Decrypted: Why is CZ investing heavily in DeFi?

Today we are focusing on Binance because of CZ’s tweet on October 24.

Decrypted: Why is CZ investing heavily in DeFi?

When he mysteriously talked about investing heavily in DeFi, and claimed that it was not investment advice (I believe you are a ghost), many people began to wonder where he meant DeFi. The editor is also very inexplicable, but it is certain that this is a signal, so I opened Pancake along this line and found some answers, what is going on? Then look down.

Convex’s layout

Decrypted: Why is CZ investing heavily in DeFi?

Let’s start with three key projects, Wombat Exchange, Wombex Finance, and Convex.

Since Pancake restarted IFO, a total of 6 issues have been conducted, and among these 6 IFOs, Wombat Exchange has been launched. This is a BNB native multi-chain stablecoin exchange protocol that focuses on recalculating the stablecoin exchange experience through algorithm design, and is currently a well-known stablecoin exchange protocol on the BNB chain.

Compared with other stablecoin exchange protocols, Wombat’s main advantage is that it can achieve 100% capital utilization without impermanent loss, and the slippage is also very low, and the design of a single token pool can be staked for a single token, and compared to PancakeSwap, slippage has certain advantages. Like Magpie, which launched Pancake IFO today, it is a custom fork of Convex on the BNB chain.

Wombex Finance is a BNB Chain native protocol used to increase LP yields and centralize the power of Wombat. The combination of Wombat AMM innovation and the veToken model opens a new chapter in revenue generation on BNB Chain. An efficient veToken-based protocol requires a special governance coordination tool, which facilitates the growth of the protocol and helps LPs allocate funds. Wombex combines the power of liquidity providers and WOM token holders to supercharge each other and accelerate Wombat’s long-term growth. To do this, Wombex accumulates both veWOM and aggregate LP deposits.

Decrypted: Why is CZ investing heavily in DeFi?

As a revenue aggregator on the Ethereum chain, Convex Finance aims to simplify the process of locking and pledging Curve and CRV through a simple and easy-to-use interface with the help of CVX Token, release the liquidity of locked CRV to a certain extent, and increase the remuneration of CRV holders and liquidity providers, so as to promote the development of the CRV ecosystem.

The first important point here is that Convex wants to replicate the DeFi competition routines of the past, making $WOM into $CRV and $WMX into $CVX. In the DeFi competition that year, Convex was arguably the biggest winner, it was a special effort to boost revenue for Curve users, centralizing CRVs and stablecoins for all Convex users in the same wallet, thus maximizing the benefits of exhausting all CRVs.

Decrypted: Why is CZ investing heavily in DeFi?

A clearer expression is: CRV is ostensibly a stablecoin exchange agreement, but in fact, it is a reserve system that controls the liquidity of stablecoins and can become an invisible “Federal Reserve”; CVX is ostensibly an aggregation accelerator, but in fact, it is a bribery center and a big killer to improve the liquidity of CRV voting rights.

When Curve competed, Yearn, StakeDAO, and Convex worked together, and as a result, the exchange and retail investors did not have to work hard, and the price increased a lot. At the same time, Convex rose from the lowest 1.9 to a record high of 60.09 because of Curve competition, a full 30-fold increase.

  • More detailed details in the DeFi competition can be viewed here: 

So the question is, if WOM wants to follow the CRV to create huge liquidity for stablecoins, which stablecoin is it creating liquidity? Why create liquidity for it?

Fiat anchoring

Decrypted: Why is CZ investing heavily in DeFi?

Here, another knowledge point needs to be added, that is, the anchoring of crypto assets. Why talk about this? Simply put, if you can create a stablecoin with sufficient liquidity, you can complete the internal blood transfusion and internal circulation of cryptocurrencies.

As an independent economic system, the crypto circle is like a country that absolutely cannot overissue currency indefinitely, otherwise it will end up in Zimbabwe, and the currency will be worthless. There is an anchor behind the currency, such as the gold standard of gold before. With the confirmation of the dollar’s status as a reserve currency for global settlement, the dollar has become the anchor of other national currencies.

So what is the anchor of cryptocurrency?

Logically, there are two, centralized stablecoins and de-Chinese dramatized stablecoins, and the volume of crypto assets depends on the stablecoin, and the anchor behind the stablecoin is still the US dollar. All why do you know why you need liquidity? Strong liquidity means more assets.

In the future, if the interest rate hike continues and the balance sheet reduction continues, then the liquidity will be reduced, the liquidity will be reduced, and the impact on the market after the reduction of stablecoins is very large. At this time, it is necessary to turn to algorithmic stablecoins, and despite many failures, there are still people who want to conquer this field. Because this position is so important, once whoever masters this field becomes a money printer.

Nowadays, almost all of the algorithmic stablecoins that are relatively strong on the market are anchored to the assets of the currency circle. For example, DAI is anchored ETH.


Decrypted: Why is CZ investing heavily in DeFi?

Binance previously issued an announcement to aggregate liquidity to BUSD, and then made the small currencies new to BUSD trading pairs have a big upward trend, but this operation is not for BUSD, because BUSD is anchored to the US dollar.

What is that for? Still focusing on Pancake. I don’t know when Pancake started on a stablecoin exchange – HAY. It is a decentralized overcollateralized lending and liquid pledge platform on the BNB chain. HAY is a protocol native de-stablecoin overcollateralized by BNB, convertible for $1 worth of BNB. Its use cases include liquidity mining on LP DEXes, a payment method that transfers the value of goods and services, by borrowing HAY at a collateral ratio of approximately 152% (approximately 66% LTV) as collateral for the protocol. The protocol aims to be fully decentralized and will launch its DAO once its governance of Token Helio’s TGE is complete.

Decrypted: Why is CZ investing heavily in DeFi?

The second focus is here, and after research, it was discovered that the project was benchmarked against Maker DAO. Maker mints DAI using ETH overcollateralization, and DAI provided DeFi with huge liquidity early on, which is currently the largest algorithmic stablecoin in crypto. And HAY is a stablecoin minted with BNB overcollateral, simply put, Binance wants to start layout at this time and supply itself with liquidity.

Both WOM and HAY are strategic gaps for Binance DeFi. So the reason why CZ shouted on Twitter to invest heavily in DeFi is mainly because algorithmic stablecoins are paving the way for algorithmic stablecoins after it.

What projects are worth paying attention to when DeFi competition opens?

Decrypted: Why is CZ investing heavily in DeFi?

The intention of WOM competition is already obvious, it seems that like Curve’s explosive script, there is a good chance that history repeats itself, and the main combat forces of WOM competition at present are three parties including Wombex, Magpie and Quoll Finance, and the main core of their agreement is for WOM holders, increasing the flexibility and profit of holding coins.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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