Since the cryptocurrency market has grown so rapidly and even dizzyingly over the past 1 year, the article that will interest many investors, especially those interested in the DeFi market, will surely be the article, leading to a number of potential projects led. Today, let’s take a look at some of the notable issues right now that can be fertile ground for DeFi projects.

Note: The following article is the author’s personal opinion and should not be viewed as investment advice. Now we come to the first problem. Enjoy!!!

Bitcoin is still the “madness” of the market

It’s easy to see that the Bitcoin Dominance Index (the market capitalization rate of Bitcoin) has always fluctuated 60-70% for the past 1 year (the period that DeFi experienced the “boom” in the market, but that’s still a quite a large proportion.

In addition, the correlation index (correlation) between BTC and Altcoins in general (and DeFi in particular) is often very high, around 0.7-0.8. Bitcoin’s huge impact is reflected not only in numbers but also in the general market sentiment when everyone who buys Altcoins is always worried about Bit because when Bit 1 falls, Alt can crash to 10.

If the KING falls, the whole kingdom will follow.#BitcoinThe drop in prices is dragging some of the strongest players in the world down #Crypto Game too, including $ ETH $ XRP $ LTC ONLY $ BCH $ ADA $ DOT

As the market slowly recovers, will $ BTC be able to pull the train up again? ???? pic.twitter.com/sWcyCPkxR0

– Kyros Ventures (@KyrosVentures) January 12, 2021

The next solution to this problem is pool farms that provide liquidity with BTC tied to an altcoin. For example, the BTC-ETH pool farm requires users to block BTC and ETH. These, about theory, can help keep altcoins from falling too low when BTC fluctuates. If altcoins drop too low against BTC, the Arbitrage (someone who uses arbitrage opportunities) will buy cheap altcoins to fall into the pool while creating traction so that altcoins don’t slide too far against BTC.

However, this solution has not yet spread, and The volume of these pools is too small compared to the size of Bitcoin. Even the fluctuations of BTC also has the opposite effect psychologically also LPs (which provide liquidity in the pool), which leads to them rashly withdrawing liquidity and exacerbating price fluctuations.

If you settle down you can lose your career, and if the DeFi market is to be really stable it is necessary to minimize the influence of BTC, or … don’t expect BTC to fluctuate much.

Cross chain

The fact that too many blockchains are developing in parallel accidentally creates a problem, that is synchronization. Each blockchain will have its own token standard, so the bridges from ecosystem A to ecosystem B are extremely important.

This creates fragmentation for users a very uncomfortable and uncomfortable experience participating in a blockchain ecosystem.

On the blockchain project side They need a simple gateway to attract money or every layer of product they build in the ecosystem will be wasted. If supported by a centralized exchange with the same plentiful money as BSC or SOL this is not a problem.

For example, if a user has USDT in TRC-20 format, it won’t cost much to send that amount to CEX. Keep buying from CEX the BEP20 and Solanas SPL tokens from BSC and then transfer them to the DEX system of these two ecosystems. Thus, the cash withdrawal process is strongly supported.

But with these ecosystems without that competitive advantage, they have to focus very much on the cross-chain array just to be able to attract money from other ecosystems.

Security – reputation of the project

Easy to spot, BSC is blooming but also shows a dark side of “decentralized”who are scam projects and poor quality.

The final hacks on BSC are Technical error, not a rare occurrence or accident with the black swan. For more information, see the following articles:

As a result, the subject of project prestige and safety, which is rarely talked about, has now caught the attention of the community as well.

Certik is also a project that has been implementing an audit system for a long time. However, it seems that the general psychology of the community still doesn’t think much of a project being labeled “tested.” Spartan Protocol was previously censored by certik but was hacked once when upgrading to V2 earlier this year.

As such, this is still an issue that requires more radical solutions, and the investing community itself must constantly monitor and improve its own information.

liquidation

If capital is concentrated in liquidity pools, investment pools, etc. Bottleneck for line Money showed up by mistake. These short term is beneficial to the token price as the total circulating supply decreases. However, long term, the token will not fulfill its essential role in an ecosystem, that is Transfer of value. And since the token is not secured by an activity in the ecosystem (e.g. trading, stock exchange, …), the token itself has negative effects.

Undeniably, the fact that many tokens are staked out in the network is a good point as it helps to ensure security (especially with PoS – Proof of Stake systems). However, Stake value ratio / total market capitalization There is also something to consider. If a token has too high a proportion, it shows low circulation in the ecosystem and is a bad sign of the long-term health of a project.

The current “liquidization” solution has some new directions as follows:

• Evaluation of LP tokens: It allows users to pawn LP tokens while generating a new round of money making.
• Create more interest-bearing pools for LP tokens or certificate tokens with security (e.g. cToken, yToken, aToken, ..)
• Liquidation of agricultural profits: This is the direction Pendle is taking, but it still takes more time to be effective.

With the liquidity problem resolved, the cash flow from outside the DeFi market will get more boost. Because nobody wants to put capital in a place where the money gets stuck and doesn’t keep rotating to make a profit.

“Legalize” the demand for NFT

Personally, I currently see NFT as a its own market in DeFi ecosystems. Let’s take the Lending, Aggregator and Transaction – AMM arrays as an example. These arrays are closely related to each other; this product takes resources (eg liquidity, user set, ..) from other array products in order to increase the total value together and thus helps to increase the total value. 1 + 1 will likely be greater than 2.

While, NFT currently be independent as a market for buying and selling images. There have been some solutions for NFT collateral to mint stablecoins in order to continue to restore cash flow, but as mentioned above, these solutions are not exhaustive.

Another problem is that NFT liquidity, when buying and selling NFT it will be very difficult. Some projects have suggested breaking the NFT into small pieces to make it easier to sell, but of course its implications are not too obvious. Binance’s NFT marketplace could be the solution everyone was hoping for.

See more:

In addition to liquidity, you will need a “cultural” boost so that NFT will gain more recognition instead of just being seen as a game of “rice and clothes” as it is now. It should also be added that collecting in the West can be viewed as a culture, a hobby (of course this statement is not biased in the direction of either positive or negative), while in the East NFT can be viewed as a financial game where the first arrives ” sells the vision “to the latter.

And that feeling of mine is stronger, especially after Binance (an exchange that has had a heavy impact on Asia’s Fomo) joined the NFT game.

end

The above 5 topics are my personal views on the DeFi market. Hopefully the article above gives you a different and more interesting perspective on the current DeFi market.

Note: This article is for informational purposes only and reflects the author’s personal opinion. None of this should be viewed as investment advice.

Synthetic TinTucBitcoin

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