How Can Decentralized Finance Survive the Current Crisis?

How Can Decentralized Finance Survive the Current Crisis?

Decentralized Finance (DeFi) has been in the spotlight lately, primarily because of the shocking collapse of the Terra ecosystem.  Its debacle cost tens of billions of dollars in a matter of days, creating violent shocks across the crypto market, and resulting in a loss of credibility among retail investors.  In 2021 DeFi provided investors with high rates of return, a too-good-to-miss opportunity. Now as Terra’s shock waves continue to bring down DeFi liquidity, investors are also considering their trust in crypto. One of the worst domino effects triggered by Terra came in the shape of Celsius, offering high-yielding interest accounts to 1.7 million users with $12 billion held. Now this crypto lending platform is currently rumored to be facing bankruptcy and has suspended user withdrawal requests to stabilize its operations.  To cap it all, the notable crypto hedge fund Three Arrows Capital is also facing an insolvency crisis. Clearly DeFi appears to be in trouble. But what has caused this current crisis, and why?

DeFi is an umbrella term for a set of financial activities that eliminate the need for intermediaries in traditional financial services. Loans, savings, remittances, insurance, and cryptocurrency transactions are all included. For example, some people will use DeFi to lend a friend $100 in Bitcoin, and as the lender they will earn interest on the loan without traditional intermediaries. As the FT explained DeFi is, “an umbrella term for a collection of crypto asset projects that aim to do away with a centralized intermediary — like a bank or an exchange — to provide financial services. They use DApps to execute common services like lending, savings accounts, and trading coins”. Before its collapse, Terra was considered a star product of DeFi, a payment network based on its TerraUSD stablecoin.

 

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A skeptical view of the DeFi. Source: @ChainLinkGod.eth

Terra’s high interest bearing Anchor protocol was also supposed to resist the market downturn and be a tool for high profits whether in the bull or bear market.  But as Terra collapsed and tens of billions of dollars evaporated, those hopes were dashed. As Elizabeth Lopatto, deputy editor with The Verge explained, “Kwon’s rise and fall was fairly rapid, even by cryptocurrency standards. Luna emerged as a bright spot in the markets in December and reached its peak valuation, a touch over $116, in April; Luna was worth more than $40 billion, all told. During that time, a lot of crypto, including Bitcoin and Ethereum, was sliding. Luna’s popularity was due to a lending program, Anchor, that promised annual percentage yields (APY) of almost 20 percent — obscenely high.”

Over the past ten days, Celsius has prevented all of its estimated 500,000 users from withdrawing their money because of “extreme market conditions”. with no word on when it will be available again. As much as $8 billion in deposits is frozen. If that wasn’t enough it was reported that a week after the withdrawal freeze Celsius warned its community of a rise in fake social media accounts claiming to be from Celsius. At the same time, it paused its Twitter Spaces and AMA’s to focus on its liquidity crisis. “As has been a priority since our company’s inception, we maintain an open dialogue with regulators and officials. We plan to continue working with regulators and officials regarding this pause and our company’s determination to find a resolution,” a June 20th Celsius blog post confirmed. However, the comments to the blog post further underline how this has severely dented user trust. “I wonder how this is in the interest of the community when you didn’t ask them if they’d like to pause all chain activities. Everything you’ve said so far is lies and you will know that when the functions resume, I’d rather be in meme coin hype with 50/50 chances than this,” being typical of the overwhelmingly critical set of responses.

Hong Kong-based crypto lender Babel Finance paused withdrawals and redemptions, citing “unusual liquidity pressures”, while Singapore-based crypto hedge fund Three Arrows failed to meet margin calls from lenders. On Monday, another Hong Kong-based crypto exchange Hoo announced a halt on transactions after customer withdrawals became so great that they risked exhausting the company’s available funds, reported the FT.

In our view, problems with protocols like Terra don’t lie in the details of any one platform.  Because the current crisis was the result of a faulty model, Terra’s debacle was also fed by the belief that nothing like what has happened in the traditional finance world would ever happen in the blockchain market.  But the fact is that when you purposely remove the intermediaries which come with the traditional financial model, you also remove the safeguards that traditional finance has worked so hard to build over the past few decades, and especially after the 2007-08 credit crunch.

As it stands, DeFi is already in trouble.  According to data from DeFi Llama, the TVL of most top DeFi blockchains has dropped by 30% or more in the past month.  At the beginning of April, the total TVL (total value locked) of all blockchains was over $170 billion, and that number is now down to around $60 billion, which is a 65% decrease from before Terra crashed. “Moreover, since December 2021, the top smart contract platform tokens have lost 70% in value against the U.S. dollar as well, sliding from $823 billion to today’s $245 billion,” reported Jamie Redman in Bitcoin.com.

Some in the industry believe this change in the DeFi market capitalization is a tough but necessary step, as it will significantly reduce the emergence of risky projects and allow the industry to stabilize. However, others believe that the decline in TVL highlights deeper problems in DeFi that are not simple to solve.  And these current issues could prompt lawmakers to act sooner rather than later to create a series of more robust regulatory frameworks. An obvious example in the US is the recently tabled Responsible Financial Innovation Act which while not explicitly mentioned DeFi does seek to establish agency oversight and regulations according to which assets are securities.

As Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH) continue to fall in value despite the efforts of bulls to shore up their value, making the cryptocurrency market more uncertain, there are some smart moves investors can deploy to prepare for more market volatility.  If you have funds on a DeFi platform, make sure you fully understand how the platform works and how it generates any rewards.  If you have moved all of your funds to a high-interest rate DeFi protocol, then please proceed with caution and think carefully about the consequences of a platform freeze or even crash, as this will be critical to the safety of your funds.

“While it’s far from certain the DeFi sector in its current form will fail, it’s likely to have more trouble before its problems are over.  The domino effect after the Terra crash is gradually playing itself out, and it remains difficult to predict how far it will spread.  If more major projects and institutions collapse however, it will no doubt impact on the wider crypto market. Already we’ve seen signs of this with FTX helping BlockFi with a $250 million loan, and crypto broker Voyager Digital with an even larger loan of $485 million.” Anndy Lian, Best Selling Book Author and Chief Digital Advisor to Mongolian Productivity Organization commented.

While we are all worrying that DeFi is heading downwards, we also need to remember that DeFi is created to eliminate banks and financial institutions as central intermediaries in various financial transactions. There is no stopping for DeFi. New projects are popping up during these bearish times. DeFi projects are still trying to innovate and do more.

Pollen for example, has started their second token sale and hopes to have its first index product launched by the end of the year. Pollen Virtual, a trading simulator that lets you create and manage virtual portfolios, is now on mainnet to give every trader — DeFi degen or crypto newcomer alike — a level playing field to test and showcase their trading capabilities, building reputation and earning PLN token rewards. Pollen COO William Vandyk explains:‘’The signals generated from Pollen Virtual are being used to build an Index Factory, constructing indices that anyone can buy which will hold real assets, their composition determined by collective intelligence and free from any fund management or performance fees”

Ledger is one of the most popular hardware wallets on the market are partnering with Alkemi Earn. They are integrated into Ledger Live’s Discover section. This is the first time a DeFi lending and borrowing app is available to Ledger users.

“DeFi continues to grow as we speak. Nothing is going to stop us.”

 

 

Original Source: https://www.benzinga.com/22/07/27979603/how-can-decentralized-finance-survive-the-current-crisis

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

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Play-To-Earn Games: The Current State of the GameFi Industry

Play-To-Earn Games: The Current State of the GameFi Industry

As cryptocurrency and DeFi continue to impact the world, several industries are working hard on ways to innovate with decentralized technology. The gaming industry is one of the latest to integrate blockchain, crypto, and NFTs, especially with the growth of the metaverse. The technology has transformed the way gamers trade in-game assets, characters, rewards, and so much more by integrating DeFi, NFT technology, and fundamental blockchain concepts.

 

The new play-to-earn (also known as ‘GameFi’) concept allows users to convert their in-game assets and rewards to real money that can be spent in the real world. The GameFi world has grown significantly, and it is predicted to have a huge impact on the worldwide gaming market, which is expected to reach $314.40 billion by 2026. Reputable investment firms are interested in investing in GameFi initiatives because they perceive it as a viable entry point for new consumers into the worlds of blockchain and Web 3.0. During Electronic Arts’ recent earnings call, CEO Andrew Wilson suggested that while the market for NFTs and play-to-earn was still early, it did point to the future development of gaming. “The play-to-earn or the NFT conversation is still really, really early…there’s at some level, a lot of hype about it. I do think it will be an important part of the future of our industry on a go-forward basis,” Wilson added.

 

Solana Ventures, FTX, and Lightspeed recently announced the formation of a $100 million joint GameFi fund. This fund will be intended to invest in GameFi initiatives that utilize the Solana blockchain. BigONE would like to discuss the current condition of the GameFi industry with our users in this article and how the play-to-earn model can help onboard the next 1 billion people to blockchain and the metaverse.

 

The Rise of ‘Play-to-Earn’ Games

Play-to-earn games have disrupted the traditional gaming market by allowing users to earn money for completing pre-determined objectives while playing games. According to a study, more than 75% of online gamers wished to exchange their virtual assets for a currency that could be utilized across multiple platforms. The ‘play-to-earn’ model has altered the structure of the gaming industry. Players can trade and exchange their virtual assets on various exchange platforms.

 

Prior to the advent of the Play-to-Earn model, in-game tokens and assets had no real-world value. Because the reality is that the commercial first movers in gaming had their own proprietary currencies. What makes GameFi so attractive to the new wave of gaming developers is that it can be automated without any centralized intervention. This means that the play-to-earn model has long-term attractions, allowing game developers and players to invest time and money, knowing the underlying blockchain platform won’t change without community consensus. “Today, only a tiny fraction of online users and gamers even have a crypto wallet, and almost no brands and games issue NFTs. But irrespective of multi-month dips in the blockchain/crypto/NFT economy, we see more of these groups embrace blockchain-based experiences each month. This produces a virtual cycle that drives more users to register a wallet, mint an NFT, or integrate crypto assets”, concluded metaverse expert Michael Ball. In other words, the incorporation of cryptocurrency allows users to add value to their in-game assets. Traditional games were only for entertainment and thrills; the play-to-earn model introduced the benefit of earning money while still having fun.

 

Axie Infinity’s Leading Role

The ‘play-to-earn’ games have become a popular entry point for users new to the cryptocurrency space, thereby promoting the adoption of blockchain technology. The third quarter of 2021 saw a rapid increase in GameFi revenue thanks to Axie Infinity’s gross income of $781.6 million. The Axie Infinity token also reached an all-time high of $155 after starting the year with a value of $0.54.

 

The metaverse-powered gaming project enables players to breed, raise, and trade cute digital pets called Axies. The idea of the game is to get small love potions (SLP) to create new Axies. In turn, SLP is itself a crypto token that can be sold on an exchange, with top players earning up to 1,500 SLPs a day. As a further revenue stream, the game also allows you Axie can also be sold as an NFT, plus other in-game items. The monthly trading volume of all Axie Infinity NFTs is around $170 million. Finally, there is another cryptocurrency from the game called the Axie Infinity shard (AXS). Holders of AXS can vote on governance, allowing Axie Infinity players to vote on proposed upgrades, and players can also use it to stake in the community treasury.

 

What’s more, the business’s core revenue and the performance of AXS are closely correlated. “The interplay between own Axie’s revenues and AXS price is noticeable,” wrote Jeremy Ong and Jayden Andrew, analysts at crypto-focused research firm Delphi Digital. “This makes sense given the majority of revenues come from Axie breeding fees paid in AXS to the treasury, which significantly decreases the circulating supply of AXS – causing a supply-side squeeze.” Data intelligence firm IntoTheBlock noted that the number of Axie Infinity token holders has grown by 400% since November 2020 – up from zero to over 16,000 addresses.

 

The rapid growth of the GameFi sector has piqued the interest of various investors, who want to profit by contributing funding to develop ‘play-to-earn’ games, most notably the Solana-based GameFi fund. While Facebook’s name change to Meta and its vision for a metaverse future is also driving the gaming market. It appears that AngelONE, the crypto venture investment arm of BigONE Exchange, has gone a little ‘meta’ itself by listing Enjinstarter (EJS), a GameFi launchpad dedicated to growing “a thriving ecosystem for blockchain gaming.” The aim of Enjinstarter, built on Enjin’s jumpnet blockchain, is firmly grounded in the play-to-earn global community, designed to introduce new ways for players to earn crypto in a fun, engaging way. The Enjinstarter listing successfully raised 100% of its target on November 8. AngelONE partner Susu Gu, said that supporting GameFi projects such as Enjinstarter was nothing new, as it fell into their mission to find quality investments for crypto investors. However, the success of games such as Axie Infinity, coupled with the long-term vision of a gaming-led interoperable metaverse, had prompted investor interest. “While this will, in turn, bring in more funds into this field, as the $100 million joint GameFi fund shows, it’s not a return to the days of ICOs in 2017 and 2018 where a white paper and a website was enough to attract funding.”

 

Chairman of BigONE Exchange, Anndy Lian, said that with so much money invested in GameFi projects, it would soon evolve from a sector to an industry in its own right. “Not surprisingly, there are companies attempting to jump on the GameFi bandwagon to cash on it. At BigONE we believe that GameFi is not a passing fad but integral to the way the gaming-led metaverse will evolve by providing a better gaming experience for players due to its increased level of security and the opportunity to make money.” Lian added that despite the recent Naavik study detailing the slowdown in the average earnings of players, the game was likely to lock in long-term user retention so long as it could continue to deliver GameFi earnings to players.

 

The GameFi space is ever changing. New challenges and new projects pop up daily for example DeFi Kingdoms, a game built on the blockchain, designed with useable NFTs has been a strong contender to Axie’s supremacy. Or game platform enabler like PlanckX who is able to help traditional games get into the play-to-earn space.

 

I am hopeful to see more growth in 2022. Let’s review this in December to see if it comes true.

 

 

Original Source: https://hackernoon.com/play-to-earn-games-the-current-state-of-the-gamefi-industry

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

j j j