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Dorothy, head of Synthetix Greater China, and Nigel, head of Perpetual Protocol China, shared the main obstacles to the development of decentralized derivatives and the design of AMM mechanism.
Original title: “Dialogue between Synthetix and Perpetual: Structured and aggregated products may be the future of the derivatives track”
Finishing: Chain Catcher
Recently, the 23rd issue of the Catcher Academy hosted by Chain Catcher invited Dorothy, the head of Synthetix Greater China, and Nigel, the head of Perpetual Protocol China, to conduct “Why Derivatives Will Be the Most Potential DeFi Track This Year” Topic sharing.
During the period, Dorothy and Nigel shared with the community users the main obstacles to the development of decentralized derivatives, the problems and solutions of AMM mechanism design, and the risks that ordinary people need to pay attention to when participating in DeFi derivatives mining, etc. Dry goods, the full text is now organized as follows, hoping to inspire readers.
Chain catcher: Please briefly introduce the positioning of Synthetix and Perpetual, and the specific exploration and advantages in the DeFi field.
Dorothy: Synthetix is ​​a decentralized synthetic asset (Synths) protocol built on Ethereum. Users can stake our token SNX to mint the stable currency sUSD, or directly purchase sUSD to perform digital transactions on our platform. Trading of synthetic assets such as currency, foreign exchange, stocks, commodities, indices and reverse assets.
In the world of blockchain, we do not have an effective way to directly trade traditional assets such as stocks. Therefore, we need to synthesize virtual assets on the chain for trading by anchoring the price of traditional assets.
To put it simply, synthetic assets are mirrored simulations of target assets, such as sUSD against USD price, sGold against gold price, sTSLA against Tesla stock price, and sDeFi against DeFi index. By mapping real-world assets, everything is Can be traded on the chain.
Synthetix was established in 2017. It is the first project in the industry to try a decentralized synthetic asset issuance and transaction mechanism. It has the advantages of no slippage, unlimited liquidity, and a rich asset portfolio. It is one of the top projects in the DeFi world.
Next, we will deploy the protocol on Optimism’s Layer 2 network and launch V3 upgrades, including futures functions.
Nigel: Perptual Protocol, as its name suggests, is a vAMM-based derivative agreement on the chain. The current main product is a perpetual contract.
We are the first project to sell token LBP on Balancer. After more than half a year, it has now become a more mainstream IDO method. In addition, our mechanism is vAMM, which is also the first protocol to introduce AMM to derivatives trading. This innovation has also made many DeFi enthusiasts pay close attention to us.
In terms of advantages, I think it is a little preemptive, because the market wants to find a low-cost and relatively large number of user transactions on the chain perpetual contract trading platform except Perpetual. In addition, we have developed on xDai, so the cost is relatively low, and the user experience is much better than that of the first-level network.
Chain catcher: The popularity of DeFi has lasted for almost a year, and the products in all sectors have matured, especially the derivatives track. Many investment institutions are in the layout. As an early participant, do you think the current DeFi derivatives track is right? At what stage of development?
Dorothy: First share the definition of the concept of derivatives. A derivative is a financial contract whose value depends on one or more underlying assets or indexes, including forwards, futures, and swaps. And options (Option) and other forms, can be standardized or non-standard, the main purpose is hedging, speculation and arbitrage.
In the field of digital assets, futures are linear contracts with relatively simple products that have achieved explosive growth in the previous year; while options are very complex derivatives with high thresholds. It was not until last year that more institutions entered the market. Exponential growth.
The early leading centralized futures exchanges include BitMEX and OKEx. Recently, Binance, Huobi and FTX have caught up in trading volume and become the new leader. For traditional compliance agencies, CME is the only one. The choice; in the more immature options track, deribit has long thrived.
On the decentralized track, Synthetix is ​​the leader in synthetic assets. We support spot trading of synthetic assets and reverse synthetic assets, as well as binary options trading, and will also support futures trading after Layer 2 is launched.
Among the decentralized exchanges that specialize in futures, dYdX is the oldest project, Perpetual Protocol, Ddx, Injective, and Mcdex are all rising stars that emerged last year, and Hegic and Opyn are emerging projects in the options track.
The derivatives track is still at a fairly early stage, and the trading volume is still very small compared to centralized exchanges. There are more entrepreneurial projects on the futures track, but there is not a clear head project that has run out. The options track is more difficult to promote and popularize because of the complexity of the options themselves.
Nigel: Comparing the ten-fold difference between derivatives and spot transactions on a centralized system, I think the explosion of DeFi derivatives is far from coming. Perpetual agreements are considered derivatives that are running out of scale, but every day The transaction volume of Uniswap is only 50-60 million, and Uniswap’s recent transaction volume is more than 1 billion U.S. dollars.
Over and over, the transaction magnitude of on-chain derivatives is at least a hundred times different from that of centralized derivatives. So we can’t even name the current stage with a name that can be found. I made up a name myself called the cocoon period. In this period, the whole track is added together to try and make mistakes, fail, and waste. Don’t be afraid to trap yourself, you need encouragement for a while.
Chain catcher: In the traditional financial sector, the volume of derivatives is much higher than the spot volume, but in the DeFi sector, the volume of derivatives trading still accounts for a very low proportion of the entire trading volume of crypto assets. Under the benchmark, many practitioners believe that decentralized derivatives still have a lot of room for development. What do you think is the potential market space for decentralized derivatives? What are the main obstacles to development at present?
Nigel: I think it is at least a hundred times more space. The current obstacles mainly come from the following points:
There are still too few DeFi users. Most of the currently educated DeFi retail users come to participate in mining to earn profits, or because of the better liquidity and depth of DEX to trade on the chain, they do not have the habit of using derivatives.
The solution to the previous problem is that the project needs to keep attracting users. However, users who are attracted find that the network is expensive and slow, and more importantly, the depth of derivatives on the chain is not good. Therefore, the second obstacle is insufficient infrastructure and insufficient product strength.
Dorothy: We can look at a set of data. In the traditional financial market, the total market value of stocks is 70 trillion U.S. dollars, the bond market has a larger market value of 130 trillion U.S. dollars, and the market value of the derivatives market is more than all of them combined. It has reached 1,000 trillion U.S. dollars. It can be seen that the derivatives market is not an order of magnitude worse than the underlying market of underlying assets.
In contrast, on the centralized exchanges of our industry, the trading volume of digital asset derivatives is only three times that of the spot market. We can expect that in two to three years, the derivatives market will grow further, leaving the spot market far behind. Reached 10 times the size of the spot market.
While the centralized market has yet to break through, the decentralized derivatives market is still in a very early stage, and it is more for DeFi “farmers” and experts who entered the market early, and cannot accommodate large financial institutions for transactions.
I think the current main obstacles come from three aspects. The first is the problem of market education. Many derivatives users are used to trading on centralized exchanges and are not familiar with or even trust DeFi products. Especially under extreme market conditions, the top centralized transactions such as Binance have stronger solvency, while decentralized exchanges can only rely on the cash retained by insurance funds and foundations, and the solvency is doubtful.
The second is the issue of transaction costs. Derivatives exchanges themselves are much more complicated in smart contract design than Uniswap and other spot exchanges. In addition, derivatives traders trade more frequently and are more sensitive to execution prices and transaction fees. , The overall experience will be affected. At present, many products on Ethereum are restricted by the Ethereum network, and face the problems of high network handling fees, delayed oracle price feeds, high costs, and serious transaction price slippage.
The last and most critical issue of liquidity. Centralized exchanges complete the matching through the order book, and users and users are rivals. If there is no market maker, it is difficult to efficiently match orders based on the liquidity provided by the users’ own fragmented trading needs. On the decentralized exchange, the efficiency of the chain is low, and it is difficult for market makers to control transaction costs and cannot effectively provide liquidity, and it is difficult for users to complete transactions at ideal prices.
In order to solve the liquidity problem, Synthetix created a debt pool method, through which users pledged funds to generate a debt pool as counterparty, to achieve no slippage and unlimited liquidity transactions, and Perpetual Protocol’s vAMM (automated market making curve) mechanism It seems to quote a similar concept of pledge pool.
Chain Catcher: What do you think is required for decentralized derivatives on DeFi to reach the volume of the derivatives market on CEX? And what’s the tipping point?
Nigel: The first is the infrastructure, including network performance, network costs, etc., and the second is that the frequency of people’s behavior on the chain needs to be increased by an order of magnitude during the development stage of the industry. Of course, this depends on the above conditions. The third is the layering of products. Outstanding is not a spring. A hundred schools of thought are contending for DeFi. Someone must target big whales, some serve retail users, some target long-term agreements, some target perpetual contracts, and there are enough in each category. People and teams try and make mistakes.
The tipping point is that I think the market for Fomo is relatively easy, and the hot spots take turns. After Layer 2 comes out, everyone takes it for granted that there may be no problem, and then stirs up a wave. But I think the real detonation is to make a thing become accustomed, such as Uniswap, Synthetix, including the head DeFi protocol. Therefore, although the perpetual agreement is a member of this track, I am not optimistic that derivatives will be detonated in the short term.
Dorothy: I think Ethereum L2 (Layer 2 network) will be an important explosion opportunity for derivative DEX, both in terms of currency price and practicality. For example, dYdX has chosen to cooperate with StarkWare, which supports ZkRollup technology, and has launched the L2 version.
Together with Uniswap and Chainlink, Synthetix is ​​an early support project of the Optimism network. It is expected that the L2 trading function will be launched this month. Network fees are now a major issue that restricts all ecological projects in Ethereum. On the second-tier network, transactions can reduce network fees by at least 90%, meet faster transaction times, and effectively reduce slippage problems.
But I don’t think that the trading volume of DEX derivatives can catch up with CEX in the short term. Even on the second-tier network, decentralized exchanges still have a gap with centralized trading in terms of user experience and transaction fees. Of course, the relative success of decentralized exchanges can force centralized exchanges to improve problems such as pin insertion, downtime, and position penetration. Centralized exchanges can further educate the market and expand user groups, which can bring more fresh blood to decentralized exchanges.
Chain catcher: Judging from the experience of traditional finance and even centralized exchanges, derivatives are still a problem in terms of customer acquisition. What do you think is the key to on-chain derivatives exchanges to attract users? What risks should ordinary people pay attention to when participating in DeFi derivatives mining?
Dorothy: Centralized exchanges generally attract market makers to provide liquidity through commission rebates, and provide ordinary users with discounts on transaction fees through the VIP level system. The most common way for decentralized exchanges is to provide Liquidity mining.
Synthetix uses a form of pledged mining. In order to encourage users to use our platform for pledges and transactions, we launched an inflationary monetary policy in April 2019. The policy stipulates that within 5 years, a certain percentage of SNX tokens will be issued each year, year by year. Decreasing, the initial inflation rate was 75%, and this year’s inflation rate is roughly 29%.
Users can stake our token SNX to mint stablecoin sUSD. The pledge rate on the Ethereum Layer1 network needs to be maintained at 500%, which is equivalent to 5 USD worth of SNX minting 1 USD worth of sUSD; when the pledge rate is less than 500 %, the user needs to burn the sUSD held to increase the pledge rate and restore it to the level of 500%.
On the deployed Layer 2 network (currently only supports pledge casting and receiving pledge reward functions), the pledge rate for maintaining positions is 600%.
When the staking rate drops to 200%, users will have 3 days to cover up their positions, and increase the staking rate by burning sUSD. If the user fails to complete the cover up within the 3-day validity period, then the staking rate is less than 500% (the second layer network is 600%) will be liquidated, returning the pledge rate to 500%. Such a mechanism gives users a sufficient buffer period to avoid the risk of forced liquidation on the chain and protect their positions.
There are also platforms that adopt a transaction mining model, just like MCDEX. Because perpetual contracts are directional transactions, the platform provides users with automatic hedging tools, and users need to rebalance (rebalance) regularly.
In general, to participate in derivatives DeFi mining, you need to check in advance the security of the platform’s smart contracts (such as whether the security audit is passed, whether there is a back door) and the reliability of the platform’s qualifications (such as team background, institutional endorsement). Most mining operations have impermanent losses or liquidation risks. Users must study the operating rules of the platform and put risk management in the first place.
Nigel: I think the most important thing is the maturity of the product. The reason why OK can occupy the leading position in the delivery of futures contracts is that the product is strong enough. In the same 18 years, the sudden emergence of BitMex also carried forward the perpetual contract. Under the conditions of maturity of all infrastructures, use innovative awareness and endure the time that no one pays attention to to polish on-chain derivatives that are truly product-powerful.
I think that the security risk should be paid attention to in DeFi derivatives mining. After all, the opportunity is not a scarce product, but the principal is. Most of the mining itself is the project party’s demand for liquidity, thus using token benefits to drive users to inject liquidity. I think the profit-seeking is naturally correct. After all, no one can avoid being vulgar in the market, but if everyone is willing to spend a little time thinking about the value of the agreement and the value provided by liquidity, think about it before doing it, and it may be boring to make money. Get a little spiritual satisfaction outside.
Chain catcher: We all know that the emergence of AMM is very important to the development of DeFi, but in the past period of time about AMM’s impermanent loss and capital utilization rate has been the industry’s attention. Can you start from these two issues and analyze derivative products? Problems in the design of the AMM mechanism and possible solutions?
Dorothy: The traditional AMM mechanism uses the formula of xy=k. This constant product formula has the disadvantages of low capital efficiency and high transaction slippage. Market makers who provide liquidity to the trading pool often suffer impermanence losses due to this.
As far as I know, most futures exchanges on the market still adopt the order book model. For example, dydx and ddx apply the model of off-chain matching and on-chain settlement. The disadvantage of this model is the high degree of centralization. The core parameters of perpetual contracts rely on off-chain facilities. When the order book fails, the on-chain funding rate cannot be updated. In addition, other smart contracts cannot interact with the off-chain order book to build other structured products.
Synthetix plans to launch futures products with 10 times leverage after Layer 2 is officially launched, following the debt pool model of spot trading.
First, explain the concept of fund rate. When the futures contract (Futures) of the traditional financial market is delivered on the expiry date, the price will naturally converge with the spot price. It was invented by BitMEX and used by most exchanges. Perpetual swap) does not have a delivery date, so we need to adjust the price through the capital rate, and the dominant party (in the opposite direction) will subsidize the other party to achieve the purpose of returning the contract price to the spot price.
On Synthetix, the price of our synthetic assets is directly generated by the Chainlink oracle machine, and there is no decoupling of the contract price and the spot price. On the contrary, we have to adjust the funding rate to affect the market slope and reduce the risk of the debt pool.
On other trading platforms, every buy order must be completed by the corresponding sell order. In fact, the market will never tilt, and the number of contracts traded between long and short sides will always be balanced.
But in Synthetix, every contract transaction does not require a counterparty, but a sUSD debt pool generated by pledging SNX tokens for users. Here we need to explain the concept of floating debt pools.
All SNX holders will generate a “debt” when they mortgage. At the beginning, the debt is the amount of sUSD they initially minted. After that, the debt will fluctuate with the income of other synthetic asset holders on the platform.
When someone buys other synthetic assets such as sBTC with minted sUSD, and sBTC increases in value, then that person will outperform the market, the debt pool of the entire market will increase, and this person’s income will be added to all participating pledges in proportion Debts of SNX holders. Each holder must repay all sUSD debts in order to unlock and retrieve the pledged SNX (in this case, the final debts of other debtors are higher than the amount of sUSD at the initial minting).
When a user exchanges sUSD for sBTC, sBTC is essentially generated out of thin air, and no one sells it. After the transaction is completed, the system will automatically destroy sUSD and create sBTC for users. The total amount of sBTC in the entire market increases, and the total debt of all SNX holders also increases. It is this zero-sum game mechanism that provides unlimited liquidity for the market.
Now we look at the application of debt pools in the futures market.
Assuming that in the unilateral market, 90% of trading users are bullish, and then the spot price does rise, then the users participating in the pledge must repay higher debts, so the bulls have to pay a higher funding rate than other platforms. To attract more empty orders and reduce the risk of staking users.
Assuming that the total value of long orders on the entire platform is $100,000 and the total value of short orders is $10,000, then in this case, the short will receive a funding fee of $10,000, and the additional funding of $90,000 will be paid to Pledge users. The purpose of this design is to keep the market from leaning toward long or short positions, and to maintain neutrality, so as to reduce the debt risk faced by pledged users. In summary, it is to use the funds provided by the pledge user to act as the counterparty of the transaction user.
Nigel: I have observed that there are several ways to eliminate impermanent losses with AMM Based products:
The first type, ThorChain, the conscience project party, centralizes to help users solve the impermanence loss of Cover and Rune-related trading pairs.
The second is to innovate the AMM mechanism, such as DODO’s PMM, or simply like us, Perpetual Protocol has no real liquidity, and virtual liquidity in the AMM pool. After users deposit assets, they do not essentially enter the liquidity pool, but are individually sealed up for clearing and settlement. According to the user-set leverage multiple mint, the corresponding amount of vUSDC enters the virtual liquidity pool. The advantage is that users can get good transaction depth without anyone providing liquidity.
The third is our future solution. This solution is not for our own AMM, but minimizes the integration of Perpetual Protocol into the AMM Based DEX, which is convenient for users to hedge against the impermanent losses caused by liquidity with one-click.
Having said that, I want to extend this topic, that is, derivatives need loyalty that does not depend on liquidity. The loyalty of liquidity is very low. They are profit-seeking. For derivatives, which is currently not so profitable, how to avoid the loyalty risk of liquidity.
I think Synthetix is ​​a very good way of synthesizing assets, a token that produces two, three, and all things. The transaction objects and assets on the platform come from the origin of SNX. The mechanism is very good, including the MIR that performed well in the past six months. Another way to avoid the risk of liquidity loyalty is to use virtual liquidity to provide services to users. The pressure on users and project parties will be less, and there is no need to rely on liquidity providers. You can keep liquidity while pleasing users.
Chain catcher: As a well-known synthetic asset protocol on the Ethereum platform, Synthetix plays a very important role in the field of DeFi derivatives. PERP also adopts the new mechanism of vAMM. Can you talk about the problems in traditional financial derivatives? A better solution through decentralized derivatives? What are the more anticipated application extensions in the future?
Nigel: I think from the user’s point of view, it is permissionless. Traditional derivatives have strict requirements on investors due to their high leverage ratio and high volatility. In other words, it is the strict review, market fragmentation, and the limitation of the distance between time and physical space. On the chain, in the decentralized world, it may not exist anymore, 24×7 hours trading, no KYC, the experience is wonderful.
I still hope that the Lego attributes of DeFi can be presented in derivatives, so that our lone derivatives can have better composability and empower the DeFi world.
Dorothy: In the traditional financial market, the markets of different countries and different types of assets are often fragmented, and the market access barriers are also high. The Synthetix platform can provide users around the world with no identity restrictions, no thresholds, no review, and one stop. The 24-hour trading of spot, futures and binary options of digital currencies, foreign exchange, stocks, commodities, indices, and reverse assets provides great convenience for users to conduct cross-asset, cross-market, and cross-position transaction management. . For example, one day crude oil plummets and the U.S. dollar is depreciating again, then you can exchange your assets for Bitcoin as a hedge.
Another major advantage of decentralized protocols is community autonomy. Users can vote for the types of assets they want to trade on the platform, adjust the currency composition in the index, and make other important decisions, which is unimaginable in the traditional market.
Non-custodial, no threshold, and anti-censorship are the biggest advantages of decentralized protocols. The DeFi agreement can subvert the existing financial system and become a true “digital bank”, providing an inclusive financial portal for billions of people around the world, especially the new generation of digital natives.
Chain catcher: Derivatives track products are relatively diversified, including options, futures, prediction markets, synthetic assets, etc. Once the problem of Ethereum’s expansion is solved, how will these subdivisions be combined? At the same time, what kind of competitive landscape will give birth to the DeFi track?
Nigel: Once the expansion schemes are excellent, users and agreements are concentrated on one or two expansion schemes, and the limitation of infrastructure performance on the product is lifted. I think that in the end, there may be a relatively large platform that will cover all the agreements on the various product categories of the derivatives track.
There are two possibilities. One is to add functions to the protocol with platform potential, and to integrate each company’s strengths into a platform with protocol matrix interoperability.
The second possibility is that in the future, there will be a relatively macro-oriented middleware platform that encapsulates the necessary infrastructure, attracts various types of derivatives, and eventually becomes an ecological platform. This is what I think is the future combination. Simply put, the agreement will not be isolated. Based on this platform, the composability just mentioned with the current mainstream DeFi protocol will also be easier to implement because of the convenience of mutual calls.
Dorothy: The largest transaction volume in the current DeFi market still comes from native digital assets, but the volume of the traditional asset market is a thousand or ten thousand times that of the entire digital asset market. Therefore, on-chain synthetic assets that mirror real-world assets will become digital assets in the future. There will be huge room for growth in the mainstreaming wave.
What we are currently doing is to combine synthetic assets with various derivatives such as futures and options to provide users with a variety of trading tools.
In addition, I am also very optimistic about structured products that take advantage of the composability of smart contracts. In fact, in the DeFi world, it is not users who use a certain smart contract agreement most, but other smart contracts. At present, the structure of derivatives on the chain is relatively simple, and most of the income of aggregators like YFI comes from mining on Curve. As the industry’s infrastructure matures, more teams will take advantage of the composability of financial Lego and combine different options and futures contracts to launch an on-chain structured structure with higher returns and richer types than existing agreements such as YFI. product.
Source link: www.chaincatcher.com
All DODO solutions will work towards permissionless “no barriers to entry” and community management.
Interview & Writer: Lou Yue
Interviewee: Leida Xiong, founder of DODO
“Excellent investment background, Chinese DeFi project star, new active market maker…” Soon after it went online, DODO, with multiple “halos” on its head, entered the DEX as a very cute little yellow chicken. An extremely competitive track.
In order to have a deeper understanding of the project and to better grasp the market trends, we invited the founder of DODO, Leida Xiong, to discuss topics such as project review, DEX status, new versions of DODO, and potential development in 2021. , The following is the core content of this interview.
DODO’s “Half-Year Summary”
DEX has ushered in exponential growth since the summer of 2020. Automated market maker (AMM) platforms represented by Uniswap have become the mainstream choice in the market, but users have gradually discovered the ” impermanence loss ” while providing liquidity. (Impermanent loss)” the risk of volatility brought by, the value of the assets in hand will invisibly shrink.
The possible risks of AMM have inspired DeFi’s enthusiasm for innovation. The decentralized trading platform DODO has innovatively proposed the next-generation solution for liquidity supply-the proactive market maker (PMM, Proactive Market Maker) algorithm to reduce impermanent losses and holding risks. Realize the flexible market making and efficient asset issuance of DEX.
DODO’s series of innovative ideas quickly attracted the attention of the market. In its seed round of financing, it was led by Framework Ventures, which focuses on DeFi investment, and it was also its first Chinese DeFi project . In the private placement round of financing, both Binance and Coinbase were invested.
It has been nearly 5 months since the pre-launch of DODO in August 2020, and we also invited the co-founder of DODO, Leida Xiong, to briefly do a “half-year review”.
Dodo in the eyes of the radar bear
Leidaxiong said that what DODO wants to do is to innovate continuously . It will introduce new things unprecedented in the market in each major version; continue to carry out micro-innovation in each minor version. DODO will not do imitation disks, because innovation is the most important driving force in the DeFi world.
The logic of DODO’s thinking is to find a problem and then use new technology to solve it. The DODO team has rich financial and smart contract programming experience. As long as it does not violate the laws of market economy, there must be a way to solve it in a decentralized (DApp) way.
The blockchain world has new problems and challenges every day, but DODO will focus on the general direction of doing transactions and focus on doing transactions well. Including but not limited to spot trading, leveraged trading, derivatives trading, etc. On the other hand, all DODO solutions will work towards permissionless “no barriers to entry” and community management . Because only permissionless can release the creativity of users to the greatest extent and allow more people to participate in innovation.
Three months of “mysterious disappearance”
DODO under the market spotlight has carried a lot of expectations and attention from the beginning. Many people also want to get the latest progress and related news of the project. However, in the nearly three months from October to the end of 2020, some progress on the project seems More “mysterious”, some people speculate that DODO may be preparing for a major product release. We also asked Radar to reveal the “mysterious actions” of DODO during this period.
Radixong pointed out that DODO is mainly doing two things . First, because it is the first time for itself, the generations and the team to do a brand new project, and in the epidemic situation, everyone basically works remotely, so build a remote from scratch. The team and making the team run very smoothly is a very challenging thing.
I spent a lot of time in recruitment around October, interviewed about 100 people, and expanded the team from a few to 20 people in a month or two . At the same time, an efficient way of remote collaboration was explored, and the progress was very rapid.
There is a lot of work in these two months. In fact, they are all underwater. You may not see them, but these tasks are very necessary, because the slowness in the front will make the back very fast. If the team is not well set up in the early stage, the speed cannot be increased in the later stage. It is very worthwhile to give the team some time for running-in and trial and error .
On the other hand, DODO v2 is a major version update . For any team, the release of a major version within six months requires huge and complicated work, and many things need to be demonstrated. The design of a new algorithm without barriers to entry is not like copying. An AMM is that simple. There may be many teams that can make imitations in one month and gain market attention, but this is not what DODO wants, nor do they think it will bring a lot of important value to the DeFi world or China’s DeFi projects, so they are willing to spend A little more time to make a novel, problem-solving product.
Therefore, throughout October , the solution of the PMM algorithm on the long tail coin was demonstrated. In November, the front-end code and contract structure were reconstructed. In December , the aggregator version 1.5 was released. The aggregator has many back-end parts. It’s not that the contract can be taken over and redeployed, so it took some time, and the pace of the current 2.0 version is actually very tight, especially 2.0 is very huge, from product planning to vision to final front-end implementation and contract implementation. It is a large set of works.
DEX industry status
At the beginning of the new year in 2021, decentralized exchanges are still undergoing rapid development. According to DeBank data , the number of decentralized exchanges continues to grow, and the DEX trading volume included in the statistics for the past 24 hours is hovering around US$2 billion. As a member of the DEX circuit, we also asked Leida Xiong to share his views on the entire DEX circuit.
DEX development prospects
Radixiong said that he is very optimistic about the future development of the DEX track. He pointed out that trading is the center of the digital currency world. The crypto world is divided into centralized exchanges and decentralized exchanges. Decentralized exchanges are exempt from entry thresholds. What cannot be achieved in a centralized exchange also allows everyone to see the prospects for the development of DEX.
The fundamental reason behind the entry-free entry threshold is the low operating cost of DEX. It can be listed and traded without a centralized server and strong user trust. This is something that cannot be achieved by a centralized architecture. In principle, do A decentralized exchange may only require ten developers. If DEX has a good experience, it can even provide services similar to Binance. Therefore, in the next five years and ten years, it must be the world of DEX, not centralized The exchange world, because its natural cost is too low, DEX represents the direction of current productivity .
Radixiong further pointed out that DEX will be the No. 1 track for the development of the DeFi industry . Taking the traditional world as an example, any asset-related transactions must eventually fall into the transaction, whether it is trading stocks or bonds or trading funds. Buying and selling, buying and selling requires trading, so there may be some people doing assets, some people doing insurance, security, etc., but they will definitely fall into the transaction in the end, so DEX should be the first track, there is no one. Even newly issued assets may not develop as fast as exchanges.
The “market competition” between DODO and Uniswap
When it comes to DEX, Uniswap may be the first or most frequently mentioned one. Uniswap’s transaction data is indeed in the top position. The airdrop of UNI tokens once caused a huge response in the market. They are also members of DEX. , Leidaxiong also discussed DODO’s current market positioning and the direction of the project’s future breakthrough.
Radixion bluntly said that in the DEX field, DODO’s only opponent is Uniswap , or the only opponent in the entire DEX world is Uniswap, because it is now in an absolute dominant position, and the current number two exchange is more than ten times different from its daily activity. It may account for 90% of the market. If you don’t defeat UNI, it doesn’t make much sense to be the second child.
When talking about the huge development in the DEX field, and the Uniswap transaction volume can even reach the level of Coinbase, Leidaxiong pointed out that because DEX has implemented a free entry threshold, this is something that CEX cannot do.
- Change of thinking from liquidity to asset issuance
Radixiong pointed out that when working on the v1 version, more consideration was given to on- chain liquidity. Better liquidity than Uniswap could defeat him, but later found that this was not enough because it adopted more aggressive parameters at the beginning. When it comes to the “rolling” liquidity advantage, users still go to Uniswap to trade, including the aggregator prices are no worse than Uniswap, but it still has 90% of the users in the market, which proves that there is no future for liquidity alone.
After careful analysis, it is found that Uniswap’s new assets are well found is one of the reasons for its fire, that is, users can buy any currency, but this is not its biggest advantage, because some aggregators, including DODO, can buy any currency. The trading scope and liquidity are even better than Uniswap, but Uniswap mainly enjoys To b services for free. As the traffic master, the project party opens a pool in Uniswap. After the pool is opened, the user will be announced to Uniswap to purchase, so the user’s trading habits are fixed . As the traffic owner, the project party can enjoy the traffic for free wherever he takes the traffic.
In addition, another reason why the project party chose Uniswap is that DEX, including SushiSwap, did not provide more functions than Uniswap , or that they did not provide good enough.
Without resolving the fundamental contradiction, any improvement will not be possible. Therefore, DODO v2 focuses on the new asset issuance model. If the v2 pool is activated and 3% or 5% of the currency is used for selling liquidity, it may be Obtain greater development.
- Selling liquidity theory
If DODO can do one or even many things and functions that Uniswap cannot do, then it can be defeated. For the current thinking, the answer is that DODO can be listed without funding , liberating the liquidity of the project side. this is Uniswap AMM algorithm can not be done, a lot of people do not realize how strong this function.
For a new project, because there is no money, it is impossible to allocate funds in Uniswap. Therefore, the selling liquidity is not enough, and users cannot buy coins at all. Therefore, they must do liquidity mining, and exchange for liquidity through constant inflation of tokens. But in fact, these are unnecessary. DODO v2 provides a new pool of funds flow to achieve a better algorithm is simple and convenient to create the main purpose of liquidity.
- Crowdfunding to build a pool
With reference to the “call auction” in the stock market, DODO designed “Crowdpooling”, a new method of liquidity issuance. The project party provides a certain amount of tokens, specifies the unit price of the tokens and the issuance quota, within a specified time, anyone can recharge for subscription. If the user’s subscription exceeds the token issuance quota, the token quota will be allocated according to the amount of funds recharged by the user. After the crowdfunding period ends, the public pool is automatically established.
Further reading: “New Method of Liquidity Issuance: How to achieve a fair start for “crowdfunding pool building”? 》
- DAU is the most valuable indicator of DEX
Radixion believes that increasing DAU (daily activity) is very important. DAU is the most valuable indicator of DEX. What everyone values ​​most is TVL. The second may be transaction volume, and finally the number of transactions or DAU. Among them, DAU is the most difficult to buy. Mining is equivalent to buying the transaction volume with coins, and then TVL will rise. Only DAU cannot buy it, because it is extremely difficult to change the user’s trading habits . The previous TVL explosion project was only a short-lived, unable to grasp any value, DODO needs to focus on long-term value. The operational goal of DODO v2 is to increase DAU .
How to measure whether a DEX can obtain DAU is based on the ability to obtain resources for free . Market hotspots have been converted very quickly. Uniswap did not spend any energy but gained market attention for free, because the project party as the traffic master attracted traffic.
How to obtain resources for free is to do a good job of tools, apply them to the development of some projects that can detonate the market, and then continue to interact with the market, and always iterate the tools forward, so as to serve the so-called content creators. These content creators are simply the people who issue coins and those who do projects. These people are the traffic masters.
By analogy, content creators are the up owners of station B, and retail investors are tourists who post barrage. Why station B is so popular and why so many people post barrage is because it has a lot of videos that no one else has. The main reason that up chooses station B may be because of good user experience and good service. In short, it must be taken care of here to provide content and bring traffic, and station B can obtain resources for free.
Towards DODO 2.0
From the launch of the project to the iteration of version 1.5 and then to the upcoming version 2.0, DODO is also moving forward. We also invite Radixong to introduce the 2.0 version from his point of view in terms of functions, use cases, products, etc. Some features and main functions of
Both a supplier and a distributor
Radixiong pointed out that 2.0 is both a supplier and a distributor . The supplier is to build a pool, and the button to build a pool is constantly producing content. Distributors are the sharing of liquidity. Therefore, version 1.5 adds intelligent routing . Even if the new content is not produced by DODO, at least it can not be lost. Both hands must be grasped and both must be hard.
Uniswap is just a content producer and did not distribute it. Because all content is now produced in Uniswap, so I don’t feel the importance of smart routing. If one day DODO has half of the new assets and Uniswap has half of the new assets, then users find DODO can trade 100% of the new currency, but only 50% of UniSwap can trade. Then it is self-evident which one he chooses. You may realize that distributors are a vital hand.
DODO v2 realizes the integration of content production and distribution, especially on the production side. New functions will continue to be released to benefit content producers. Only by creating new things can we capture the tastes of changing people.
Further reading: “Towards DODO 2021: As both a liquidity provider and a traffic distributor”
Multiple use cases for the PMM algorithm
In general, the PMM algorithm is a compression of the order book, which can realize on-chain liquidity at a low price and is flexible enough to support various modes.
The PMM algorithm is defined as a universal liquidity framework , through the modification of parameter settings, a variety of use cases are realized , just like AMM is a calculator, and functions such as adding a little reserve are simple and easy to use, but PMM is a general version of the computer. Using the calculator above, this algorithm can be degenerated into AMM through parameter settings, but at the same time it can do a lot of things that AMM can’t, such as playing games, listening to songs, and sending emails.
Extended reading: “Understanding the PMM algorithm behind DODO in five minutes: a universal liquidity framework and multiple use cases”
Economic model
When talking about the DODO token economic model, Radixion pointed out that tokens have two main functions. The first is an incentive plan. Both TVL and DAU can be purchased resources. On the other hand, it is to carry the value of the product, to amplify the value of the product with tokens, and to amplify it in the secondary market. DODO is also very happy to give all the value to the tokens.
The incentive plan includes three aspects, mainly including new gameplay liquidity mining, new gameplay transaction mining and Listing Mining plan. At the same time, it plans to launch a wealth management aggregator similar to YFI “Plus One Mining”.
There is also a systematic method for giving prices, which will give loyal token holders some benefits . The loyalty measurement is to use a coin fee to calculate the growth of users. It is a bit like quantifying the value of the lock-up period. Users can do many things. For example, governance, governance includes the portion of fee dividends, as well as inflation and staking rewards will be given to loyal users, in addition to some special rights.
From the perspective of the overall development of 2.0, the timetable for DODO development is one generation of sales and development . For example, version 1.5 is being sold, version 2.0 is being developed, version 2.1 is being demonstrated, and version 2.1 will add governance and transactions. In other respects, the overall pace and regular innovation.
When developing, I will start thinking about the next generation of argumentation, collect the current pain points in the market, and then see if it can be solved, how to solve it, and continue to innovate. The pace of product development is also driven by new features. Open 2.0 public beta Later, bugs and feedback will be collected for repair.
Looking ahead to 2021
Finally, we asked Leida Xiong to share his forecast for 2021. He expressed his optimism about assets, which is the most promising year for this year.
For example, small country exchanges are obviously inferior to DEX’s issuing assets, because DEX has high liquidity, the assets of small entity exchanges will go to DEX to raise funds and trade in DEX. The DODO 2.0 model is very suitable for the entry of such assets. The entry of new assets will not only bring new users to the entire market, but will also bring value lock-in. The entry of these values ​​into the blockchain world is a huge, long-term The positive.
On the afternoon of December 30th, BitHelios of Tinder Research Institute and seven guests from Bill, Jayson, Bruce, xy, Chen Mo, Cao Yin and Super Jun organized an online roundtable sharing. The topics included new changes in algorithmic stablecoins, mining strategies and Experience, future trends and development, and then the Tinder Research Institute conducted an overall round table content. The excerpts from this sharing are as follows:
Bruce (MC/guest)
Welcome everyone to the Tinder community algorithmic stablecoin roundtable, this is also the first algorithmic stablecoin roundtable in Chinese! I sincerely thank all the guests for coming. You are the pioneers and trendies of algorithmic stablecoins.
Bill (guest)
Hello everyone, thank you Tinder Research Institute for giving me an opportunity to share with you some personal opinions on algorithmic stablecoins. These opinions are purely personal opinions and will focus on 1. New changes in algorithmic stablecoins 2. Mining strategies and experience 3. . The three topics of future trends and development are unfolded. We welcome you to point out any incorrect or need to be improved.
1. New changes in algorithmic stablecoins
Let’s first review the development stages that algorithmic stablecoins have gone through.
The first stage: The prototype stage of development represented by AMPL. In this stage, the rebase coin adjusts the currency balance of the holder’s wallet according to the currency price. This balance change method cannot meet the basic needs of stable currency development: use It is impossible for a person to hold a currency whose balance changes every day for the basic functions required for stable currency such as consumption and transfer. But AMPL successfully tried a possibility of dynamically adjusting the money supply based on market demand on the blockchain.
The second stage: the initial stage of development represented by ESD/DSD. ESD is the first to introduce a bond model to solve the deflation problem algorithm stable currency. This method can ensure that the user’s wallet balance remains unchanged, which is a future stable currency application scenario. Expansion laid the foundation for development. During the inflation period, users can obtain more inflation tokens by pledged tokens, and during the deflation period, speculators can purchase coupons and destroy the tokens to achieve deflation.
ESD/DSD is an algorithmic stable currency using a single currency, that is, inflation and deflation are all completed through this single currency. Pledge tokens during inflation to obtain more tokens, and destroy tokens during deflation to obtain coupons with different premiums. This reduces the willingness of token holders to use tokens in circulation, and its more important purpose is to make profits by speculation, which to some extent limits the long-term development of stablecoins. Stable coins that do not have circulation value have no long-term development value.
On the other hand, ESD/DSD adopts a development model similar to a capital disk. The earlier the entrants, the more profitable they will be. The rapid wealth effect has triggered a frenzy in the market. The crazy development compared with the inability to expand the application scenarios may be ESD /DSD development brings huge potential crises, and the digital currency market may collapse quickly when it enters a bear market. Investing in this stable currency requires extra control of risk.
The third stage: the mature development stage represented by BASIS. BASIS uses three tokens to simulate the US dollar issuance system. The three tokens correspond to the three core tools in the US dollar issuance system: BAC corresponds to the US dollar in circulation, and BAS corresponds to Fed equity, BAB corresponds to US dollar treasury bonds.
Based on years of experience in stable operation of the US dollar currency issuance system, the development of BASIS has also achieved great success. Since its official launch, BASIS has been widely recognized by the market, continues to be in an inflationary period, and more and more traditional financial funds have begun to enter BASIS stable currency system.
The BASIS design completely separates the stable currency BAC and the equity currency BAS, which solves the problem that the liquidity of a single currency is difficult to strengthen. Investors and speculators focus on the investment transactions of BAS and BAB, and users can complete daily payments and consumption through BAC The basic functions of stable currencies such as trading and trading.
As the pioneer of the three-currency separation, BASIS has many areas to be improved in its model, which brings opportunities to newcomers. These areas to be improved include: 1. A more equal launch mechanism guarantees more The entry of multiple people, instead of just letting the earliest entrants or big funds get the most benefit. 2. Equity currency BAS needs to introduce lock-up and provide liquidity to help the long-term development of the ecology.
The nature of algorithmic stablecoin is to challenge the fiat currency issued by the state. After this stable currency develops to a certain stage, it will inevitably trigger national resistance. This is clearly seen in the government’s intervention in the forced closure of BASIS’s prototype basis.io by the US government. Therefore, algorithmic stablecoins must be developed and operated in an anonymous manner. At the same time, it is necessary to consider the various impacts that may be brought about by strong government supervision.
2. Mining strategy and experience
Algorithmic stablecoin mining is to participate in the minting business with almost zero cost. It is the investment method with the largest return in the current market. Therefore, it has attracted a large number of investors to enter the stablecoin mining field. However, this kind of investment is too early and the model is not perfect. Therefore, currency prices may fluctuate violently, and using the wrong investment strategy may make you return to zero overnight.
Common mistakes in mining include:
(1) After entering the black market, all funds are returned to zero. With the emergence of a large number of imitations, various forms of scams have also appeared. Identifying scams in social networks such as Telegram, WeChat, and Twitter is a basic skill for engaging in digital currency investment.
(2) Failure to understand the rules of the game leads to losses or unprofitability. Various stablecoins have different operating rules. For example, in ESD/DSD, DAO pools and LPs have different coin production conditions and thawing times. If you do not study the rules carefully, Entering rashly may lead to the embarrassing situation of seeing others continue to produce coins and being locked up for a long time and unable to produce coins.
(3) The wrong mining and currency trading strategy is selected. When stable currency is used for lossless mining, there may be different stable currency mining pools. Each pool will have different mining speeds. Choose a suitable stable currency for mining. There will be a big difference in output. For many small-capital investors, direct purchase of share currency can often increase the rate of return on investment, but the price of share currency fluctuates greatly. How to choose a suitable price to buy and sell is very important. Otherwise you will lose money when everyone makes money.
(4) Blindly entering the project by MLM brainwashing or buying and selling in the opposite direction leads to losses. We may be familiar with various WeChat group screen-scrolling brainwashing to encourage everyone to stud. This kind of follow-up after brainwashing often becomes a catcher.
Mining experience
(1) Follow the right community, follow the right people. In the good community, everyone learns from each other and constantly improves. In the end, everyone becomes a master of investment. The bad community is brainwashed daily by MLM, and finally everyone becomes a brainless leek. After a batch of leeks leave the market at a loss, they will continue to cheat a batch of new leeks to come in and continue cutting. Try to avoid MLM-style communities and group owners who don’t think and learn.
(2) Continuously strengthen the understanding and cognition of the financial system, and learn more about technology. Most of the applications of digital currency are based on the application system of the financial system. Only a deep understanding of the financial system and its rules can quickly understand the various applications of digital currency and DeFi and quickly seize opportunities. Almost all the upstarts who have emerged in this DeFi boom are financial professionals with deep understanding of finance.
(3) Learning more blockchain technology at the same time also allows us to avoid various traps and quickly seize opportunities. This knowledge includes reading information on the chain, wallet tracking technology, manual operation of smart contracts, reading and comparing smart contracts Wait.
(4) Learn more about people’s understanding and analysis skills. Behind every project is a living person. Before investing our hard-earned money, we must carefully analyze whether the people behind the invested project are criminals with evil hearts or Entrepreneurs fighting for their ideals? Is it a 14-year-old kid with no business concept or a serial entrepreneur with extensive entrepreneurial experience? These people’s analytical capabilities can help us maintain the maximum success rate throughout the investment process.
(5) Do more rational analysis and independent judgment to avoid brainwashing impulses. When choosing investment targets, the most taboo is to blindly follow the wealth secrets of the so-called big coffee teachers, and make investment decisions only after an independent, objective and rational analysis of all the information obtained. In the unregulated blockchain financial market, the vast majority of so-called industry experts are leeks who make a living by buying coins at low prices and selling them to brainless leeks for a living.
(6) Do not judge items blindly, and keep a sense of curiosity about all new items. The most common remark we hear is: this spicy chicken imitation plate, don’t touch it. But in fact, most of the excellent projects starting with Ethereum started from imitating disks. You can know how many Ethereum imitating disks have been successful. So I will not jump to conclusions on any new project, and continue to study each new project with a kind of curiosity.
(7) Control positions, no stud, no gambling, and reasonable allocation of the investment ratio of each project. Gambling on dogs seems to have become a fashion for digital currency investment. It does not look at the fundamentals of the project, does not analyze the potential, but only looks at the public sentiment stud, but this is not investment, it is gambling. The difference between investment and gambling is: gambling is a bet on pure mathematical probability, and investment is a business model with increasing probability of success. But even a seemingly good business model may have black swan incidents, such as the incident of hacker attacks on the COVER project in the past two days. This kind of uncertainty can minimize the loss caused by problems only through reasonable control of positions.
(8) Learn to make a profit and exit at the set take-profit point, and don’t be greedy for the last cent. There is no shortage of all kinds of regrets around us. The most frequently heard may be regret for not selling at a high point or buying at a low point. If we observe the investment behavior of investment masters, we will find that no master can always grasp the highest and lowest points to complete the transaction, and a larger proportion of their transactions are fluctuating in the mid-range. It is a necessary ability for a mature investor to make a profit and exit at the profit point set by oneself and then stop looking back.
3. Future trends and development
Just as the Bank of England emerged from the melee of many private coinages and helped create the glorious history of the British Empire, we are also witnessing a variety of coinage battles based on blockchain technology today, which will eventually produce a batch of alternative centralized stability. The decentralized algorithm of the currency is a stable currency.
Are these algorithmic stablecoins completely unsecured algorithmic stablecoins like ESD/DSD, partially mortgaged algorithmic stablecoins such as FRAX is trying, or algorithmic stablecoins that use disguised mortgages such as LP lock-up mortgage? It is possible, and it is also possible that multiple stablecoins of different forms coexist.
What we need to do as investors is to keep learning, keep curious about all kinds of new things and keep trying, only in this way can we seize the most promising opportunity. You may have missed Bitcoin, or you may have missed Ethereum, but as long as you seize this once-in-a-lifetime opportunity, you will have the kind of success that you got when mining Bitcoin with your personal computer 10 years ago!
Jayson (guest)
Hello everyone! Thanks for the invitation of Tinder Research Institute! Bill shared very well, very structured. I will share from my experience. It may be a little messy, but it is guaranteed to be true.
Let me introduce myself first. Many Amber friends know me because of the Decentraland (MANA) project. I was an early investor in the project, and later joined the team as the head of China. I left the MANA team last year, and then I was mainly busy with my own business. In fact, I have left Amber for about a year. Before entering Amber, I came from a traditional investment bank. I worked for Goldman Sachs 15 years ago. In Melbourne, I mainly made secondary market investments. Later, I returned to China to start my own business and started 2 companies. One raised 3 rounds of money, and the other successfully exited in 15 years.
Like many old leeks, I have experienced the Defi scam -> Defi is really fragrant. It’s just the problem of getting in the car late in the morning. I participated in Defi at the end of September. The first mine I dug was SWRV, and I basically missed the entire Defi.
I learned that ESD is about October, which is considered to be an early introduction to this project in China. After I knew the mechanics of this project, I was in a big position. Then it took about 1 month to study. Now everyone has a better understanding of the mechanism, etc., but there were very few materials at the time, there were no Chinese materials at all, and there were only a few articles in English. I mix in ESD Discod and ask various questions every day. I have experienced it except for the first time, and it has been 4 cycles now. Regarding ESD, there is another very interesting thing. After I discovered this project, I went to the AMPL group to promote it, and then I was scolded by group friends that I was a liar, and then kicked out of the group. At that time, the market value of ESD was about 40 million. Now ESD The market value has far exceeded AMPL.
Regarding Basis Cash, I have been following it before. In fact, before Basis went live, the popularity was very low. Before his Telegram went live, there were only 300-400 people. To be honest, I didn’t expect Basis to be as popular as it is now. Because I invested in these two projects earlier, I built several groups. At the beginning, the esd group had only about 40 people, and it lasted for more than a month. By the beginning of December, it suddenly became popular.
This is my own mental journey of participating in the project. In fact, when I first participated, I was not so determined, but full of suspicion. But after spending a lot of time researching in the last two months, the future will become more and more clear.
In terms of the overall environment, the US government’s sanctions on these non-compliant centralized stablecoins are a certainty. You have already seen XRP, and the next one is USDT. The entire Defi is basically built on top of USDC and Dai. Both of these have their own problems. USDC is compliant, but centralized, it can block your account. As for Dai, its size is relatively small and its capital utilization rate is very poor. So in fact, the market urgently needs a decentralized stablecoin as a spear.
OK. There is no problem with the track, then the next one is the question of selection. I personally think that the underlying structure of the algorithmic stable currency has been established. ESD and BAS have obviously gotten out of the way. ESD has more than 10 million vaults, and BAS has more than 400,000 vaults. Once the project party has money, many things can be done. ESD has been significantly accelerated recently. For example, V2 is already in progress and will be launched in February. Then the specific staff are also relatively senior in the industry. I can feel it when I come out.
·Andy Chorlian – ex-MakerDAO smart contract developer, YFI strategist
·Dan Matthews – PieDAO, Audit DAO
·Austin Williams – OpenZeppelin auditor and creator of Coupon Clipper
·Scott Lewis – DeFi Pulse, Slingshot and mechanism designer
·Will Price – crypto data scientist and mechanism designer
A rich community, coupled with the speed of rapid self-evolution, will quickly stand out from competitors. BAS is also working on BAS V2, but what’s more interesting is that some imitation disks launched today (I won’t say the name, so I don’t want to advertise them) have already implemented some of the functions of BAS v2 in advance. Boardroom is LP pledge instead of single currency pledge, which solves the problem of insufficient liquidity of BAS. These competitive and innovative imitation disks are also urging the projects that are running ahead to continue to evolve.
As for other non-innovative imitation disks, they all become the nourishment of ESD and BAS. As for whether a single currency is better or multi-currency is better, there are many debates. I personally feel that it is a bit premature to make a judgment before passing the test of time. There are relatively few players on the current track, so I bet on both.
At present, the most important thing for ESD and BAS is to find a use case to support his current volume and future development. In the past few days, we can see a large number of imitation disks using ESD and BAC, which has increased the demand for everyone to use. In the next step, LP trading pairs based on ESD and BAC, mortgages, and other peripheral tools will be launched and continue to realise market value. As the real usage rate increases, the market value will continue to increase.
About bubbles
My personal investment covers real estate, stocks and coins. I have fully experienced the 2008 financial crisis and the 2 big bull markets in A shares.
What I want to say is that every time a revolution comes, there will be a huge bubble, and many people will make money at an incredible speed. Only bubbles can attract capital and talents can quickly enter this industry. There are many smart and brave people who embraced the bubble and gained huge wealth. Many people chose to stay away from the bubble and gained wisdom.
The industry has developed to this day and has been running blindfolded. Until now, everyone discovered that 70-80% of the entire industry is built on the very unstable foundation of USDT. Everyone knows that the collapse of USDT is only a matter of time. Many people want to use the same method to solve this problem, but it is difficult for you to use the same method to beat the opponent. It must be dimensionality reduction. I personally believe that decentralized stablecoins are the future and the general trend. This is a track that costs tens of billions or even hundreds of billions of dollars. It is worth our heavy position and keep betting.
Bruce (guest)
Hello, everyone, I am Bruce from Tinder Community. I was a blockchain VC analyst before and participated in Internet project financing.
I mainly want to talk about mining strategies, especially Basis. I am interested in algorithmic stablecoins and making money on AMPL. At the beginning of this wave, I paid attention to ESD DSD etc. a bit late
Thanks to Bill for sharing. After reading his Twitter, I quickly realized that this wave can work. Before the appearance of Basis, I also thought it was a bit of an order, but Basis was different. I basically figured it out on the 14th, and wrote on Twitter on the 15th. A lot of what I wanted to say was already written on the 15th.
New changes
For an algorithmic stablecoin to succeed, it must meet three points: stability, decentralization, and wealth.
Let’s look at ESD, etc., the unity of stock and currency. What everyone wants is pledge rather than use. This high volatility is a good speculation target.
But Basis split, we see: Bac was underwater for the first time, fell below 0.9 and quickly pulled back, and now the premium is only around 20%. Compared with other currencies underwater for a long time, Basis has not even seen BAB.
Why there is no underwater, why there is no BAB, the reason is simple, the supply of BAC is less than demand. In the future, if the supply of BAC exceeds demand, its volatility will drop and remain stable. The benefits of BAS satisfy those who want to get rich.
With regard to decentralization, in the future, by merging the BAS pool and Boardroom, sufficient liquidity will be provided for BAS trading, and decentralization will be achieved through high volatility. But high volatility is not a risk in itself.
In the long run, BAS will gradually flow from speculators to Holder. BAC underwater is a mining machine with a price lower than the cost. A lot of money is bought in to reduce the supply. The BAB is first-come, first-served, rushing to redeem, further reducing supply. Long-term investors will buy the bottom of BAS when the BAC is under water, increase the price, and maintain the stability of the BAS price, or bottoming.
Mining strategy
80% of my funds are allocated in BAS BAC, 20% in DSD, and no other imitations. The logic is a barbell strategy, one end with large funds allocates Basis, and the other end with small funds allocates DSD with high risk
I have a vague way of judging the good points of BAS: look at the market value comparison of BAS and BAC. If the market value of BAS is less than or close to BAC, it is suitable for buying. The greater the deviation, the better for heavy positions. If the market value of BAS is greater than BAC and the deviation is too large, it is not suitable to buy in the short term, but it is not recommended to sell your own BAS. Because if BAC’s mining revenue attracts funds, the additional issuance of BAC will keep up with the market value of BAS.
Today, everyone played the imitating disk very well. I have limited energy. I feel that there is no consensus on the imitating disk, and I cannot judge some hidden traps.
Future trends and development
Some people say that the algorithmic stablecoin is a zero-sum game, and I think that Basis is a non-zero-sum game. When there is a negative spiral, there will be people buying bottoms to maintain price stability.
I think the current algorithmic stablecoin is DeFi in June, and the higher level of competition has just begun. Mainstream prejudice is very big. It is best for you to think rationally and independently. Don’t take it for granted that it’s just a game. Don’t be disturbed by excessive information. If you are very impetuous, it is recommended to go for a walk and breathe in the cold air.
When BAC achieves unsecured price stability, there must be pioneers to use it. At that time, it was the curvature engine. The entire encryption ecosystem was the driving force of Basis, achieving the speed of light development.
This may be the first time in human history that an algorithmic central bank has been implemented to achieve decentralized and stable currency issuance. Let the market determine the supply of currency, and always automatically match market demand. In the future, everyone will put aside the old mortgage stablecoins and use advanced algorithm stablecoins.
Finally, I want to say that let’s share it with other partners who don’t know. It’s a little more peaceful and not too aggressive.
xy (guest)
Hello everyone, I am xy, let me share these three topics next!
New changes in algorithmic stablecoins:
I just saw Bill’s sharing in three stages, and I agree very much. In the first stage, AMPL provides a long-term vitality. Its Rebase method is very violent and single. Although it did not eventually form a leading stablecoin project, it did make a good start for algorithmic stablecoins. , There is a stablecoin project that is now recognized by more people.
I think both Basis and ESD are second-stage projects. The currency price of ESD is relatively stable, and it has also been recognized by core DeFi ecological projects such as AAVE. Basis is in a period of rapid development. If BAC is to enter the external ecological expansion, it will take time. But the most exciting thing is that the successful cold start of Basis has also brought a very good rate of return, and has brought a wave of enthusiasm for algorithmic stablecoin investors.
Let’s talk about the DSD project. It is an algorithm currency, but for now, the time setting for its ecological expansion is still at an excessively fluctuating frequency. Compared with DSD, ESD is a relatively healthy regulation rhythm. The regulation rhythm of DSD is not at a stable stage, and the structure of the two communities is not the same.
In the third stage, in my personal opinion, a more respectable direction is FRAX and ESD2.0, including Basis2.0, which is also working on a more healthy and stable stablecoin product solution. For example, the method of turning Rebasecoin into a Rebase pledge rate is an ideal method. Although it may not bring you a more dramatic development cycle like ESD or Basis, I think this method is relatively healthy. .
Both ESD2.0 and Basis2.0 are doing something similar to FRAX, and they got a better cold start through the second phase. In a relatively short period of time, it has a large market value and a very good community. The current development of FRAX is not as fast as ESD and Basis. This is also a different approach, but I think in the end they will all end up in different ways, and I think they will all end up towards a more convergent solution.
Mining strategy and experience
I paid attention to this kind of project and spent some time to research it, and I was attracted by its scheme and model. After most people are exposed to new things, they will not have a more fundamental value investment consensus in the early stage like Jayson and Bruce. My suggestion is to understand how to participate before choosing the method of participation. An obvious advantage of algorithmic stablecoins is that their data is all on the chain and can be checked. If we treat him as an investment target, there are fundamentals to see. For example, through the data analysis on the official website, we can calculate the number and total amount of Redeem this time, how much the price of ESD in the stable currency needs to rise, can Redeem drop coupons, Redeem drop all coupons, whether there is more room And time, when you figure this out, it becomes easier to play.
For other wild mines and new imitation disks, my personal opinion is to seek stability. Use consensus stablecoins (such as ESD, Basis stablecoins) to mine, try not to mine the second pool, mining the second pool is equivalent to short-term, then it is best to watch the market, do not take it lightly, I am not a short-term It’s not recommended to watch the stock, these are two different ways. If you want to be stable, the single currency stable currency is put in for mining. The above are some risk tips.
Future trends and development
We divide this topic into two different directions. The first level is the development of ecology. At present, among these algorithmic stablecoin projects, ESD is the fastest. We see that the ESD community has a group of very energetic people, they are crazy together. Currently, the projects in the DEFI ecosystem that support ESD as a financing asset are also the most and most recognized assets. Secondly, I think an asset that is easier to accept may be FRAX, because FRAX is relatively more in line with the definition of stable currency.
Basis, why should I rank it third? Of course, the plan is very good, but he is still in a relatively accelerated cold start stage, it has not yet completed the cold start of the fundamentals, and the currency price is relatively crazy and fierce. Therefore, it is better for us to regard Basis as a speculation or investment target. If you want to participate more deeply, you can be a contributor to its core community and make some contributions to it, and you can get some better returns.
Algorithmic stablecoins are more exciting. I also said in another sharing. I think its emergence is inevitable, and even its significance as an asset can be used as an idea on par with BTC and ETH. He is The native encrypted assets that only appear in the field of blockchain directly point to the financing, lending, and currency issuance methods of the traditional financial world.
Through some simple mathematical models, the traditional financial world, which consumes huge amounts of financing and currency distribution, has been completed with quite high efficiency. I do not intend to treat him as an experiment. It will definitely have a real impact on the financial structure. What we see now is only the tip of the iceberg. This is my view on algorithmic stablecoins.
Chen Mo (guest)
Hello everyone! I am Chen Mo, from the Bitouq community. Thank you for the invitation of Tinder Research Institute to discuss learning algorithmic stablecoins with you. Personal views are not financial suggestions, only for learning and communication!
The previous great gods have already made a detailed analysis of the development history of algorithmic stablecoins and product iterations. I will not repeat them here. In order to save time, let me briefly summarize the three topics together:
Since the development of algorithmic stablecoins, I think the whole pattern has basically taken shape, that is, Basis and ESD are the main markets. So there have been a lot of “imitation disks” recently. In fact, everyone should have expected such changes. Refer to the early liquidity mining of DEFI, it also started from layer by layer dolls. Most of the imitation disks appeared. Will choose the currency of the leading product for matryoshka, in fact, this method not only generates competition to some extent, but also stimulates the development of top-level products. This is the current situation in the entire market.
For the current investment strategy, the early benefits of imitation will definitely be more impressive, but it should be noted to prevent being deceived and fancy cutting leek routines. For such products, I still prefer the method of no pre-digging and no reservation. As well as the neutral setting of the rebase time period, the speed can be increased but not too fast. For the two major “main market”, what needs attention is the high volatility of the equity currency and the lock-up time of the lock-up mechanism.
Last but not least, if you don’t understand Rebase, don’t enter the market! Because this is not a game that you can copy, do your homework yourself, otherwise you will die miserably. The future development trend, my personal understanding, the current investors of algorithmic stable currency products are divided into two categories:
The first category is that although I don’t believe that algorithmic stablecoins can really be “stable”, they are willing to invest in early high-yield, or speculate.
The second category is long-term optimism that algorithmic stablecoins can be used as stablecoins in the future.
As far as the existing product types are concerned, ESD has the characteristics of locking liquidity and is more speculative. Basis separates equity coins from circulating coins, which makes it easier to break through in application scenarios. The stablecoin mining mechanism based on Basis is the fairest and lowest risk option, which is also a point verified by the market. For users with low risk appetite, direct selling by prostitutes is the lowest risk option. Those who have a good understanding of the whole mechanism and have risk tolerance, continue to enter the 2 pool and 3 pool. No matter what kind of supporter, I think it is helpful to the future of algorithmic stablecoins. The specific future development of this is created and determined by us and the market together.
Cao Yin (guest)
Hello everyone, this is Cao Yin. I joined Amber in 2015, when I was still working in China Cinda!
In April 2015, I took the initiative to propose to the leader to establish a blockchain business unit, and became the first blockchain technology analyst in a state-owned financial institution in China at that time. Later, I took the lead and participated in the districts of relevant departments in many countries. He also wrote several books on blockchain topics and plans.
I should be regarded as one of the first people in China to start investing and using DeFi. In 2017, I invested in the Loopring Agreement, the earliest and most successful DeFi project in China, and I have been writing DeFi-related articles. Then I started All in DeFi in 2019. Investing in DeFi projects, and also incubating DeFi projects in depth, such as the jewel in the crown of Polkadot. Acala.Network, as well as YFII, the most active DeFi community project in China that has been listed on Coinbase Custody.
Next, I will talk about why I think the track of algorithmic stablecoins is bound to succeed.
In the process of investing and researching DeFi, especially when I was involved in the design of Acala products in the early days, I deeply realized that although the current DeFi world is developing rapidly and the ecology is becoming more and more mature, it is precisely the lack of a mature financial system that is most important The cornerstone: pure currency.
Now our DeFi world uses two types of assets as currency, 1. USDT, USDC and other fiat-backed centralized stablecoins; 2. DAI, over-collateralized decentralized stablecoins, fiat-backed centralized stablecoins are The most unreliable, Tether has been targeted by the SEC for a long time, and USDC can freeze user accounts at any time, and DAI, an over-collateralized stablecoin, not only has the problem of low asset utilization, but more importantly, the over-collateralized stablecoin From the perspective of the evolution of currency history, it is only one of the historical forms of currency.
The Chinese call for currencies is relatively uniform, and they are all called currencies, but the forms of currencies in different periods in English have left different titles, such as Bank Note and Fiat Currency.
Pledged stablecoins are actually Bank Note, similar to ancient Chinese silver notes, and algorithmic stablecoins are more modern Fiat Currency, but supply and demand are not regulated by the central bank, but by the mechanism of algorithmic stablecoins based on the money market supply and demand. Automatic adjustment.
You can regard the expansion and stability adjustment mechanism of the algorithmic stablecoin as a precision-designed machine. At present, the expansion of this machine is driven by human greed. In the future, when the algorithmic stablecoin market matures, the scale is large enough and there are After a large number of DeFi applications based on algorithmic stablecoins, it is the arbitrage demand from professional institutions that drives this machine to achieve stability.
This is just like the development of Uniswap. There are now a large number of professional investors on Uniswap who are doing brick-and-mortar arbitrage among centralized exchanges in order to achieve the price level of decentralized trading pairs on Uniswap. In the early days, the price of Uniswap followed the centralized exchange, and now many token price pricing hubs have actually been transferred from exchanges to Uniswap, and the migration of this pricing hub was actually realized in just one year.
However, there is no conflict between algorithmic stablecoins and mortgage-type stablecoins such as Dai. Even now, the currency issuance of central banks is based on the dual model of national credit + reserve assets, but mortgage-type stablecoins have a clear ceiling. It is the market value of collateral that can be mortgaged. However, it is still far from the ceiling at present, and the market value bottleneck will be encountered after a 100-fold increase, and the mortgage stable currency is actually a kind of debt, similar to treasury bills and various commercial papers. The algorithmic stable currency is a purer currency and an asset. Therefore, the attributes of the two are different, so there is a reason for their existence at the same time, and the future development direction of the two will be different. The mortgage stable currency will continue to expand the scope of mortgage assets, especially in the direction of physical assets. For example, Maker recently launched a plan to issue DAI for real estate mortgage financing. The algorithmic stable currency will continue to expand as the real native currency of the DeFi world with the needs of the cryptocurrency market.
Finally, I will talk about some of my thoughts after studying various algorithmic stablecoin mechanisms:
How to design a better algorithmic stablecoin mechanism, taking into account expansion and stability.
1. Must stay away from equilibrium
The so-called staying away from equilibrium is actually to find a way to encourage the exchange of energy and material between the algorithmic stablecoin system and the external system, that is, to amplify the transaction volume and expand the scale of the asset portfolio with other DeFi protocols.
At present, the indicators for evaluating the algorithmic stablecoin system are very immature. In addition to Market Cap and TVL, transaction data should also be introduced. Personally, transaction data is even more important than TVL. Some algorithmic stablecoin projects, such as the second-generation algorithmic stablecoin ESD, deliberately designed a lock-up distribution system, which seems to reduce the selling pressure and increase the price stability of ESD, but this artificial lock-up stability actually limits the trading volume of ESD and even increases the entropy of the entire system. , Is the practice of sacrificing the last. In contrast, the third-generation algorithmic stable currency Basis without lock-up, Basis’s BAC is smaller than ESD, the transaction volume is significantly larger than ESD, which also makes the scale and stability of BAC will inevitably exceed ESD in the future.
2. Increase the number of internal subsystems of stablecoins and give birth to a “self-organizing system”
由于算法稳定币的Rebase 机制，代币价格以及代币流通余额，同代币投资者的投机偏好之间存在着很强的反身性，再者由于投资者的认知和信息的不完备性，造成了算法稳定币的原生随机性。通过算法稳定币的子系统之间的动力学机制，放大并引导这种随机性背后单个投资者的布朗运动，催生有意义的突变，产生「涌现复杂性」（emergent complexity）或者说「自组织系统」（self-organizing system）
因此，可以说，单系统的算法稳定币必定无法稳定和有序，而内部子系统越多的算法稳定币，越有可能实现稳定性和有序性。早期的算法稳定币，比如Ampl，Yam 等，是单币种单系统的算法稳定币，根本不存在系统间相互作用，没有强壮性，无法摆脱的单向死亡螺旋，除非市场外部环境趋势性变化。
第二代算法稳定币ESD 增加了Coupon 代币，发挥了类似债券的角色，但是Coupon 的有效期只有三十天，只能算是0.5 个子系统。第三代算法稳定币Basis.Cash 是目前子系统最多，以及子系统间动力学机制设计最为先进的算法稳定币，也是最有望通过内部子系统随机相互作用实现「系统自组织」的算法稳定币。
Basis Cash 有三个子系统：BAC，BAS，BAB，BAC 是对标美元的稳定币，BAS 则是拥有治理权权和分红权的股票，而BAB 则对标央行债券，这三个子系统相对完整的抽象复刻了现行央行货币政策动力学系统，从目前来看，堪称所有算法稳定币动力学系统中，最有可能实现有序自组织的设计。
3. 有意加剧算法稳定币的波动性，实现价格锚定和余额扩展
在项目前期，不用担心算法稳定币价格的不稳定，只要交易量在放大，价格的波动涨落反而是促使算法稳定币在更高能级上实现有序的重要手段。当然，前提条件是算法稳定币系统内存在形成有序结构的内在条件，如果像AMPL 这样不存在有序结构的系统，即使AMPL 价格波动上天入地，也永远不会实现有序，而Basis.Cash 这样存在内在有序结构的项目，才能够在代币的价格波动中，实现向锚定价格的最终收敛。
但价格收敛仅仅是算法稳定币的目标之一，算法稳定币的市值也很重要，要实现高能级情况下的币值锚定。这就应该加剧算法稳定币的价格波动，而不是限制波动，然后在有序结构下，通过价格涨落，实现价格锚定的收敛，同时实现算法稳定币规模的不断扩张。比较现有算法稳定币项目，只有ESD 和Basis.Cash 具有一定的内在有序结构，而ESD 的锁仓分发机制和Coupon 有效期限人为限制了ESD 的价格波动，其结果就是ESD 要么只能在较低能级上实现价格收敛，要么在较高能级上价格失序崩溃。
而Basis 代币通胀没有锁仓，同时BAB 也不设有效期限，充分拥抱波动, 此外Basis 的债券BAB 的价格=BAC 的平方, 这样的设计在BAC 价格较低时, 可以予以一定支撑, 并巧妙的实现了在通缩时的隐含通胀, 而当BAC 价格回到通胀线以上时,BAB 的机制设计可以兑现隐含通胀, 并放大BAC 的价格波动。
如此设计, 不仅没有限制BAC 的涨落偏差，反而非常巧妙地将通缩时期的偏差置换到了通胀时期，并进行了放大，有助于BAC 在价格随机涨落中能够更快的在通胀线上实现价格收敛，也就是随机涨比随机落更多，这将使BAC 的市值能够保持持续扩展。
最后一点，就是要输入负熵，并且算法稳定币系统外输出熵。这一点我就不展开讲了，展开可能会被人骂，大家可以自己悟一下，为什么要对外输出熵。
最后的最后，总结一下：
1. 算法稳定币将是2021 年最亮的赛道
2. 算法稳定币还会继续迭代，但目前来看最有希望的是Basis.cash
3. 算法稳定币追求的不是稳定，而是有序
4. 拥抱混乱，不要恐惧混乱
超级君（嘉宾）
诸位好，我是超级君，2012 年买币，2013 年开始在圈内创业，从事过挖矿、钱包、交易所等等工作，2018 年成为自由人，探索区块链最前沿的新玩意，从Dapp 时代到DeFi 时代。
开篇明旨，我认为算法稳定币赛道是除了比特币、以太坊之外的第三条大赛道，具体曹老师和Bill 已经讲得很清楚了。
根据过往的观点，我认为就是简洁有力的东西，只需要共识的演进。算法稳定币就是这种东西，在目前所有的算法稳定币中，我只看好BAC，其他的我觉得都有缺点，所以我自己而言，也是挖矿BAC，持有BAS，其他的都没有，仿盘没任何意义，DeFi 世界奖励原创者。
刚才曹老师的分析很受益，对于各个算法稳定币的分析，和我的观点非常相符，这里不累赘了。我关注点在于算法稳定币的共识演进。共识的演进，并不是逐渐而成的，可能是触发某些黑天鹅事件，在旧秩序崩塌的那刻，突然地扩散，迅速侵占人类的心智。回望过去，比特币和区块链的发展莫过于此。
今年可能成为算法稳定币的爆炸发展起点，可能就和外部的环境有很大的关系，美联储自己随便印钱，那么区块链这边技术已经成熟，所以像算法稳定币这类「地下美联储」的故事就能流传开来，吸引人们的参与，获得大家的认可。
区块链的底层基础已经愈加完善，产品的推动力是接下来算法稳定币进一步发展的方向，目前BAC 其实还没有外拓，纯粹还是在玩发币的游戏，当然现在的外拓也不太可能，毕竟挖矿有日化2% 的收益，可能接下来收益低下去了，生态会有更多BAC 产品的出现，比如借贷、OTC、交易对等等……
总而言之，在我看来，算法稳定币是目前最有想象力的defi 项目，同时也是最需要冒险的领域，我看好这个领域，也已经投资了这个领域。时间关系今天就讲到这里了。
Bruce（MC/嘉宾）
感谢大家的分享，2020 是难忘的一年，见证历史。 明天就是2020 年最后一天了！2021 年，算法稳定币会在DeFi 这个时间加速的世界成长到何等庞大，区块链世界又会产生哪些巨大变局？还真是让人期待啊！
不用高估短期进度，也不可忽视长期趋势，我已经听到了算法稳定币那巨浪的声音，那潮汐的律动。今天的圆桌分享，是先行者的第一波浪潮，未来大家一起乘风破浪！
Original title: Blade Dialogue | dYdX-the new favorite of DeFi derivatives trading platform.
In the DeFi boom, DEX trading volume has continued to rise, and new DEXs are also pouring in. Compared with the new type of DEX, what are the innovations of the old decentralized derivatives exchange dYdX in terms of technology and security? What are the main differences with other DEX platforms? What are the advantages of using StarkWare to implement a layer 2 scalability solution?
On December 3, dYdX founder Antonio Juliano and Amber’s well-known KOL had the same spring
Invited to be a guest at the “Blade Dialogue” AMA hosted by Midu, during the live broadcast session, two guests conducted a series of discussions and sharing on StarkWare’s implementation of Layer 2 scalability solutions, and dYdX’s technological innovation advantages.
The following is the original live broadcast, enjoy.
1. Moderator’s question session:
Daisy: First, let the guests introduce themselves, and briefly introduce what dYdX is and the results achieved since the launch of the platform.
Antonio: Hi everyone. I am Antonio, the founder of dYdX.
I have been engaged in digital currency work for more than 5 years, almost all of my entire career. I started my career as a software engineer at Coinbase. In 2015, Coinbase has many of the best talents in the field of digital currency and is a very good place to work. What really moved me was Ethereum. For the first time, it is possible to create a program that executes on a distributed ledger that does not require permission at all. I suddenly realized that this is a major shift in the computer field. I decided to take the plunge and founded dYdX at the end of 2017.
dYdX is a leading decentralized exchange. The developer’s mission is to build open, safe and powerful financial products. Our DEX provides spot, margin and perpetual contract trading with up to 10 times leverage. Our products enable traders to better manage risk, allocate funds more efficiently, and express complex opinions on prices and volatility.
We at dYdX have received 12 million U.S. dollars in venture capital and supported by companies such as a16z and Polychain Capital. The cumulative transaction volume is 2.1 billion U.S. dollars, and the average daily transaction volume is 10 million U.S. dollars. We launched a perpetual contract in 2020, which now accounts for about 45% of the total amount. Since its launch, our commission income has reached US$2.4 million, a monthly increase of 30%. Last week was our highest trading week in history, with a total weekly trading volume of more than $145 million, but this is just the beginning.
Daisy: In the DeFi boom, DEX trading volume has continued to rise, and new DEXs are also pouring into it. What is the core competitiveness of dYdX as one of them? What are the main differences with other DEX platforms?
Antonio: We believe that we have established one of the most powerful decentralized trading platforms in the world, and our technical capabilities are outstanding. We combine the security and transparency of DEX with the speed and availability of CEX. We think DeFi will replace traditional financial technology, but the premise is that the user experience and design are excellent.
dYdX is an audited smart contract running on Ethereum, allowing our traders to control their assets. Our hybrid DEX infrastructure combines non-custodial, on-chain settlement and off-chain low-latency matching engines and orders. Our off-chain orders make the trading experience very fast.
Unlike AMMs, we provide the DeFi world with institutional-level, liquidity and low slippage trading experience! dYdX understands the importance of liquidity and cooperates with leading market makers. dYdX implements low-latency, high-throughput technology and API docking, providing scalable and programmable access to its market. When a market maker submits a transaction, the transaction is matched, and settlement is deterministic.
Spot traders know how good DEXs like Uniswap are at trading the long tail of crypto assets. We see huge growth in DEXs in leveraged and perpetual contract trading, and we are very focused on becoming a market and technology leader. In addition, we believe that DEXs will continue to gain market share related to CEXs because of less friction, better UI/UX, higher security, and more attractive product transactions. There is too much valuable potential to be developed here.
Tongchun: If dYdX can be as smooth as cex, and at the same time there is no need to pierce the needle like cex, personally, I still feel promising.
Daisy: Please introduce the team and investors of dydx.
Antonio: Our team focuses on providing the best products in decentralized finance, and I am extremely proud of this. We are an efficient team, most of whom are engineers, surpassing the level of peers. We recruited 10 from leading companies in Silicon Valley (Google, Uber, Waymo, Blend), blockchain companies (Coinbase, consensus sys), financial technology companies (Bloomberg, Nerdwallet), Wall, and top universities (Princeton, University of Pennsylvania), etc. Multiple engineers.
We have also invested in the establishment of our growth team, which includes Wall Street, technology and investment professionals who have worked at Ripple, BlockTower Capital, Techstars, The Wharton School and American International Group (AIG).
Our investors think what we do is very important. We are supported by leading venture capital funds, including a16z Crypto, Polychain Capital, Bain Capital Ventures, Dragonfly Capital, Abstract Ventures, Vy Capital, and Craft. We also thank those incredible angel investors for their support, including Brian Armstrong and Fred Ehrsam (Co-founders of Coinbase), Elad Gil, Linda Xie and Naval Ravikant.
Daisy: I understand that the dYdX team is using StarkWare to implement a layer 2 scalability solution. What are the features and advantages of this solution?
Antonio: Our goal is to become one of the world’s largest and most technologically advanced exchanges. In order to do this, we are working with StarkWare to establish a ZK Rollup Layer 2 system for perpetual transactions across margins, which will allow larger and scalable transactions. Our technical team is working on a scalability solution based on StarkWare’s StarkEx scalability engine and dYdX’s perpetual contract. The second layer solution significantly improves the scalability of the blockchain by allowing any type of calculation to be transferred off-chain, while using Ethereum as the public immutable information submission layer. StarkWare’s dYdX integration combines rigorous proof of data integrity and on-chain data availability to ensure a complete non-custodial agreement.
Our upgraded perpetual contract will be ready in a few weeks, and the goal is to have an alpha release in January 2021, and a full range of products will be released shortly thereafter. Focus on providing the best user experience, providing our traders with lower gas fees, thereby reducing transaction fees. We will also quickly launch more trading pairs and accelerate the speed of new pairings so that traders can trade the tokens they want to trade at any time.
In addition, traders and market makers will be able to trade perpetual contracts from a single guarantee pool that supports cross-margin, thereby releasing significant guarantee efficiency and high turnover transactions. Other benefits of moving to the second tier include: instant transaction settlement and more performance price orders (allowing higher leverage and lower clearing penalties).
Once dYdX’s Layer 2 solution is launched, the DEX trading experience will be very similar to the experience of trading on CEX, while still providing all the benefits of DeFi.
Daisy: dYdX has been building and iterating products. For example, in 2018, it built a P2P lending agreement + expo; in 2019, it built a lending agreement with a capital pool + dYdX exchange + local order book/liquidity. In addition, what innovative products has dYdX launched? What are the innovations in technology and security?
Antonio: The goal of dYdX was to provide trustless access to financial instruments that are more complex than existing DEXs. The first product developed by dYdX is called Expo, which was launched in October 2018 and supports leveraged long or short Ethereum positions. What replaces Expo is the upgraded Solo protocol. Currently, our spot and leveraged trading platform supports three assets, ETH, DAI and USDC, with a leverage ratio of up to 5 times. All assets on the platform automatically earn interest and there is no lock-up period.
We have also launched a lending pool similar to Compound, where funds are borrowed into a smart contract and can be withdrawn at any time. Users can borrow money as long as they use 125% of the borrowed assets as collateral and maintain a mortgage rate of 115%. Interest rates are floating and vary non-linearly according to the ratio of deposits and loans. In the third quarter of 2020 alone, we issued a loan of US$4.6 billion.
In 2020, we launched a decentralized perpetual contract. We currently support three trading pairs, BTC-USD, ETH-USD and LINK-USD, with leverage up to 10 times. After our Layer 2 is released, we will add more trading pairs, settle with stablecoins and pay margin. We believe that decentralized perpetual contracts are a big step forward and fit naturally with DeFi. Smart contracts exist to solve the problems of integrity and lack of transparency. These problems exist in centralized perpetual contracts, because users do not understand the clearing mechanism, insurance funds, and social losses. Perpetual contracts open up other trading possibilities not currently available in the DeFi world. Now, any assets, not just those based on Ethereum, can be traded on DeFi. Derivatives trading is an exciting application case of blockchain technology, and we are very happy to be able to build the core components of the DeFi system.
Daisy: Recently, DEX trading volume has declined to a certain extent. Some analysts believe that this is because DEX has failed to launch a new model recognized by the market, and funds have begun to flow out. When do you think DeFi will attract larger market makers and institutions? Is it possible for ETH 2.0 to solve DeFi’s scalability requirements? What do you think of Defi 2.0?
Tongchun: Defi2.0, at present, it depends on whether Ethereum 2.0 can solve the scalability. Individuals are also concerned about the progress of 2.0.
Regarding the question of when DeFi can attract larger market makers and institutions to enter the market, the literal meaning of DeFi is to do decentralized finance. Since it is finance, it should be benchmarked against traditional finance. Amber people once said that DeFi is a chain On P2P (Internet loan intermediary). How to expand channels to obtain lower-cost funds and better assets, whether it is a common problem faced by P2P or DeFi; 3 years ago, Yide is actually an early uniswap. Amber does not lack assets, but high-quality products. Bigger requires better technological iteration.
Antonio: For dYdX, this means operating with the highest level of technology and structure, the market can be similarly compared with traditional financial products, and given its higher transparency, this may be a successful form of its DEX.
dYdX works closely with external consultants and legal teams of venture capital to help us build products and services. We only support cryptocurrency-to-cryptocurrency transactions. Perpetual contracts do not support U.S. IP addresses. The margin limit is 28 days to comply with CFTC regulations. We are still hiring our general counsel to help us more proactively check possible problems, which are not yet clear in the DeFi industry.
Daisy: Does dYdX have any plans to expand into the Chinese market in the future? Are there any plans to launch platform coins?
Antonio: China is a very important market for dYdX, DeFi and the global cryptocurrency industry. dYdX is committed to achieving long-term success in China and is investing heavily to achieve growth.
We are constantly improving how to better serve the local market. So far, we have translated our front-end trading application and service desk into Mandarin. In addition, we have established partnerships with several leading wallet providers in China, including imToken, Math wallet, TokenPocket and BitPie. Finally, we are recruiting the first employee in China to promote the growth of dYdX in China. If you have someone who is suitable, you are welcome to recommend it to us.
We are also very happy to be a member of the Huobi Global DeFi Alliance, narrow the gap between East and West, and explore new products and cooperation opportunities. We have also joined the Open DeFi Alliance of Conflux Networks to jointly help DeFi participants in the East and the West improve their innovation, risk management and liquidity. After joining the forum of IOSG VC and DODO in Shanghai Blockchain Week, we are also paying attention to more activities.
Currently dYdX does not have its own platform currency. However, our team has been actively researching liquidity mining to guide user growth, and explore different paths to be more decentralized, and give more control to users. It is very possible to increase the tokens used for governance in the future.
Daisy: Some people think that DEX and CEX must have a battle. What do you think of the relationship between the two?
Tongchun: Regarding the relationship between Dex and Cex, the two are different fields. There is no battle. Their two competitors should be traditional finance; the entire blockchain industry is still too small. Amber has been around since the advent of BTC. Just 12 years, or the initial stage, Dex and Cex should complement each other.
2. Free questioning session
Life for you: All DEX platforms must face two problems, namely low liquidity (resulting in excessive spreads between orders) and slippage. Can you tell me how to solve this inherent limitation?
Antonio: dYdX solves these common DEX problems by using a hybrid approach: we focus on order matching, while using smart contracts to execute transactions. This gives traders more experience, similar to what you will find in CEX (it will be better once we launch our new L2 product soon!) We cooperate with multiple market makers to ensure platform liquidity High and small spreads.
Don’t wake me up: How does dydx avoid lightning loan attacks?
Antonio: Due to the price predictions we use, dYdX is not vulnerable to flash loan attacks.
dYdX has some top-level security, established in DeFi-audit by the best security companies and top Silicon Valley engineers. In the past three years, we have never had a hacking or security incident.
Wishful heart: How does dYdX generate profit/revenue to maintain your project, and what is its revenue model? How does it make investors and your project win-win?
Antonio: dYdX charges transaction fees just like you see on ordinary CEX. Our fees are very low, and will be consistent with centralized exchanges, especially after we use Starkware to launch the second layer (due to the 1000x scalability improvement).
Tragic and unforgettable: Can you list 1-3 killer features of dYdX to maintain its leading position in the competition? What is the most confident competitive advantage of your platform?
Antonio Juliano: I think we are the leader in leveraged trading by providing perpetual contracts and margin trading. In CeFi, we see that the scale of leveraged products exceeds the sum of the entire crypto market. I look forward to the same thing happening soon in DeFi, and dYdX takes the lead.
Have you in your life: What is your most important next priority/milestone in your product plan? Does your project have sufficient foundation (funding, community, etc.) to realize these plans?
Antonio: Our next important milestone is the launch of our second-tier scalable solution through Starkware (ZKRollups). In addition to moving to L2, we have also launched a brand new product for perpetual contracts, and plan to launch many new markets next year.
We have raised $12 million from top crypto investors, such as 16z, PolyChain and other companies, and we have already obtained good capital.
Night wind: What is dYdX’s global expansion plan? Are you focusing on product development now? Or focus on building and attracting customers and users? Referring to the problems faced by OKEx before, what is your opinion on the future domestic and foreign regulatory or industry development trends? What security measures does dYdX have to ensure the safety of user funds?
Antonio: We are very excited about the expansion of the international market, especially in the Chinese market. That is to say, dYdX is a team that pays great attention to products and development. We always focus on building the best products and technologies first. You will soon see the results of our new second-tier product released in a few weeks!
Finishing: Zhao Jianghao
The following is the text of the interview:
Zhao Jianghao: It is understood that Inbit Mining’s services mainly include mining machine maintenance, maintenance training, power supply R&D and sales, mining machine hosting and other related services.
After leaving the mining pool, are you mainly doing mining equipment related services? Why choose the direction of mining equipment after-sales service?
Zhu Fang: Inbit is now doing services related to mining machines and mining farms. We are making some attempts. At present, in addition to the power supply of chips and mines, our services are involved.
At present, mining machine repair, secondary sales, custody, and extended warranty services are actually relatively lacking in the industry. The mining circle is still very primitive, and there is not even a maintenance company that can gather the maintenance service qualifications of mining machines.
Zhao Jianghao: In other words, there is no competition in the current mining machine service field? Another question is, what is the demand for mining equipment-related services in the mining market?
Zhu Fang: Competition in this field is also fierce. It’s just that everyone is a very rudimentary competition, the means of competition are very traditional, and competition does not produce any value. The competition in this area is like the competition between breakfast vendors. Everyone is vying for a good location and shouting, no one is going to improve the service.
We want to be the king of Yonghe in the breakfast shop.
The market has great demand for services in mines and mining machines. Mainly because a lot of formal and professional funds have come in and they need professional people to provide services. Now all kinds of professional and intelligent tools have been perfected, allowing us to provide more professional and transparent services. This is also an opportunity for the current market.
Zhao Jianghao: From your point of view, you should agree that “Bitcoin mining is moving towards specialization and scale.” In recent years, we can clearly feel that the mining industry is moving in multiple directions. In your opinion, what are the development trends of Bitcoin mining?
Zhu Hai: Yes. The industry is becoming more specialized and large-scale, and more subdivisions have emerged. Including our services are gradually becoming professional, providing more sophisticated technology.
In addition to these aspects, there are several trends.
One trend is that the risks of mining are decreasing. All ecological risks in the entire mining industry are decreasing and guarantees are increasing. Before 19 years, none of the mines said they were compliant. However, this year’s mine pools can withstand scrutiny in all aspects of laws and policies, and force majeure will hardly come from the government.
There is also a trend that more money enters the market and profits become thinner. In the past, the risk was high, but the return on investment was often high, but if you encounter force majeure, there is no way to lose money. Now the risk is low, but the investment income is low, the loss is also small, and it can be done through various financial means.
Zhao Jianghao: The “mining bull market” -the high water period has long since ended, and now the low water period has arrived, and this year happens to be the year when Bitcoin rewards are halved. What impact did the dry season after the halving have on the mining industry?
Zhu Fang: Every time I look at it, the impact of the dry season is the same, and in many cases there are some differences, which are caused by market conditions, mining machine iterations, and changes in the mining pattern.
Specific to this dry season, one of the impacts is that the price of mining machines will fluctuate greatly. Because of the high electricity price, the price of some low-efficiency mining machines will plummet; after the market gets up, miners find that these mining machines can be turned on again, so the price of mining machines soars.
Taking into account the factor of halving, its impact is to make a batch of older mining machines withdraw from the market early. At a certain stage before the currency price rose, some machines with more than 60 watts experienced panic that shouldn’t have been there.
Zhao Jianghao: In an interview with the market leader of the microbit mining pool before, he mentioned a trend that many mining pools and mining machine manufacturers gradually shift their services overseas. How do you see the trend of “mining abroad” in recent years?
Zhu Fang: Because the demand for domestic Bitcoin mining machines is different from the demand abroad.
In foreign countries, technical geeks used to have demand for mining machines, but now many institutions are in demand for mining machines. Looking at the country again, the country used to be mainly energy players and a small number of technology geeks (technology enthusiasts), but now most of them are still energy players. So there is a big difference between domestic and foreign countries.
Now Bitcoin mining is no longer as hot domestically as before, but its popularity abroad is beginning to increase. The imbalance of domestic and foreign demand has caused some changes in the market. In the second half of this year, many products were indeed transferred overseas.
Zhao Jianghao: In recent times, the price of Bitcoin has risen continuously. At its peak, the price exceeded $16,000, which exceeded many people’s expectations.
What is your opinion on the price trend of Bitcoin in the next year?
Zhu Hai: Judging from the monthly line, Bitcoin this year is almost a unilateral upward trend. The upward trend should continue in 2021, and it is possible for the price of Bitcoin to rise to between US$30,000 and US$100,000 in 2021. However, epidemic factors and world economic and political reasons may have a greater impact on Bitcoin prices. Ideally, I think the price of Bitcoin can reach the price range of 50,000 to 120,000.
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