Synthetix founder: What is the next step for DeFi? Why is DeFi not the culmination of summer?

Synthetix founder kaiynne recently posted a thread on Twitter, talking about where DeFi is going next and why DeFi summer is not the culmination. Golden Finance is compiled as follows. 

1. It is irrefutable that every major DeFi token outperformed ETH last year . In hindsight, this is really not surprising. In the DeFi summer, the blue-chip DeFi project is not only the mainstream ETH narrative, but also the only narrative. 

2. With the emergence of new narratives, many people have switched from DeFi tokens to NFTs, believing that DeFi has fallen into a trough of disillusionment. 

3. Coupled with severe supervision and market uncertainty, there is a perfect environment for you to lack confidence in the future of DeFi. But the future is actually brighter than ever. 

4. Let’s go back to 2016. The early Ethereum community was very diverse, and so was the narrative. Governance, identity, prediction markets, tokenization, DEX, stablecoins, capital formation, and of course DAO. 

5. In mid-2016, the DAO managed to combine many of these narratives and created the first concrete example of the power of Ethereum’s smart contracts, which is of course dangerous. 

6. Watching $150 million pouring into smart contracts and then pouring out again, this made global headlines and significantly improved the awareness of Ethereum. 

7. But the narrative of capital formation actually started almost before the DAO of the Augur Project ICO in August 2015. By the time DAO, there have been more than ten token sales. 

8. Whether it is good or bad, it depends on your tolerance for speculation as a driving factor of capital market attention. After the DAO, the dominant narrative has become an ICO. Except for the early L1 competition such as polkadot, there was little change in early 2018. 

9. We also contacted the NFT mania for the first time at the end of 2017, but this was shattered by the expansion challenge and the bear market. 

10. In mid-July 2018, it is obvious that the market adjustment will not be temporary. The sell-off in late November is to confirm that the bull market has gone, because even our most enthusiastic supporters face reality. 

11. But when things got serious in August 2018, a group of people looked around the rubble and realized that almost everyone who was still building was implementing some kind of financial contract.

12. Therefore, DeFi narrative was born. From the first DeFi summit during DevCon4, it has been dominating the narrative until early 2021. 

13. As liquidity mining gains momentum, DeFi continues to gain momentum. The problem is basically that everyone who builds on the smart contract layer is in the depths of the DeFi rabbit hole. We drank a little koolaid and started to ask ourselves how DeFi will attract more than 1 million users. 

14. In hindsight, this question seems too naive. The fundamental problem is that finance is the main infrastructure. Few people in the world care about market structure and payment methods. Maybe there are only tens of thousands of people. 

15. Although the ICO boom has taken advantage of almost unlimited speculative demand, DeFi income agriculture is a more challenging process. In addition, the market has matured and become more efficient, which makes it difficult to turn Yolo into anything, although of course many people do. 

16. This means that most of the DeFi summer participants are existing native users of cryptocurrency. There is a large inflow of funds, but mainly from large funds and whales, rather than end users. The soaring gas price will only further distort this. 

17. But fundamentally speaking, most of DeFi is infrastructure. Even considering the speculative aspects of governance tokens, only a small number of people are interested. 

18. So what does this leave us? We have new financial opportunities and will achieve 100-fold improvements in many aspects of the financial market. But few people care. Compared with web2, Ethereum’s users are still very small. 

19. The second wave of NFT frenzy. NFT is the tokenization of culture. Most people don’t care about financial infrastructure. Everyone participates in culture. The target market is all mankind. 

20. If you need any further evidence, just check the number of celebrities in real-time NFTpill on Twitter. Yes, we have some ICO cool people in 2017, and there were some anomalies like @mcuban during the DeFi summer. But NFT has attracted more attention than any other narrative. 

21. Does this mean that we will see that DeFi continues to languish in relative obscurity? Honestly, from an attention point of view, I think so. But this does not mean that DeFi will not have an impact. 

22. NFT will absorb and connect many aspects of culture. NFT will change games, sports, music, movies, art and more. This will result in us having more than 50 million users. 

23. When did the paradigm change the last time the platform reached more than 50 million users? That was 2010. Below are the sales of the iPhone in the first three years.


24. Instgram, Uber, and other applications that have been launched with the expansion of the iPhone’s installed base can use this new platform to grow at an alarming rate.


25. What does this have to do with DeFi? DeFi is not really user-oriented, it feels because we have been relying only on enthusiasts since 2018. However, in the future, ordinary users are more likely to interact with DeFi as an infrastructure via mobile wallets rather than directly. 

26. Now let’s pull all these threads together. The intersection of NFT and culture will drive massive user growth in the next few years. But there is still an unresolved problem hindering us. Expansion. 

27. The Ethereum ecosystem is expanding, but the pace this year is slower than many people expected. But by the beginning of next year, we will have multiple production-ready Layer 2. Combined with the progress of ETH2.0, Ethereum will be able to handle more than 50 million users next year. 

28. Once all these conditions are met, we will begin to see applications that leverage the DeFi infrastructure we have built in the past few years to provide a 10x user experience for financial products by aggregating and improving the overall user experience. 

29. Unfortunately, no matter how much we hope so, DeFi alone cannot drive user growth alone. It is too niche. But once we have millions of people get the Ethereum user experience model, we will be able to convert these users to a better financial system. 

30. Just like the rise of the App Store, we cannot predict in what form this will take place, but when you combine a transformative technology with a large user base, amazing things will happen. 

31. The encrypted user experience looks strange now, but so does email (encrypted baby boomers will understand). The behavior of new users needs time to train, but eventually they will change from strange to common sense. The concept and power of self-trust will become part of our culture in the next ten years. 

32. So much so that most people will forget, it was strange at first. But the point is that you need something to drive this. NFT is the killer application of encryption and will drive adoption in the foreseeable future. NFTs are still in the super early stage, and the design space is huge. 

33. DeFi will undoubtedly become the future of finance. Compared with TradFi, its efficiency is too high, and no amount of supervision will slow its speed. Especially when you have tens of millions of users adopting new applications that utilize DeFi. Uber effect. 

34. Compared with what is about to happen, the transaction volume we see in the most popular DeFi protocol is also insignificant. We currently only have a small group of fans, but DeFi will conquer the world, and it will only be carried out in stealth mode. 

35. What does this mean for DeFi tokens? I think the way it develops is that there are a small number of protocol contributors who hold tokens, there are also token-holders, and a huge user base who only wants to use services regardless of protocol governance. 

36. The income generated by these DeFi agreements will be huge, so you will also have a group of people who just want to access asset classes without needing to manage them. Staking services and other forms of passive positions will greatly expand its user base. 

37. In terms of scale, the DeFi tokens that generate cash flow will be priced mainly based on these cash flows, rather than almost entirely based on guesses about future growth as they are now. The valuation of the dominant agreement will be many times higher than today. 

38. The future will be based on open agreements, which will lead to a substantial increase in market efficiency. Once we have large enough installed users, the low barriers to entry for startups will allow rapid progress. This will create a positive feedback loop. 

39. The final state is the world where most infrastructure runs on Ethereum. The dominant agreements will gain great value, but they will be realized through openness, transparency and composability.

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