The development of DeFi in the Ethereum ecosystem
Friends who have heard of DeFi must all know Uniswap. Its AMM model has laid a good foundation for the development of DeFi. In the past year, the most reverberating words in the ears of members of the entire blockchain circle is estimated to be DeFi. So, what is the reason for the rapid development of DeFi?
Back to finance itself, what is the nature of the value of encrypted assets? Let's take BTC as an example. BTC is defined by people as digital gold, a peer-to-peer digital currency. But this is just a concept, and the concept does not generate value; some people say that "the output of mining has a cost!" In fact, these can not be used as its value support, so what is it that supports the market value of BTC trillion US dollars? ?
The answer is liquidity. The value of fiat currency is because it can serve as the value scale of general equivalents, because it has the best liquidity and the strongest trust endorsement.
The same is true for BTC. The peer-to-peer transaction method is the basis of liquidity. Back to the original BTC, it is mainly used for the hype of the trading platform, simple cross-border settlement and settlement of various blockchain applications.
The current BTC has developed into the basic trading medium of the global encrypted trading platform. With the birth of various BTC financial derivatives, and many merchants/institutions have accepted BTC for payment and settlement, BTC has very good liquidity in the current global market, which has served as the value support for its trillion-dollar market value.
Back in the DeFi world, many early decentralized trading platforms (DEX) adopted the order book model. The development of this type of platform is relatively limited because it needs to provide liquidity for the order book, that is, it needs a market maker. In DEX, all transaction data is transparent, and market maker strategies can easily be arbitraged, so the development of DEX has encountered a bottleneck.
The emergence of AMM has largely solved the fundamental problem of liquidity. Various DeFi projects have rapidly stimulated the liquidity growth of their own tokens through liquidity mining, such as COMP, SUSHI, CURVE, etc. The development of DeFi through liquidity mining allows the liquidity of the Tokens of various projects to be correlated, and DeFi is built Lego.
The development of DeFi has locked up a large amount of ETH, and the liquidity of other assets is bound with ETH and various ETH ecological assets, quickly forming an ecology of huge deposits.
The ceiling of the Ethereum DeFi ecosystem
With the outbreak of the DeFi ecosystem, the Ethereum network transaction volume has risen sharply, and various arbitrage robots have opened an artificial intelligence model in DeFi applications. When ordinary users participate in these applications, they become slow and the network is congested, and it costs tens of dollars to operate. Therefore, the popularity of Ethereum DeFi gradually began to weaken, and the frequency of users' use began to decrease. The development of Ethereum ecological applications has once again encountered a ceiling.
Layer2 technology brings Ethereum ecological application to life
The Ethereum mainnet is expensive to use, and Layer 2 technology is gradually adopted by many projects. The Ethereum Foundation is actively exploring in the field of sharding technology and Layer2, and also particularly supports some projects on ZK Rollup and Optimistic Rollup. More typical projects, such as: Matic, OMG, LRC, Nerve, ZKS, Talon, etc. These are all relatively popular Layer 2 projects recently.
The advantage of Layer2 is that it directly interacts with Layer2 applications through the Ethereum account system, and the applications do not run directly on the main network. In this way, the performance, scalability, and cost of Layer2 applications can be well resolved. The development of Layer 2 and the maturity of Layer 2 applications will continue to bring new vitality to the Ethreum ecosystem.
DeFi's flames continue to burn on Heco and BSC
It can be said that the Ethereum ecosystem has laid a solid foundation for the rapid development of the DeFi field. Recently, BSC and Heco came out one after another at the right time, which happened to have undertaken a large part of the spillover of the Ethereum ecosystem.
They build the main chain based on the underlying framework of Ethereum. The main framework is exactly the same as that of the Ethereum network, and only changed to the DPOS form at the consensus mechanism level. This design allows Ethereum's DeFi ecosystem to be quickly deployed on these two networks, greatly reducing the cost of developers creating projects (almost only need to design a new front-end to create new projects).
For example, PancakeSwap on the BSC network and Mdex on the Heco network have their contracts modified based on Uniswap. At present, the market value of PancakeSwap and Mdex has reached hundreds of millions of dollars.
Compared with the Ethereum network, BSC and Heco networks have some unique advantages of their own. The first is the introduction of natural funds from the trading platform , the second is the incubation support of the ecological project by the trading platform team, and the third is the platform as a natural cross-chain bridge for various main network assets.
This layout of the two major platforms not only diverts assets and deposits them on the trading platform, but also builds DeFi Lego in their own ecological network. Some time ago, after a fierce operation, the prices of BNB and HT rose rapidly, and BNB also officially ranked third in the global crypto market value.
In summary, from the current development, Heco and BSC seem to be the best Ethereum Layer 2 solutions. Perhaps in the near future, a project that can build a decentralized cross-chain bridge between Heco and BSC will become another new hot sector in the industry, let us wait and see!