First Release | Defi Liquidity Mining Stakeholders and Risk Analysis

The recent liquidity mining boom brought by uniswap on Defi has become a sudden hot spot in 2020. Even at the beginning, few people were discussing uniswap, ampleforth, compound, YFI, Curve, Sushi and other various gameplays with potential. With the gradual increase in the number of participants, the number of people asking questions is also increasing. Today we will analyze where are the fundamental stakeholders in Defi liquidity mining, and who earns whose money? Who took whose plate? Here we go:

BTC, ETH and other ASIC mining machines, graphics cards and other mining are to provide computing power for the network to maintain the network and obtain block rewards. Due to the increase in the computing power of the entire network in recent years, the difficulty has increased, and the proportion of personal equipment in the computing power of the entire network has dropped sharply, resulting in a decrease in mining efficiency. Therefore, a mode of making money together with centralized computing power such as mining pools and hosting has emerged (pay attention to understanding here, Liquidity mining actually has a similar revenue model curve)

PoC such as Filecoin maintains the network through the computing power of the hard disk graphics card and the storage capacity of the hard disk, so as to obtain block rewards. Its logic is similar to PoW mining, except that the computing power is changed to storage power, and other hardware is used to increase the performance of the equipment.

Baidu Apollo debuts "Apollo 001" series of commemorative digital collections: Jinse Finance reported that according to the official public account of Baidu Apollo smart driving, Baidu Apollo launched the first "Apollo 001" series of commemorative digital collections on the entire network. The model corresponds to an important milestone event of Baidu Apollo autonomous driving. It is reported that the digital collection will release the family portrait airdrop of the car robot family at 09:55 on July 8, 2022. [2022/7/7 1:58:19]

Therefore, in the same way, liquidity mining is to provide transactional liquidity (the volume of LP tokens mortgaged) for the entire ecology to make the transaction exchange smoother and smoother, so as to obtain rewards, which can be simple Understand it as a kind of market maker.

Therefore, the essence of the three is to provide greater help to the network ecology, so as to obtain rewards. From this point of view, it can also be seen that in the ecology of BTC, ETH, and PoC, very early individuals and large-scale The participating miners and large institutions may be the biggest beneficiaries of benefits.

LBank Blue Shell will launch CSPR (Casper) at 20:00 on May 3rd and open USDT trading: According to the official announcement, LBank Blue Shell will launch CSPR (Casper) at 20:00 on May 3rd, open USDT trading, and open recharge at the same time According to the data, the Casper network is the first real-time proof-of-stake blockchain based on the CasperCBC specification. Casper is designed to accelerate the adoption of blockchain technology by enterprises and developers today, while ensuring its high performance in the future as the needs of network participants evolve. [2021/5/3 21:19:51]

To think of liquidity mining in an easier-to-understand way, it can be understood as those individuals and merchants who provide users with USDT, BTC and other asset exchanges on OTC platforms similar to centralized exchanges. There are many merchants on large platforms, and users exchange It's smoother, faster, and the price difference is smaller. With a small platform, there are fewer market makers, the amount that users can exchange is small, and the price difference is even larger. These merchants earn the middle price difference through the difference between buying and selling, but this price difference is not too large for each individual user, so the user experience will be very good.

LBank Blue Shell launched BOSON at 01:00 on April 10, and opened USDT trading: According to the official announcement, at 01:00 on April 10, LBank Blue Shell launched BOSON (Boson Protocol) and opened USDT trading at 23:00 on April 9. 00 open for deposit, and open for withdrawal at 16:00 on April 12. Open the recharge transaction BOSON at the same time as going online to share 10,000 USDT.

At 01:00 on April 10th, LBank Blue Shell opened the deposit transaction BOSON to share 10,000 USDT. The user's net recharge amount is not less than 1 BOSON, and the user can get USDT rewards equivalent to 1% of BOSON according to the net recharge amount; the trading competition will be ranked according to the user's BOSON transaction volume, and the top 30 can be divided according to the proportion of individual transaction volume USDT. For details, please click the official announcement. [2021/4/7 19:54:33]

This model is actually the original intention of the founders of YFI, Curve, etc., to select the optimal interest pools through aggregation and provide liquidity for these pools, so as to obtain rewards such as transaction fees and corresponding tokens. However, the inexplicable madness of these Defi tokens has gradually evolved into a feast of joy and sorrow that has skyrocketed and plummeted. It really temporarily closes your eyes, a toast to "freedom" and a toast to "death", the atmosphere begins to heat up, and the danger And charming, really wanna dance tonight, feel a little bit dangerous.

News | Credible Educational Digital Identity Launched in Baiyun District, Guangzhou Using blockchain and other technologies: On December 25, the launch ceremony and application seminar of the Trusted Educational Digital Identity (Education Card) Guangdong Province application pilot was held in Baiyun District, Guangzhou.

According to reports, the credible education digital identity integration adopts core technologies such as domestic encryption and blockchain, and innovatively issues integrated digital identities under the network environment of "cloud computing, edge computing, and mobile computing", realizes integrated key management, and builds " Trusted Educational Identity Chain". (China News Network) [2019/12/25]

Taking Uniswap built on Ethereum as an example, the basic and simple steps are as follows:

Buy ETH tokens on centralized exchanges (Huobi, etc.)

From the exchange to the online wallet supported by the platform, metamask (little fox), coinbase wallet, etc.

After connecting the wallet with the Uniswap platform Connect, click on Liquidity, select the currency you want to participate in, and look at the proportion you want to participate in and the number of tokens required (take Sushi as an example in the figure below)

IMEOS’s first BM said that EOS contracts have integer overflow protection: According to IMEOS, a cooperative media of Jinse Finance, recently ETH has experienced multiple ERC20 smart contract processing overflow errors, and BM commented on Twitter: The new ETH contract bug may destroy the entire Token The supply of tokens allows holders to leave valueless Token. This is why the code cannot become law, and it immediately means that the EOS erc contract is not vulnerable to this attack. Some people in the EOS official group also expressed concern about whether EOS has integer overflow protection? BM Response: There are plenty of C++ template classes that encapsulate types and check for overflow. [2018/4/25]

Through uniswap, exchange ETH, etc. into the corresponding amount of the currency that you want to provide liquidity (Sushi, USDC etc.), if you can’t find the currency, then enter the contract address of the currency

After success, click on Liquidity to participate in liquidity mining according to the proportional demand, and deduct handling fees and the like.

After the liquidity is successfully added, the so-called UNIV2-LP token is generated, and after Approve these LP tokens in sushiswap and other corresponding platforms, participate in mortgage staking, and the configuration of liquidity mining is completed.

*Note: Do not transfer coins directly from the exchange to the contract address of liquidity mining (there is no return).

We can see that the steps are not particularly complicated, but there are often minor problems on the way, such as congestion pending, and the handling fee is expensive to about 15$ for a small step. Decentralized platform, very little guidance information, etc. If you make a wrong step, you may not know where your coins are transferred. After a process goes down, the handling fee is estimated to be deducted at about 100$ at present.

From the above table, we can clearly see the role of each different role in liquidity mining and the source of profit. Basically, the biggest profit point lies in the fact that the large households and large organizations that mine the head mine may have started secretly Dig the project side here. As for the source of profit, it must be the cash flow brought by Houlang’s takeover. The taker actually knows that he may be buried when he takes over the deal, but he also participates in this feast with a speculative mentality and the mentality that I am not the last wave. .

If we look back at the examples mentioned earlier in our article, market makers actually earn stable spread fluctuation fees and win by volume, so why does Defi liquidity mining produce such a large appreciation and fluctuation of currency prices? In my personal opinion, it is mainly because of the following points:

Good story, the concept of Defi is indeed a brand-new concept with a lot of room for imagination, and it is difficult to value it if you can imagine it

There is a cognitive threshold, even a 13-year-old leek may not necessarily understand how to play liquidity mining. The leeks and newcomers in the secondary market are even more confused, and the FOMO mentality begins when they look at the currency price

Promoted by centralized exchanges, major exchanges have basically launched a Defi observation section, which has promoted investors' attention

The FOMO desire to make money is coming, everyone wants to get a piece of the action, and all forces have contributed funds to participate in the experience

The Swap spread is relatively large and not very obvious. The profit and loss of direct flash exchange is not as intuitive as the K-line, which leads to more spread swaps

Liquidity mining is interesting but also very risky, because the cost of issuing DEX coins is very low, many imitation disks and garbage coins can attract many investors to participate in mining with a good story, and then run away within 24h-1 week. This is even more serious than the ICO event in 2017, because Defi couldn't find the team, and they didn't know who was doing it. The person who pressed the send button behind his back might be Erha. The basic moral hazard is gone.

The essence of liquidity mining is to attract funds to increase the depth and volume of transaction targets, so that swap and transactions can achieve smooth and low spread effects. People who provide liquidity come with the purpose of making money, and they will also attract more profitable projects. After that, it will be the rhythm of the Ponzi scheme, because the profits given can already be annualized completely based on their brains. . Anyway, if you attract a wave and run away, so what if you get 10,000 times the annual rate.

A good Defi liquidity project can indeed make transactions on top of DEX fast and easy. You can use your own online wallet to conduct swap transactions, so that individuals can avoid the risks of storing coins in third-party exchanges, and 100% control themselves assets are traded. But at the same time, it also increases the risk of losing all assets due to theft of your own account. There is no third party to help you out (do you dare to believe in completely decentralized insurance? Anyway, I basically don’t believe it. I secretly leave a back door. grinning).

So objectively speaking, Defi's liquidity mining application is indeed a very good innovation, which increases the possibility and convenience of people participating in contribution and use. However, if you have the mentality of speculating and getting rich, unless you have resource information early enough, deep enough, and hard enough; otherwise, it is better to give up this idea as soon as possible, at least at this stage, it is basically to take over. That is to say, liquid mining is not something for small casual players, and the price of the handling fee can be seen. If you take a few ETHs and have not started digging, you will lose 10%-30% of the handling fee first. , Of course, some people did get rich, and at the same time, more people stayed on the top of the mountain. Liquidity mining is basically for large households and institutions to provide liquidity to make money. In the future, these people will also be important participants and resources for the project party to further develop new functions and new projects.

But, do what you want, hope is a good thing.

▌Author: Brother Future (Gengche)

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