Many People think that DeFi will be the same as P2P finance, and it will quickly become popular and quickly withdraw from the stage; others say that DeFi will definitely change Traditional financial model. The common focus of these discussions is how to treat DeFi , what kind of force is it, short-lived, or a representative of new forces?

To answer this more profound question, it is necessary to examine the basic forces that determine the development of DeFi, which can be called the "four elements" of DeFi value discovery. The basic strength of DeFi development, that is, the four elements of DeFi value development, include reliable and stable technical devices , scientific and reasonable incentive mechanisms , transparent and appropriate regulatory logic, and real application requirements . Through the analysis of these four elements, we may be able to find out the development logic and development direction of DeFi, distinguish true and false DeFi, and discover the investment and financing logic of DeFi .

1. Reliable and stable technical device

From the perspective of technical foundation, DeFi is no different from other blockchain projects. Because blockchain technology integrates cryptography, smart contracts, consensus mechanisms, and community governance into one, any link or mutual cooperation is connected. Problems may lead to more serious consequences. For example, we often see that certain coins are forked, contracts have loopholes, and they are controlled by certain powerful institutions. These "heavy weights" from time to time have made DeFi's development a step forward. Step startling.

But objectively, this is not just DeFi, but a problem faced by any blockchain project. On the contrary, because DeFi aggregates a large number of technologies, users, funds, etc., there is more attention to these issues, which will allow the entire industry to continuously develop technological innovations and accumulate technical experience, which will help the entire blockchain industry and even the construction of the entire digital economy. The infrastructure is very helpful. We must pay particular attention to those projects with strong decentralization. Once mature, they will have a bright future.

2. Scientific and reasonable incentive mechanism

We often say that the blockchain constructs the Internet of Value. The significance of the Internet of Value is that the discovery, transaction, and transfer of value can be implemented through the network constituted by the blockchain, which means that the investment, financing, and transaction of the project can be passed through The network is implemented directly. For investment and financing to become a reasonable closed loop, its core is to have an inherently reasonable incentive logic. Therefore, we can think that the essence of the Internet of Value is a scientific and reasonable incentive mechanism, that is , the Token model design of any DeFi project needs to properly handle the incentive issues of all entities involved in the project , specifically including the relationship within the founding team. That is, why other people in the founding team should work with the founder; the relationship between the founding team and early participants, that is, the input and output of early participants, and the information sharing between each other; the relationship between early participants and subsequent participants, that is Why would later participants come to participate in the project; the relationship between the participants of the entire project ecosystem and users outside the system, that is, why others use your system. If the incentive mechanism is found to be unreasonable, it can be continuously optimized through community governance. The goal is to make various relationships more scientific and reasonable.

3. Transparent and appropriate regulatory logic

Many people think that DeFi and supervision are actually meaningless. In fact, it is a compromise arrangement for all participants in order to maintain a relatively stable order. The original intention is to allow participants in the whole process and the whole ecology to have scientific and reasonable rights, obligations and responsibilities. Our goal is to ensure that the reasonable interests, responsibilities, and incentive relationships of the blockchain ecology are guaranteed through legal arrangements. Of course, this institutional arrangement requires the practice and interaction of practitioners and regulatory agencies to gradually form.

From the current practical perspective , some SEC committee members believe that governance tokens should belong to securities, and airdrops are also considered to be securities issuance; in addition, the supervision of centralized exchanges and stablecoins will also affect the DeFi industry.

4. Real application requirements

The specific performance of application requirements is a valuable input, but it is based on the premise that it can create tangible value for participants. Are there any application requirements for DeFi? Where is the space for future innovation? I think from two perspectives.

First, the entire financial system may be decentralized

Physical assets are connected with investors through financial activities and financial operations. Based on various tools and links of traditional finance, including banks, securities, insurance, funds, exchanges, etc., they can be logically decentralized, and the formation includes decentralized lending, decentralized banks, decentralized securities, and Centralized insurance, decentralized funds, decentralized asset securitization, decentralized exchanges, decentralized stable coins, decentralized derivatives and other innovative formats, that is, all financial instruments can be decentralized.

Second, DeFi may be the beginning of the decentralization of the entire economic activity

On the one hand, DeFi is a testing ground for financial digitization. Since there are two major assets in the blockchain field, Bitcoin and Ethereum have achieved relatively recognized value. Based on them, many digital currency assets have been generated. DeFi can easily realize the digitalization of the entire process of asset issuance and transaction.

On the other hand, DeFi may also become a testing ground for other trade and economic activities. Because of the blockchain application in other non-financial scenarios, a big problem is to solve the problem of asset digitization, such as real estate registration, fund registration, securities registration, and physical digitization. With the development of the Internet of Things and network security technologies, the problem of digitization of offline physical assets will be gradually solved. What we need to be clear is that the most important value of DeFi lies in its decentralized characteristics.