Part 1: DeFi Gold Rush
Q: WaykiChain is one of the first public chains to deploy DeFi. As pioneers, how did you seize the opportunity of DeFi and do the preemptive layout?
To be honest, at first, we just wanted to deploy the collateral stablecoin and lending market. At that time, there was no word DeFi, or there was already but it was not widely spread. Last year, we have been discussing the landing of the blockchain. In order to land, we must aim at the needs of users. Then the financial attributes of the group of blockchain users are very strong. If you want them to play games and go to e-commerce, these are not what they need. To make money, and borrow money is what they need. So we started the All-in option, along with some initial progress made in the business, such as the maximum collateral amount of our DeFi system reaching 36 million, accounting for 17% of the total amount of WaykiChain, which verified our original idea. Bitcoin just made a currency or asset, so the introduction of a public chain with smart contracts is to make regular transactions between assets and currencies, isn’t it finance? From this aspect, if DeFi can’t succeed, then the landing of blockchain is a pseudo-proposition.
Q: Can you explain to us the status and scale of the DeFi market nowadays?
The size of the DeFi industry can be roughly measured by the value of lock-up. Ethereum, as the largest DeFi platform at present, occupies most of the market share. Now the lock-up value on Ethereum is around USD 1 billion. Since last year, other public chains have started to have DeFi applications, including WaykiChain, cosmos, Polkadot, TRON, etc. The current DeFi scale on WaykiChain is not as good as Ethereum in terms of absolute volume, but in terms of the proportion of DeFi locks, WaykiChain definitely has the highest proportion so far, reaching the total of 17%. In terms of absolute volume, only niche players in the currency circle participate in DeFi, but DeFi has maintained market growth in the past two years, and the amount of lock-up positions has risen sharply, so the entire market still has a lot of room for each project party to explore.
Q: compared to Bitcoin mining, DeFi is obviously more decentralized, and suitable to the public. From a broad aspect, what advantage do you think DeFi has when compared to traditional finance, and what is the meaning of it towards the finance industry?
I like this question, so I will spend more time explaining it.
I think the difference of DeFi can be shown in 3 points:
1. DeFi can change the role people play in the financial system. In traditional finance, as an ordinary user, your role and participation process are very limited. However, this limitation is determined by all aspects, such as the credit problem, the threshold of the number of funds, as well as the license and the threshold of power, and so on. Such limitations often make ordinary users vulnerable groups in the financial system. And under the rules of the top class, wealth will always flow to the top. For example, global currencies have been issued continuously, have we participated in the decision? No. Has it been issued to individuals? No. We can only see that the world keeps issuing money, and the money in our hands is depreciating, while there is nothing we can do. But DeFi is different. Let me give an example. WaykiChain DeFi’s governance coin WGRT, the holder has both the power of governance parameters and the benefits of the interest and penalty of the entire system. This is a role you cannot play in traditional finance. In DeFi system, it is full of fairness.
2. DeFi can reduce financial costs. Since the beginning of the industrial era, the global financial structure has remained unchanged, relying heavily on various intermediate institutions. Central banks, investment banks, commercial banks, securities companies, etc. It can be said that any financial activity needs to have more than one intermediary profit from it. For example, in addition to the loss of the price difference of a transaction, a transaction also includes brokerage commissions, exchange transaction fees, stamp duties of regulatory authorities, etc. The price difference earned by these so-called “middlemen” makes them the richest class in the world. However, DeFi adopts an open protocol and provides low-cost financial services for everyone at low cost, which greatly reduces the cost of transactions.
3. DeFi can improve the efficiency of finance. Blockchain enables financial transactions to achieve transaction settlement. It has gone beyond the traditional settlement system of financial institutions. When it comes to cross-border transactions. In terms of the transfer, a cross-border transfer can sometimes take several days, but in the blockchain system or DeFi system, the actual ownership of assets has changed when the transaction occurs.
4. There’s one more point that I want to mention that is DeFi can derive something that traditional finance doesn’t have. For example, the constant product market maker is an innovative product in the field of DeFi. We believe that DeFi can not only improve and improve the original traditional finance but also have more innovations to be discovered. The CTO of our team wrote such a sentence in the introduction of WaykiChain code: “the only limitation of the blockchain is our imagination.”
Q: At present, there is a strange situation in the industry. When asked DeFi, many people said they know it. But when it comes to the question of who invest it, everyone said they didn’t. What do you think is the reason for this situation? Where are the potential users of DeFi?
There should still be some people who have invested in the DeFi project. This year’s link, knc, and mkr are all DeFi concepts, and they all have good market performance, including WaykiChain is also a DeFi concept, and our community is not small. It’s just that few people are using DeFi products. In fact, not only a few people use DeFi products, but also fewer people who put coins in wallets to play any application in addition to the use of exchanges to speculate coins in the currency circle. For example, I got data before that showed only 14,000 people on Ethereum participate in DeFi. DeFi currently lacks a popular hit, like Dapp’s ethernet cat, fomo3D, which can mobilize the market’s passion at once. WaykiChain will release a DeFi product called Wayki-X in the second half of this year. Concerning synthetic asset transactions, we are confident that this product will become a hot issue.
The first-level potential users of DeFi are users of public chain tokens, especially for collateral-type DeFi applications. For example, users who hold ETH are potential users of DeFi on Ethereum. Only if I look high on ETH, I will collateral ETH for various other financial activities. The same is true for WaykiChain. So if most of the non-DeFi public chains are removed, and most Bitcoin holders, this first-level potential user is still very limited. The second-level potential users are DeFi participants, such as participating in DEX transactions, or using other assets to purchase DeFi stable coins for investment and so on. The third-level potential users are some users outside the circle. They will take advantage of income opportunities, such as wealth management and other applications to come in contact with DeFi. This most extensive market has not been well developed.
Part 2: on the track of public chain, the smoke burns
Q: In 2019, the overall development of the public chain industry was weak, but the situation has changed. Some people say that this year is a year of significant development in the public chain. Do you think there are new challenges and opportunities for the public chain industry in 2020?
In 2020, some public chain mainnet such as Polka will be launched, and then some old public chains will be upgraded, such as ETH, ETC, and so on. Nonetheless, I still think that the blockchain industry is in its early days, when the scale has landed, and when it will be considered a success. In my opinion, there are still public chains that completely ignore the commercial landing and only pursue technological innovation. The technical level of the public chain is the foundation, but it is not all. The important thing is to see where it lands. To pursue decentralization, and then the impossible triangle, and what consensus mechanism is good are all on imagination. Anyone who can make adoption and allow users to accept the use of blockchain will become the leader of the next generation of blockchain.
Part 3: create new value
Q: In the public chain ecosystem of WaykiChain, you have innovatively used the three-token economic model. People can’t understand it well. Can you explain it to you in more understandable terms?
Sure. Let me make an analogy if we compare the WaykiChain public chain as an economy. Then the market value of WICC represents the volume of the entire economy as if GDP measures the volume of a national economy. WUSD is the currency in circulation in this economy. And WGRT is equivalent to the shareholders of the central bank in the economy.
Q: Compared with the common single token system, what are the unique features of the three-token economic model? What is the unique impact of it on WaykiChain’s ecosystem？
Each WICC holder can collateral WICC to generate WUSD and obtain certain liquidity. Then part of the interest generated during the collateral process and the penalty if it is liquidated will go to the market to buy WGRT for destruction. Which is equivalent to WGRT holders charged this part of the interest in disguise. This simple logic benefits the ecosystem of every token. For WICC, it locks in the market’s circulating chips and reduces selling pressure. For WUSD, more WUSD means that the currency has better liquidity. For WGRT, the repurchase destruction is equivalent to distributing dividends to the coin holders. For the collateral user, without losing his/her WICC, he/she obtained WUSD and can use it to buy coins, invest, or cash out to do business turnover.
This three-token model completes the revitalization of the overall ecology of the public chain through a simple business. And WUSD, as a token with relatively stable value, is more widely used in public chain economies. For example, it can be used as a pricing unit for DEX, as a channel for OTC deposits, and so on. These have lowered the threshold for people to enter the ecosystem.
Q: I believe everyone is already familiar with WICC. Last time we talked about WUSD. Can Gordon Gao briefly introduce WGRT to us?
WGRT is the governance coin of the collateral lending system in WaykiChain DeFi. The function of this token is to take charge of the whole economic system. WGRT holders have the right to govern and adjust the parameters in the system, such as interest rate, initial collateral rate, and penalty rate. When the system works well, WGRT holders share the benefits of the entire system. When extreme risks occur, the system needs to issue additional WGRT to make up for the shortfall of the entire debt warehouse. However, the probability of additional issuance is very small. Even when the plunge of 312, MKR on Ethereum caused 4 million US dollars in bad debts due to the congestion of the Ethereum network and the unsound settlement mechanism of the MKR system. The decline on that day was similar to that of Ethereum, but the entire clearing system worked very well, and no bad debts were generated.
Q: As governance coin, can you compare the WGRT of WaykiChain with the MKR of MakerDAO, what are the advantages of WGRT?
From the perspective of the public chain ecosystem, MKR is just a smart contract application on Ethereum, and it is relatively separated from ETH itself. In MakerDAO’s own words, they are a piece of Lego toys, and they are said to be a loan DAPP. If in an economy, their role is the commercial bank. But WGRT is different, WGRT is developed at the bottom layer, and it is in the same system as the public chain economy. WaykiChain is dedicated to building the world’s first integrated decentralized financial system. All future DeFi related financial activities will be conducted around the stablecoin WUSD. For example, financial management, derivatives, and synthetic asset transactions, decentralized exchange transaction pricing units. It is equivalent to a unified currency in an economy. Therefore, WGRT plays the role of a central bank shareholder. In terms of the future ecological development of the entire coin, it is more promising.
The second is that from the economic model, MKR’s settlement mechanism and the performance of Ethereum will cause MKR to be easily issued, which will damage the interests of all currency holders. However, due to the unique risk reserve pool in the WGRT system and the emergency fuse mechanism, the interests of WGRT’s currency holders can be effectively guaranteed. Therefore, the WGRT will continue to deflate as a whole, ensuring that the income of the currency holders will continue to increase.