DeFi Market and Token Distribution Reform from the A-share Market

If the A-share market’s new issue is delivering risk-free new share interest in exchange for stockholders locking in their positions, then defi is similarly delivering risk-free new coin interest in exchange for coinholders locking in their LP pairs.

DeFi Market and Token Distribution Reform from the A-share Market

If the A-share market’s IPOs deliver risk-free IPO benefits in exchange for shareholder lockups, then defi similarly delivers risk-free neocurrency benefits in exchange for coiners locking up their LP pairs. And locking up LP pairs triggers a reversal of supply and demand, a spike in the price of the coin, and thus positive feedback.

Many people can’t figure out why Defi (decentralized finance) can go up and skyrocket. Since I was originally engaged in securities investment, I can say that I am a travellers living in two parallel worlds at the same time, I surprisingly found Defi and the 2014 IPO reform very similar. This Defi bull market, and even the currency bull market, is likely to end up with the same path and ending as the A-share in 2015.

Review 2014 A-share IPO reform

A-share market due to the 2010 IPO “inquiry issue” some problems, the end of 2013, the A-share IPO issuance system reform into the current “market value allocation, lottery” model. According to “improve the new share issue reform measures”, the new shares to a fixed P/E ratio of 23 times the issue, according to the market value of the decision to shake the share lottery. In addition, there was a limit on the first day of listing, which started at 20%, then 10% per day, and later changed to 44% on the first day, then 10% per day, but currently there is no limit on the Science and Technology and GEM boards.

This reform was initially attacked by the “marketists” at the time, saying that it was a return to the “planned economy”, but with the surge in the number of new shares and winning lots, stockholders began to feel “really good”. However, with the surge in the number of new shares and successful bids, stockholders began to feel the “real flavor. Investors in Shanghai and Shenzhen each buy some big blue chips as a lottery chips, white draw new shares, draw after the opening to seal 44%, and then every day without volume continuous up board, the final total rise far more than the IPO reform before the “inquiry system” of the rate of increase. Before the reform, the shareholders attacked the “inquiry system” issue price “three high”, the benefits are taken away by the primary market, and now after the change to this, 23 times the P/E issue price listed after all the gains are taken away by the shareholders, really good!

At the beginning I also have the intellectual intellectual spirit, think this reform is not “market-oriented”, but also expressed the view that the reform is not optimistic. Later, I won a share and made 100,000 yuan! Too fragrant, what inquiry, what market-oriented, are as far away as possible roll it ……

In fact, now it seems that this 23 times the P/E ratio issue, is part of the benefits of the listed company should have been financed to the stockholders. Originally, if the company had priced itself, the issue price could have been 46 times, and would have been able to raise twice as much money, but now this part of the money is not raised into the company, but turned into the price difference between the primary and secondary markets, and was earned by the people who applied for the new shares.

Before the reform, the “inquiry system” of stocks, the issue price is more expensive, listed companies and primary market investors earn more, leaving very little soup for retail investors, and retail investors because of losses and complaints. After the “reform”, the meat of the original listed company was cut to the hands of the winning shareholder, the shareholders laughed, but the listed company cried. Moreover, the stockholders did not because the “issue price is low” and thankful, but the speculation, 23 times the P/E ratio of the stock has been speculated to 100 times. And if the original inquiry, the issue price of up to 50 times, the listing may have to fall a drop.

And the most ridiculous thing is, according to the inquiry system issued 50 times the P/E ratio of the stock, than according to 23 times the P/E ratio of the stock issued more investment value, because 23 times the P/E ratio of the stock to raise less money, the company’s strength is lower, and 23 times is just to convey the interests of the people who won the lottery, once the board opened, it became a 100 times the P/E ratio, raising less money junk.

But it is useless to reason in the stock market, it just can go up, ah, where do you go to reason?

Analogy between Defi and IC0 in 2017

The heyday of IC0 in the 2017 cryptocurrency market will not be recounted here. But when you think about it, the IC0 model is most similar to the “inquiry system” IPO model! In the late 2017 coin issuance frenzy, ordinary retail investors simply can not buy IC0, can not vote for the project, but also need to pay someone to vote for them, or participate in the “fund”. Before a coin hits the shelves, there are often multiple rounds of private financing, and when it finally hits the exchanges, it’s like a new stock under the “inquiry system”, listed at a super high price, and then plummeted once it was listed, harvesting a large number of retail investors.

The reason why IC0 has been criticized, in addition to the project itself is not reliable, the team and various private equity leek cutting situation is very serious, which reminds me of the A-share issuance system, what Haplite, Sinovel, are this set up, high price issuance, high price opening, opening price is the highest price, completely a zeroed cottage coin model.

The most important improvement of Defi is the improvement of the initial token distribution. there is no private equity fund for new projects in Defi, there is no pre-ic0, the project tokens are gradually released to investors through the completion of some tasks (such as being LP, liquidity provider), which makes the huge benefits of the token listing transferred from the original Li Xiaolai, Guo Hongcai, Yi Lihua and the old cat these people’s hands to ordinary retail investors.

In the past, when certain projects were hot, some big funds would find ways to jam the ETH network, not allowing small households to issue contracts, or various ways to get most of the early chips into their pockets. Now defi many first issue is first stored in the pool, and then also mining to release the tokens, objectively eliminating the possibility of large funds monopolizing the difference in the primary market, many retail investors on the jerk airdrop of free tokens have earned millions.

And objectively speaking, mining participation in the project is also a two-way win-win, in addition to locking positions to help rise, investors objectively help the project to complete some tasks. For example, in the dex project, LPs participating in Uniswap are working for the project while holding shares (dex’s job is to provide liquidity), and participating in the lending class Defi contracts, some of which are lending mining, objectively makes this lending project work, because someone must deposit in order to lend.

By doing so, not only can the project start from scratch, but a large number of individual investors have risen through these projects, and if we use the analogy of IPO subscriptions, then you can probably make millions in the world of coins by winning a lot.

Therefore, Defi improves the distribution of initial token benefits, which is a huge concession relative to IC0, allowing more people to share in the benefits of rising token projects. Thereby this benefit provides an initial higher risk-free rate of return in the cryptocurrency world (equivalent to the risk-free rate of return on A-share IPOs) – which in turn may attract off-exchange capital to enter.

The cycle of overheated IPO to bull market

After the new share issue reform in 2014, due to the new shares skyrocketed, skyrocketed far more than the same industry has been listed, driving a large number of old shares in the same industry appeared retaliatory rally, that year, the GEM came out of the bull market. A shares appeared new shares up with old shares up, its yield comes from the low-risk return generated by the subscription.

On the other hand, the market capitalization allotment policy is also a deal with retail investors. At that time for the A-share, years of decline, large-cap blue chips no one asked for, and 23 times the P/E ratio discount to retail investors to convey the benefits of the cost of retail investors to buy market value for the country to protect the plate. In this way, retail investors used to draw the bottom position became staking (lock position), objectively significantly reduced the A-share circulation chips, and this part of the market value of the lock position to obtain excess returns from new stock subscriptions, effectively offset the risk of the bottom position down.

Waiting for 2015, the quantitative change has become a qualitative change, because the bottom position has turned to rise (for various factors, including market value of the new demand caused by the increase and the central bank’s loose monetary policy -) new share subscriptions into a “bottom position up + new shares earn” Risk-free windfall, the accelerated influx of funds into the A-share, and then due to the regulatory release, leveraged funding and other factors triggered a round of crazy bull market. The fate of countless people changed as a result.

This can also explain why the market generally believes that in 2015, A-share listed companies saw a significant rise in performance without improvement. In addition to monetary easing, it is likely to have a lot to do with the market capitalization allotment policy, which unexpectedly triggered a positive feedback loop, superimposed on the loose monetary policy and laissez-faire regulatory environment, triggering a runaway bull market.

Can Defi’s staking trigger positive feedback in the cryptocurrency bull market?

By the same token, defi’s staking is also likely to trigger a positive feedback bull market in the cryptocurrency world. In defi, most projects require participating LPs to get a share of the project token, which is equivalent to you having to hold a certain amount of coins to get a share of the project’s new token, and since this new token has a huge risk-free benefit. This is the same as you hold 10,000 yuan market cap to be able to draw a new stock.

If the A-share market delivers risk-free IPO benefits in exchange for stockholders locking up their positions, then defi does the same in exchange for delivering risk-free new coin benefits in exchange for coinholders locking up their LP pairs. And locking in LP pairs triggers a reversal of supply and demand, a spike in the price of the coin, and thus positive feedback.

But last September’s market tells us that just by locking LP pairs liquidity mining, let the coin price spontaneous Ponzi-like left foot on the right foot, sooner or later will also break, so also need the support of external conditions – this is the same as A shares, now A shares are still this issuance system, why cattle can not get up? If external conditions are exhausted, the core interest of the new stock boom cannot be sustained, and thus the reason to increase the lock-up disappears, and if the bull market rises too high, the established stocks will also collapse and subsequently everything goes back to normal (just like now).

But now the cryptocurrency market already has the potential to trigger positive feedback – an extremely loose monetary policy, not referring to the Fed, but to usdt, with a massive injection of money into the cryptocurrency world. At the same time, there is no regulation, you can leverage at will, and you can even take the coins to the defi to mortgage out money to continue to leverage.

Now the cryptocurrency market is probably like the A-share in 2014, positive feedback has just begun. A lot of money is trying to enter the defi to earn low-risk returns, and this will form positive feedback, allowing those with a high risk appetite to invest more leverage in the cryptocurrency market, which may eventually lead to an uncontrollable mad bull market, just like the A-share in 2015.

There are many things that happen and can’t be stopped, right?

How will it end?

I don’t want to say anything here about defi being a bubble that will burst sooner or later or something like that, it doesn’t really make sense. As in, in the long run, everyone will end up the same way.

But a lot of things aren’t linear. For example, when the bull market in A-shares collapsed in 2015, Jia followed suit. But now it seems that Jia pointed out the success of the road electric car. In a bubble, often the direction represented by the bubble is the right one, however the individuals in the bubble perished.

Further away such as the dot-com bubble in 2001, most of the dot-com companies died at that time, yet today we are in the world of the internet. I think the A-shares in 1993 were also worthless, they were all local collective enterprises, the stocks were like cottage coins, people didn’t even know what the “share system” was for. But now we know that we are also in a world of shareholding.

Someday in the future, maybe today’s defi projects are yellow, but in the future we will live in a world of blockchain, widely used decentralized finance, making financial activities more free and convenient. And today’s defi bubble only points to a general, vague and correct direction. On the one hand we need to see this direction, on the other hand we need to make this money first. Only when we make this money, we can afford to lose when the tide goes out, so that we can invest the part that we haven’t lost in the next round of real blockchain economy and realize the dream of success in life.

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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