Analyzing the Evolution Logic and Ecological Value of the Post-DeFi 2.0 Era with IXO Protocol

Introduction
In 2022, there were discussions about DeFi 2.0 in the market. Compared to the trading structure of CEX, theoretically, under static development, the trading volume of the DeFi market had about 13 times the potential for growth at that time. This market capacity is sufficient to spawn higher-level DeFi projects. However, over the past two years, progress in the market has been slow, and discussions about DeFi 2.0 have faded; the market performance of DeFi projects has also declined, failing to outperform fundamentals, Bitcoin, and even some infrastructure sectors.
The reason, we believe, is that the previous stage of DeFi was merely the financialization of a zero-sum game familiar to traditional financial speculation. On one hand, compared to the role of capital allocation in traditional finance, DeFi has had little effectiveness in the past; on the other hand, DeFi's role and function in the crypto world have only skimmed the surface, lacking a firm position in the construction of the economic system of the crypto world.
This article will take the IXO Protocol as an example, exploring the above two issues through its model and practical examples.
01 Capital Optimization
The IXO Protocol model aims to improve market transaction volume and liquidity depth to ensure that Token providers can raise the capital they need.
In the IXO protocol, there are three roles: project party (Token provider), investor (trader), and guarantor.
Token provider: refers to the fundraisers issuing tokens on the IXO platform, issuing guaranteed assets and raising funds.
Trader (investor): purchases crypto assets issued by the project party on the market, while also able to resell the tokens to the guarantor to reduce risk. If the token price rises, investors can sell the tokens to gain 50% of the profit, with the other 50% going to the guarantor.
Guarantor: provides credit endorsement for assets issued by the project party, and can earn 50% profit share from investors when the token price rises. If the guaranteed price falls, the guarantor will need to repurchase the investor's token shares at a proportional price.
It can be seen that in the IXO Protocol, the project party, investors, and guarantors form a triadic game system. In this system, each participant has their own interests and goals, while reputation serves as an incentive mechanism that promotes cooperation among the three parties, increasing the overall stability and efficiency of the system. Through the accumulation and distribution of reputation, the IXO protocol encourages more participants to take on the role of guarantor, helping to create a healthier and more active ecosystem. The active participation of guarantors not only reduces the overall risk of the system but also promotes effective capital flow and rational resource allocation.
In this model, compared to direct trading on cryptocurrency exchanges and DEXs, the IXO protocol can better address pain points such as liquidity, investment risk, trust, and incentive mechanisms.
Insufficient liquidity
Traditional decentralized exchanges (DEX) have adopted an automated market maker (AMM) model, leading to liquidity being concentrated on popular assets, while long-tail assets suffer from severe liquidity shortages. The IXO protocol introduces a guarantor mechanism that can provide liquidity guarantees for any asset, significantly improving trading depth and liquidity.
High investment risk
In traditional exchanges, investors need to fully bear the risk of asset price fluctuations. In the IXO protocol, guarantors provide partial or complete price guarantees for transactions, making investor risks controllable and providing greater confidence for trading. For fully guaranteed assets, investors do not need to worry about any capital losses.
Lack of trust
The cryptocurrency market generally faces a trust crisis, making it difficult for investors to assess the credibility of project parties and opinion leaders. In IXO, guarantors need to 'bet' with their own funds, and only truly trustworthy projects and KOLs can receive substantial guarantee support. This security based on real funds is the most efficient and safest.
Lack of incentive mechanisms
DEX lacks effective incentives for participants to contribute to the ecosystem. The IXO protocol combines guarantee income with social credit to provide guarantors with both economic and non-economic incentives. Guarantors can gain reputation, which further reflects their social value.
Based on this, it can be seen that the IXO Protocol provides cross-cycle financial guarantees for project parties. This can be reminiscent of Microstrategy in the traditional financial market, which has upgraded its financing and investment strategies of Wall Street listed companies through the trust mechanism of Bitcoin.
02 Value of Reputation
The IXO Protocol is a decentralized exchange (DEX) with a guarantee-insurance mechanism, based on the behavioral economics concept of psychological accounts proposed by economist Daniel Bernoulli in 1738. IXO introduces this concept and SocialFi into insurance trading, where community KOLs can guarantee assets recognized by the community, bearing the risk of price fluctuations, and earning reputation and a 50% profit share. In the IXO platform, trading depth is redefined; if an asset is guaranteed to 100%, it means users purchasing the asset experience no loss, something difficult to achieve in DEX and CEX.
The IXO Protocol, this new DeFi protocol, proposes an innovative trading model for crypto assets based on guarantee insurance, which is expected to address the persistent issues of lack of trust, rampant fraud, and high investment risks in the current crypto market. However, the success of the entire protocol depends on the integrity and strength of the guarantors. If the number of guarantors' collateral is small and unable to cover a large number of investors, its protective role will be significantly diminished. Therefore, building a high-credit guarantor system will be a top priority for the protocol's development. However, in the game system involving the project party, investors, and guarantors, it seems that guarantors bear more risk and receive only a small amount of profit?
Of course, the answer is no. In the IXO protocol, investors bear a minimum risk of 0% (full guarantee), gaining 50% profit and 0% reputation. Guarantors can bear a maximum risk of 100%, receiving 100% of the guaranteed tokens or 50% of the profit from token appreciation, gaining 100% reputation.
Profit: Guarantors share 50% of the appreciation of the guaranteed token assets.
Financing income: able to share 5% of the financing amount issued by the project party as income.
Reputation: Guarantors gain 100% social reputation for guaranteeing assets sold by the project party. This accumulation of reputation can be seen as an accumulation of social capital, which can bring more cooperation opportunities, higher social status, and further value realization opportunities for the guarantor.
In the IXO protocol, the concept of reputation is given new meaning and function. Here, reputation is no longer just an accounting concept in the acquisition process; it becomes an incentive mechanism encouraging participants to take on the role of guarantor in the system. Guarantors provide guarantees for fundraisers; this act of guaranteeing itself is a manifestation of trust. When guarantors successfully help fundraisers obtain funds and the fundraisers achieve their profit goals, the guarantors will receive reputation as a reward.
The reputation gained by guarantors can not only be directly converted into economic benefits but can also enhance their status and credibility within the system, increasing their chances of earning more in future transactions. This accumulation of reputation can be seen as a buildup of social capital, which can provide guarantors with more cooperation opportunities and a higher social status.
The value of reputation is also a very important concept in the traditional world, but the value of reputation entering the crypto world through DeFi protocols is not limited to just one project.
Conclusion:
In summary, using the IXO Protocol model and practical examples to explore the issues mentioned at the beginning—if the IXO Protocol can be successfully implemented, then DeFi will play a role in the development of Web3 projects that is comparable to traditional finance in optimizing capital allocation; the combination of IXO protocol and SocialFi will integrate the reputation of DID into the construction of the economic system of the crypto world, strengthening DeFi's position in the crypto ecosystem—it is no longer just a zero-sum financial game.
But this is just a small step in the post-DeFi 2.0 era; the construction of an economic order in the crypto world centered around DeFi has just begun.