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Golden Observation丨Which indicator is better for evaluating DeFi protocols?



Jinse Finance Blockchain News, August 21  There are many indicators for evaluating the DeFi industry and its corresponding growth, and the amount of locked positions is one of them, and it is currently very popular among investors. So is it accurate to use this indicator to evaluate the DeFi protocol? In fact, we can actually use many other indicators to evaluate DeFi protocols.

First, let's be clear that it doesn't apply to all protocols. That's because there are many subdivisions in the DeFi ecosystem, such as: asset aggregation service providers, currency trading platform decentralized exchanges, and synthetic asset issuers, etc., so if only a single indicator is used to evaluate Obviously not reasonable.

Golden Evening News | Important news on the evening of September 15: 12:00-21:00 Keywords: MakerDAO, Tether, India, DeFi Alliance

1. MakerDAO raised the Dai global debt ceiling to 948 million through an executive vote.

2. Jack Ma: The manufacturing and service industries are inseparable from the development of the financial industry. The core of all this depends on blockchain, cloud computing and other technologies.

3. Huobi Global burned 4.872 million HT in August, an increase of 97% from July.

4. The Japanese exchange Fisco sued Binance, claiming that the latter facilitated money laundering in the 2018 "Zaif hack".

5. India may introduce laws to prohibit cryptocurrency transactions.

6. Tether performs 1 billion USDT chain exchange.

7. The OTC price of USDT fell to 6.82 yuan, a new low since January this year.

8. Nobel Laureate Sargent: Blockchain will change the face of banks and prompt banks to respond.

9. Ten projects including Curve, Aave, and Synthetix joined the Huobi Global DeFi Alliance.

10. FATF lists potential red flags involving illegal activities such as virtual currency money laundering. [2020/9/15]

For example, purely from the perspective of capital utilization, if Compound’s supply is worth $100 billion, and borrowers get $99 billion, Aave’s supply is worth $10 billion, but borrowers only utilize $1 billion USD, if the two projects are evaluated by the amount of locked positions alone, Aave ranks higher than Compound, but does it mean that the growth of the DeFi protocol is higher than Compound? The fact is that Compound has a larger market size and higher capital utilization than Aave. This is due to the fact that Compound’s business growth mainly comes from liquidity mining, while Aave has achieved success without any meaningful token incentives. Not only that, but there are more loan sources on Compound than on Aave. It is undoubtedly unfair to evaluate Compound based on the locked amount alone. It's like saying one bank is better than another because it issues fewer loans and therefore has more liquidity to cater to future borrowers.

Golden Morning News | A list of important overnight news on September 11: 21:00-7:00 Keywords: Sichuan, European Central Bank, DeFi, Tether additional issuance

1. Sichuan: Explore the establishment of a digital asset trading platform based on blockchain technology.

2. President of the European Central Bank: A decision is about to be made on whether to issue a digital currency in the euro zone.

3. JD Digits teamed up with China Storage to launch a blockchain-based Huoduibao platform.

4. Tether issued an additional 250 million USDT on the TRON network (authorized but not issued).

5. The payment company Square established the Cryptocurrency Open Patent Alliance.

6. YFI touched $34,900 for a short time, and rose by more than 28% in 24 hours.

7. The three major U.S. stock indexes all closed down, and the blockchain concept stocks fell more and rose less.

8. Cai Liang, Zhejiang University: It is recommended to vigorously develop a safe and controllable blockchain platform.

9. The DeFi project Yfdexf.Finance defrauded investors of $20 million.

10. EMD, an EOS project suspected of running away, has returned more than 260,000 EOS. [2020/9/11]

You should know that the amount of capital Compound can currently provide users with is about 1.64 billion U.S. dollars, of which the total amount of loans is 913 million U.S. dollars, which means that the capital utilization rate of the agreement is 55.5%, and there are about 730 million U.S. dollars of funds available in the future. Used to provide support to borrowers. But Aave’s funding supply is only $1.3 billion, and the total active-ethexc lending on the platform is $154 million, which means that the funding gap available to borrowers is $1.15 billion, and the capital utilization rate is only 11.76%. You should know that for automated market makers (AMMs), the locked position is the total amount of liquidity that traders can use for exchange, while for lending platforms, the locked position represents the total amount of funds that can be borrowed.

Maggie, Vice President of Golden Hashrate Cloud Operations: Lowering the Entry Barriers for Filecoin Miners and Focusing on Cloud Hashrate Mining: Live Report, August 3rd, Hosted by, Organized by CapitalN Node Consulting, Co-hosted by Golden Hashrate Cloud , the gold medal sponsor of Shenzhen Xianhe System Technology Co., Ltd., the silver medal sponsor of Anti-Entropy Technology, and Jinse Finance as the co-hosting media of Star Hover Guide · Chasing the Central Plains · IPFS Technology and Application Research Forum was held in Zhengzhou.

Maggie, Vice President of Golden Hashrate Cloud Operations, gave a speech on "Filecoin Mining from an Investment Perspective". Maggie said that the main network of Filecoin has not yet been launched, and there are currently three ways to invest in Filecoin, including purchasing mining machines, purchasing cloud computing power, and futures trading in the secondary market. As a Filecoin computing power sales platform, Golden Computing Power Cloud has in-depth cooperation with top mining machine manufacturers in the industry to achieve one-click purchase and lower the entry threshold for Filecoin mining. [2020/8/3]

Next, let's take an example of Synthetix. The total value of the SNX token agreement mortgage and the sum of the market value of the SNX token involved in the market value of the locked position index of the SNX protocol. If trading activity on the Synthetix platform stagnates, but the price of SNX tokens increases by 30%, then the amount locked will also increase by 30%, assuming that the amount of SNX collateral remains the same. Similarly, if the ratio of mortgaged SNX tokens decreases, the lock-up indicator will also decrease by a similar amount. But in fact, the growth of the Synthetix protocol is not mainly determined by the amount of collateral in the ecosystem, but by the number of coins minted and the volume of exchanges. While locked collateral is essential, it seems unreasonable to track and evaluate the growth and usage of the protocol with the amount locked.

Jinse Finance Market Report | BTC is rising rapidly, and the market rhythm has changed: According to the Huobi market, the price of BTC has risen rapidly this morning, reaching a peak of 9530.56USDT, and the market rhythm has changed. The daily chart breaks through the large-cycle descending wedge, and the moving averages are arranged in long positions. The 4-hour chart forms an ascending channel along the moving average MA10, and the deviation value is too large after the local pull-up, which requires consolidation. The 1-hour chart arrangement is close to MA5, and the bulls still have room to exert their strength in the market outlook. As of 10:00, the specific performance of the mainstream coins on the Huobi platform is as follows. [2020/7/23]

Another set of data shows that the annualized income of the automatic market maker (AMM) Uniswap can reach 111 million U.S. dollars, while Balancer’s is 30.8 million U.S. dollars, but Balancer’s lock-up volume is 33% higher than that of Uniswap. Another example is Kyber Network, a liquidity aggregation service provider. They can obtain liquidity from some DeFi decentralized applications, but these liquidity are not locked in the agreement. Therefore, Kyber Network has a higher transaction volume and generates more revenue than Bancor, but Bancor has three times the lockup volume of Kyber. It can be seen that although the lock-up volume can measure the liquidity available to traders, it cannot inherently evaluate the value created by these automated market makers.

So, in addition to the lock-up volume, what other potential indicators can replace it? Let Jinse Finance take a look with you:

1. Agreement income

"Revenue" is a more general financial indicator that can improve the clarity of protocol evaluation, because all DeFi protocols will generate revenue for token holders, validators, and other participants, and the total revenue generated by the protocol can be directly It shows how much value the protocol creates for people.

2. Price-to-sales ratio

In addition to "revenue", the "price-to-sales ratio" indicator can also be used to evaluate the relative value of DeFi, which represents the total market value divided by annualized revenue. Of course, whether to use current market capitalization or fully diluted market capitalization is another factor to consider, but this evaluation standard can vary from investor to investor.

However, it does not mean that the lock-up volume is useless. Although the lock-up volume indicator cannot make accurate judgments on the growth and development of DeFi protocols, overall, this indicator can still be used to evaluate automated market makers and protocol mortgages These liquidity can also be generated by the synthetic asset issuance platform. As long as it can surface protocol growth and value acquisition, it is still an indicator worthy of reference.

Part of this article is compiled from Yahoo Finance


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