Introduction

The Innovation made by DeFi

DeFi, created in 2108 with the goal of realizing a decentralized financial system to overcome problems such as brokerage fees caused by the centralized system of real finance, has grown quantitatively to the extent that its total deposit market capitalization (TVL) reaches $100 billion. It has also grown significantly in terms of quality and is contributing greatly to expanding the scope of cryptocurrency. If you look at the detailed field of DeFi, there are numerous DeFi projects such as uniswap of DEX, COMP, AAVE of lending project, YFI that is capable of mining, deposit and replacement, swapping, and even insurance. In addition, they are creating new concepts such as yield farming and staking that cannot be seen in real finance. In particular, as uniswap announced V3, the total deposit amount (TVL) reached USD 1.8 billion and the transaction volume reached USD 1 billion, and the efficiency of capital was further improved, and it is now surpassing even the centralized exchange. However, despite such great achievements, DeFi is still being called upon to achieve even greater innovation.

Innovations

Some notable DEFI projects have been made a breakthrough in various aspects.

1. MakerDAO : Stable Coin

2. Compound : Governance

3. AAVE : p2p -> Pool

4. UniSWAP -> AMM, Long tail

5. DYDX -> Decentralized Future, Perpetual Swap

6. Synthetix -> Composite asset

MakerDAO

In 2014, MakerDAO was founded by Rune Christensen. It is the world's first neutral stablecoin. The reason cryptocurrencies are not widely distributed in reality is due to their large volatility. However, the MakerDAO project launched DAI, a stable coin, to solve the biggest weakness of cryptocurrencies, large volatility. A characteristic of this project is that individuals, not specific entities, can issue stablecoins individually holding cryptocurrency as collateral. So, anyone can issue DAI by opening a Collateralized Debt Position (CDP) on the MakerDAO platform. So, as the first stablecoin to be issued in DeFi to solve the biggest weakness of cryptocurrency, volatility, it is very meaningful in that the issuance of a stablecoin laid the test for the possibility and touch of DeFi.

compound

Compound is a project that provides an Ethereum-based loan service. What makes Compound different from other DeFi protocols in DeFi is its governance token. The many different parameters of Compound’s functionality, such as the collateral factor, reserve factor, base rate, slope, and kink by compound governance can all be tuned. So, compound governance has the power to change parameters, add new markets, freeze the ability to initiate new deposits or borrows in a market, and even upgrade some of the contract code itself. As COMP token is a governance token, it is used to vote on protocol updates such as parameter tuning, adding new asset support, and functionality upgrades. The token allowed shareholders and community members to collectively become Compound Governance and propose upgrades or parameter tuning. Therefore, it is very meaningful to show the true meaning of the governance token as it is possible to adjust even the smallest details of the compound protocol with the COMP owned by those participating in the compound protocol.

AAVE

AAVE is a cryptocurrency loan protocol for earning interest on deposits and borrowed assets. AAVE introduced a long-term stable interest rate model to respond to extreme changes in market conditions. With flash loan products, borrowers can borrow quickly and easily without collateral. AAVE is also the first lending project to utilize off-chain data to calculate loan rates using a decentralized oracle network of prices. In addition, AAVE implements a tokenization strategy for liquidity providers that provide liquidity to the lending pool, providing derivatives tokens called AAVEs to liquidity providers. So, it is meaningful to change the concept of loan by pool from P2P lending.

Uniswap

Uniswap is an Ethereum-based protocol designed to facilitate automated exchange transactions between ETH and ERC-20 tokens. Uniswap differs from existing distributed exchanges (DEXs) in many ways. Uniswap does not have an order book that is commonly found in existing exchanges, but allows trading through an automated market maker (AMM) due to a constant product market maker (CPMM). AMM is a smart contract and closes transactions between buyers and sellers in a pool of liquidity. In addition, Uniswap provides high liquidity for the tokens to enable trading of numerous cryptocurrencies that are not listed on most centralized exchanges among all cryptocurrencies. So, Uniswap solves the problems of price distortion and high slippage due to imbalance in supply and demand that many tokens that are not listed on centralized exchanges are experiencing. Therefore, it has great significance in solving the dissatisfaction caused by insufficient transaction between buyers and sellers.

dydx

Dydx is a decentralized exchange that enables derivatives trading, such as cryptocurrency futures trading, which was only considered exclusive to centralized exchanges. So, dydx is free from government regulation interference, which is a problem with centralized systems, and hacking, which is a problem with centralized exchanges. Dydx is meaningful in that it allows for cryptocurrency derivatives trading between individuals in a decentralized system that does not interfere with anyone.

Synthetix

Synthetix is a protocol that trades and issues synthetic assets based on Ethereum. Anyone can access encrypted synthetic assets without a counterparty on a decentralized synthetic platform. These synthetic assets are tied to a smart contract as collateral by Synthetix Network Token (SNX), and then synthetic assets are issued and exchanged. Since the Synthetics Exchange does not have an order book structure, all transactions are made on a contract basis, which is referred to as P2C(peer-to-contract). It has liquidity equal to the total collateral value secured by the synthetics exchange system, completely eliminating the possibility of contract default, and enabling on-chain transactions in an unauthorized manner. So, this mechanism solves the liquidity and transaction default problems that occur in decentralized exchanges (DEXs). Synthetics is meaningful in that anyone can easily issue and exchange synthetic assets.