DeFi: The Crypto Revolutionalizer
On June 2, The Block released a set of data showing that the DeFi protocol generated more than $370 million in revenue in May, reaching a record high. The top revenue generator was Uniswap with $153.9 million, accounting for 41.4% of the overall income in DeFi. In second and third place were SushiSwap and AAVE, which witnessed $75 million and $61.75 million inceome, respectively.
DeFi makes the blockchain revolution a reality
Since its birth as the underlying technology of Bitcoin, blockchain has received an abundance of attention and affirmation from the government and the technology sector. The term “blockchain revolution” has frequently spread from the blockchain industry to the mainstream society. However, what is embarrassing is that for a long time, no one has seen any large-scale application of blockchain technology. Nor do many people truly understand what blockchain is. The only application that has scale impact, Bitcoin, also incurs doubts over if it is an aircoin.
It is till the emergence of DeFi that the blockchain sees the light of a revolution. Through the combination of smart contracts and blockchain, DFi has rendered explosive growth in the financial market. Starting from a single spark, it has become a fire across the entire blockchain prairie and now is spreading the traditional financial industry. Wall Street is already studying and joining the DeFi trend.
After all, how much energy does DeFi boast?
Uniswap, a decentralized exchange, has the same business model as the famous stock exchange Nasdaq. It provides the service of transactions matchmaking and charges fees from each transaction made.
With merely 500 lines of code and around 20 employees, Uniswap earned $153.9 million in 1 month in a market with a total market capitalization of no more than $2 trillion. This achieve, however, took Nasdaq 50 years and more than 4,000 employees, in a market of more than $20 trillion in size. Its total revenue in the second quarter of last year was $700 million.
This is a hard blow. Advantages such as unparalleled efficiency, low threshold, high liquidity and greater viability brought about by decentralization make DeFi an unstoppable trend to become a mainstream.
With its explosive energy, DeFi will revolutionize some of the problems in the current financial system and unleash the power of the current financial system that has been subdued. Mature business models, including the transaction fees of Uniswap, the management fees of YFI, the interest differential of AAVE, have paved a solid foundation for the growth of DeFi, which will be further promoted by the massive market demand in the financial market. In other words, DeFi will revolutionize the blockchain with its invincible low cost and high efficiency.
The Trillion-dollar Market of DeFi Derivatives
As the largest investment market in the world, financial derivatives section provides DeFi with unlimited space where DeFi can give full play to its advantages and realize further growth.
At present, the derivatives market suffers from many pain points, including complex counterparties, no effective regulatory mechanism, high capital cost and time cost to build trust, cumbersome procedures from matchmaking to clearing, low efficiency, contractual disputes in clearing at maturity, etc.
All these challenges can be overcome by the blockchain technology.
The essence of blockchain is a decentralized peer-to-peer network. The original intention of creating the blockchain is to materialize trustless transactions. That is, users do not need to know the counterparty to trade, which can largely improve the efficiency of information interaction and matchmaking.
As long as the data is on the chain, it is open and transparent and cannot be tampered with. Supervisors can view the real data of any transaction contract at any time without the need to send audit requests to futures companies. Nor do they have to worry about the quality and authenticity of data provided by futures companies.
Transaction parties can use smart contracts to set transaction rules in advance, with digital currency as the margin. Once the transaction is completed, the transaction funds will be cleared instantly and by per transaction. It will not involve any manual calculation, which can significantly improve the clearing efficiency, reduce the labor cost and avoid legal disputes when the paper contract is executed.
In sum, all the distinctive advantages featured with the blockchain make it a perfect fit for the derivatives market. We can foresee that DeFi will play a critical role in the derivatives transactions in the near future. This is the ultimate target for all DeFi players in the market as well as the strongest guarantee for long-term DeFi prosperity.
OptionPanda is not marching towards an illusion but aiming for a trillion-dollar market.