

A more direct way to obtain FIL is to trade coins, which can be done on centralized exchanges or in decentralized DeFi applications. Similar DeFi applications can refer to UniSwap.

On a unified trading platform, the currency trading platform and the deposit and loan platform can be linked, and algorithms and traders can automatically determine the transaction ratio and mortgage rate, forming a unified ecosystem.

When a complete ecosystem is established, as long as there is enough interest and an active trading ecosystem, Fil's liquidity can be fully activated, making the mortgage model defined in the economic model based on the circulation volume more effective.