DeFi: Markets Favouring Security
DeFi's suite of products and instruments, despite their primitive beginnings, have provided a tremendous service. This fact is especially bolstered as the banks collapsing under the pressure of the pandemic overlapped with DeFi's parabolic rise in adoption. Countless loans and keeping up with stimulus package processes buckling the entire ecosystem. Not to mention the potentials of AMMs and decentralized liquidity providers.
Aside from that, The major selling point behind DeFi lies on the technical level underneath the surface. The fact that all the inner cogs and workings of the machine requires virtually no human input or interference; everything is automated. This has allowed much of the consequences of the human element that often plague the centralized banks to be reliably avoided. This is not new in DeFi. Much of the cryptocurrency industry operates in this manner.
The problem that hurdles DeFi, however, is the fact the markets are always on the lookout for impractically high APRs.
Security underlies Sustainability
The definition of security doesn't just stop at securing funds from rugpulls, hacks, exploits and any other form that involves taking these tokens out of your reach. This is what comes to mind when projects plaster their audits by CertiK while they boast %1000+ APRs. Both are mutually exclusive things that should not be mixed together in any DeFi project, yet it does in many such cases such as Goose DeFi. Audits can only tell you so much, and what comes into play next is DYOR.
Security also extends to mean securing the tangible value of the tokens you hold. Not just in the sense of protection against minting function rugpulls, but also implementing a model of tokenomics that favours stability rather than quick profits, a la Goose DeFi.
There are several ways to achieve this tone of security in assets, the easiest route of which is through capping the supply like Bitcoin and Proof of Brain. Whilst this may sound intuitive, the immediate consequence in this deflationary model is that there can be no adequate use cases that utilize such an asset beyond using it as a currency of exchange. It relies completely on the organic rise of demand dynamics in appreciating the price, and the vanishing supply side of the seesaw essentially prevents newcomers from joining the ecosystem. Ultimately, the correlation of new users as the minting supply decreases is an interesting one.
The second route is by linearly minting new tokens without limit, but having an ecosystem of services that utilize and burn that token. The most mature example of this route is PanCakeSwap and it's slew of creative solutions and approaches towards that, and CUB Finance is progressing steadily towards achieving that full-fledged model. Such a route enables the instrumentation of the token with services and products like Launchpads, loans in the native token and incentives to pool in LPs. The pet peeve with this model, however, is that careful attention has to be paid to keeping inflation in check.
Projects with grounded outlooks along with robust security in its fullest extent will organically be buoyed on top. PanCakeSwap, as an example, is beginning to ascend the ranks for its longstanding service.
What people don't realize with projects that possess real, inherent value is that price does not represent that value underneath. The markets are still subject to the biases and emotions of investors roundabout, and a %50+ drop in price doesn't necessarily translate to the network underlying it being %50+ as good as it was before.
Ultimately though, concerning the DeFi space, I think we are at the first peak of the bull run. Bitcoin has recovered tremendously since the crash of 2018 because as more people saw the inherent value it had, and DeFi has yet to experience its next parabolic move in price.
CUB Finance hasn't released their marketing campaign as of yet, but the progress, particularly when we are talking about a 2-year track record, is promising enough to catapult itself to the top. Especially as the market slowly experiences a rude awakening that security is truly everything when it comes to DeFi, and that maybe, just maybe, such high APRs are not a good indication of anything.
Posted Using LeoFinance Beta
