By now, we have all heard about cryptocurrencies. It is a digital currency that is secured by cryptography. Many cryptocurrencies are decentralized networks based on blockchain technology. A new spin-off from the decentralized economy is called “decentralized finance” or commonly known as DeFi.
Basically, DeFi leverages decentralised networks to transform old financial products into trustless and transparent protocols. DeFi lending & borrowing platforms allow their users to supply and lock their funds into smart contracts from there other users can borrow and pay interest. Smart contracts make all these possible, allowing automated and open finance to transact with a bank in the middle.
This “trustless” model has its pros and cons.
Anndy Lian will share his views on Defi. He is an early adopter & thought leader in cryptocurrency and blockchain and currently the Advisory Board of Hyundai DAC, the blockchain arm of the South Korean carmaker.
1. In your own words, give us an overview of what is DeFi?
DeFi is “Decentralized Finance”. This term has been the talking point at the start of 2020 and it has grown to a market cap of $15 billion according to Coin Gecko. In very simple terms, DeFi is a combination of traditional finance and decentralised technologies.
It is poised to be the start of a new financial era where it aims to be self-managing and is open to everyone who wants to be on it. It does not require everyday users to place trust in it, unlike the traditional financial system where the trust is placed on the bank to take care of the money deposited and the government to maintain the monetary value.
2. Recently, the supply of wrapped bitcoin has increased significantly. To what extent do you think Bitcoin (and bitcoin holders) in particular are driving the growth of DeFi? Are they a major part of DeFi’s growth?
Big whales are always more careful with their money, they normally hold only BTC, early on if they want to participate in the liquidity mining they have to deposit their BTC to ETH and other Ming tokens to participate which most of them think it’s risky. Yes, I think the use of WBTC pair mining will boom the Defi market in certain extend.
According to the data released today(the 2nd day of Uniswap Liquidity Mining), 50% of the miners used WBTC/ETH pair in the initial mining, and most of them are big whales.
The DeFi market is no longer the same market we see in 2019 or early this year before small investors can make a big profit in the market, now as the APY drops and gas increases, it favours the whales more. And small investors are forced into the secondary market.
The good thing about this is the market/volume grows, the bad thing is the DeFi is not that DeFi any more.
3. Conversely, are the opportunities provided by DeFi encouraging people to invest more in bitcoin?
Sure it will.
Firstly, as I mentioned before, now the DeFi market favours the whales more, small investors can not even make their ends meet after paying skyrocketed gas fees. So they are forced out from the DeFi mining game and move to the secondary market. As we all know trading Waited for 7 hours, nothing is done.tokens on the secondary market is very risky so many might just trim back to bitcoin(cause bitcoin price will also rise if more WBTC mining pools opens).
Secondly, as big whales they will keep on selling whatever coins they mined and swap them to bitcoin.
Thirdly, as the market as a whole, more and more bitcoins will be locked up which will bring another bull market for bitcoin.
However, all of these above happens only when WBTC liquidity mining succeed. So far we can see Uniswap locked up 750 million dollars on their second day of liquidity of which half is from WBTC/ETH pool, but we can also hear many complain of the market that the APY is much lower than before(compared to Sushiswap, Moonswap or Sakeswap). It’s only the beginning let’s go forward and see what’s gonna happen.
4. What, in your view, would happen to DeFi if the price of bitcoin crashed significantly/collapsed? Would DeFi struggle to grow or survive? And what would happen to Bitcoin if DeFi collapsed?
Most of the “Value” coins will go zero if the price of bitcoin crashed significantly/collapsed. One thing is for sure: no coin(maybe tiny shit coins can) can survive if bitcoin collapse. Even 10 years later the Blockchain industry is gone bitcoin is here to stay.
Well, Bitcoin is still bitcoin whatever DeFi live or die, just like the universe will still be there non matter the earth exploded or not.
5. Do you see DeFi and Bitcoin becoming more or less interrelated in the future? In what ways might their relationship change?
Defi could go big or disappear but Bitcoin is here to stay. There are no doubts about this. But I do hope to see new players coming into the challenge bitcoin supremacy. With challenges, there are improvements. This is what’s lacking in today crypto space.
Meanwhile, “Let’s Defy to DeFi”– Defy current financial norms to embrace the new DeFi economy.
Anndy Lian is an intergovernmental blockchain thought leader, a best selling book author, investor and crypto advocate. He is currently appointed as the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group where he looks after the governance and compliance aspects of the business.
Anndy is driving the crypto and blockchain agenda with governments and businesses and is a known figure in this segment. He plays a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region and is also part of the Gyeongsangbuk-do Blockchain Special Committee, Government of Republic Korea, helping the province to grow using blockchain technologies.
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Anndy Lian is an inter-governmental blockchain advisor with more than 15 years of experience in Asia. He has provided advisory across a variety of industries for local, international and public listed companies.