In this episode, we will talk about DeFi. Recently, Shenyu participated in the "Singapore DeFi Day" event and expressed his views on DeFi's profit opportunities and next year's Bitcoin market. It was quite inspiring, so we sorted out the key points for your reference:
About DeFi basic income and excess income sources
DeFi's basic income comes from Ethereum PoS income + on-chain US Treasury bond income.
As for excess returns, the entire blockchain is still an event-driven market, and there will be profit opportunities generated by various events. If you have a deep understanding of the nature of things and the operation of the protocol, then when some large and small events occur, there will be various arbitrage opportunities. If you have enough knowledge, it is still a good profit enhancement.
On this basis, we can add leverage tools or derivative tools to amplify the returns, and it is relatively easy to achieve an annualized return of more than 5%.
Previously, when many funds were used to mine DeFi, it was difficult to delegate to subordinates or third parties because the asset scale was too large and the authority allocation was complicated. In response to this pain point, after one to two years of accumulation, Cobo has achieved some extremely fine-grained risk control at the contract parameter level through the Argus system this year. The funds are placed in a multi-signature wallet, and then limited permissions are assigned to different people. The actual owner of the funds does not need to be managed in detail. In this way, different single-signature users are assigned this permission and can customize the operations within the permission. Executives such as CTOs and CIOs do not need to manage the operational details of the investment, which greatly releases the energy of these executives.
On the second level, a problem that has been bothering me for a long time is that a large number of on-chain security changes occur in the middle of the night, which makes people unable to sleep well. DeFi has also experienced a lot of twists and turns this year, with a large number of security incidents, and even the programming language itself has been hacked.
As a DeFi user, we must always monitor some on-chain indicators. Basically, our mobile phones are alerted by various alarms of different priorities 24 hours a day. Moreover, due to the time difference between hackers and us, they tend to choose weekends or midnight to attack. A large number of alarms often sound in the middle of the night. When you wake up in the middle of the night and are not fully awake, you have to figure out what is going on and then solve and deal with it.
In response to this pain point, we have developed some solutions. By dividing the permissions into very fine granularity, we allow robots to automatically monitor various on-chain changes 24/7, and establish some risk execution strategies. By assigning permissions for specific operations to online robots, we can observe on-chain changes and immediately withdraw assets from the pool to multi-signatures as soon as possible, which can solve the problem of sleep quality.
In summary, one is to decentralize DeFi funds—different team members can obtain corresponding permissions and perform more efficient operations. We have made a breakthrough in this aspect. At the same time, we have made various robots internally to ensure the security of assets and maximize the rate of return. In the past, in order to sleep well, the leverage ratio may not be very high, but now with these robots, the leverage ratio can be relatively higher, because the robot will help you handle these operations.
About the risks of DeFi investment/mining
At this stage, there is a general trend, which is the development of asset trading from centralization to decentralization. Especially after experiencing a series of events such as FTX, it has almost become an industry consensus.
The second point is more important for the growth of this industry. There are two sources, one is user growth, and the other is the inflow of traditional legal currency funds. The latter is more affected by macro policies. Regarding user growth, in the next few years, with the performance solution, the launch of the second-layer network and the development of smart wallets, users can have a blockchain wallet account and interact with the blockchain without being aware of the underlying blockchain technology and private key encryption principles. Although the standard protocol layer has not yet been unified, it can bring in a large number of incremental users. It is not clear where the money is now, but the user entrance as a general direction is relatively clear.
By this time next year, Bitcoin will have been halved and will be at a price of 40,000+, between 40,000 and 60,000. ETH should be roughly the same multiple.
Question from the audience:
Shenyu, there is a voice saying that Unibot, a new trading model, will replace CEX. What do you think of Unibot, a new type of robot trading product? And what do you think of dYdX, a derivatives trading platform, as a separate Layer 1?
The divine fish replied:
Unibot's mechanism solves the user experience problem very well at the current stage. It provides users with another entry point. Through a simple robot interaction interface, ordinary users can perform DeFi operations without having to deal with complex cryptographic knowledge or learn how to properly keep assets. However, there are problems with its security, especially the protection of private keys. I think this direction of transforming the transaction interface through Bot is correct, but while improving the user experience, how to improve security is a problem that needs to be solved. Considering some of Telegram's current development and construction on the blockchain, this direction will continue to iterate, and new ways of interaction will evolve in the future.
dYdX essentially places transaction matching off-chain and then places transaction settlement on-chain. This approach well combines the performance of centralized exchanges and the decentralized real-time delivery characteristics of blockchain. However, I personally have doubts about whether it is necessary to make a Layer 1 by yourself.
