Why we need to care about current Defi growth?

• Introduction • defipulse is a great site to catch up current growth of Defi ecosystem. • https://defipulse.com/ • What is happening ? • multiple defi projects including lending/dex/derivatives/assets/payment cartegories are growing together • locked assets on defi are growing with speed of doubling every month to reach $4billion as now • it is not driven by one or two projects, but by decentralized set of different projects • Explosion of Transactions on Ethereum Network • Ethereum Daily Transactions Chart | Etherscan : Ethereum transactions are reaching the last peak in January 2018, caused by the famous Cryptokitty. It was a temporary hike because it is led by a single game. But now, we see tens of Defi projects growing together which are very reluctant to be broken by Ethereum network congestion issue • if gas is too expensive, a game like cryptokitty can be just abandoned by users. But, Defi is related to much larger assets and its return than relatively small amount of the transaction gas. Defi users have much higher tolerance and patience for network congestions and higher gas fees. I expect Defi will keep its growth rate much…

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Agreed on most points. I think the logical step forward is for the ecosystem to better sketch out 1. what the next step looks like and 2. how we can get there. From my personal brainstorms, I believe there exist a few pre-requisites for interchain finance to truly take off, roughly in the following order: • IBC • Shared security / Cross-chain collateralization • Gas-efficient peggy + BTC bridges • New zones You can copy the code but you can’t copy the liquidity. So emphasis must be put on providing symbiotic features to existing DeFi applications rather than outright copying what already exists and hoping liquidity will come. I believe this will likely be in the form of new DeFi primitives unique to the architecture of Cosmos blockchains (i.e. proof-of-stake or interoperability) or providing meaningful efficiency (i.e. user convenience or scalability) to existing applications. Some areas that I believe can provide symbiotic relationships for both Cosmos and existing DeFi applications on Ethereum are as follows: • Liquid staking as a new DeFi lego block • More efficient + more trustless BTC bridges • Interoperability as a scaling solution • Sovereign path to…

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In Kira we are working on the base alternative consensus for all DeFi projects on cosmos - MBPoS as the biggest issue we see it securing your zones. If you send more to the chain then the value of assets at stake the validators instantly have incentives to misbehave - that is lethal in case of DeFi. Only way to solve this issue is shared security for the cosmos hub, and for that we will need CosmWasm and improved gov so hub can move towards shared security model efficiently.

Only issue that I see is that ICF is not allowed to fund any projects that want to do this type of DeFi apps that we want to see, not even solutions like MBPoS to make them secure (that is before shared security even comes into play). I understand that and that’s why I think pushing towards shared security + CosmWasm + better gov is best we can do.

@bharvest Thanks for bringing this up. It’s definitely clear that DeFi has emerged as a predominant use case in crypto, and Cosmos should want to position itself to capture growth in this market. In regard to the broader Cosmos ecosystem — there have been some early signs of validation of the thesis around App-specific chains for cross-chain DeFi (Kava, VEGA, Acala, Terra, Celo, Thorchain, and many others), and I think longer-term, Cosmos is on the right track to being competitive in this space. However, I very much echo the concern that Cosmos is moving too slow, and I am fully onboard to jam on what we need to do to speed up the progress. I like how @dogemos has framed things in terms of the prerequisites. IBC & shared security are the obvious must-haves, and until we have those, it will be tough for a great cross-chain DeFi ecosystem to pop up on Cosmos. Honestly I see better business development from Polkadot than Cosmos to achieve this goal, despite of their late implementation, when I consider current status of Cosmos. A big part of this is that Polkadot has the more complete product at this point — they’re on a clear, short-term timeline to shared security…

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Thanks for your opinion. I would like to dig deeper on what you listed for pre-requisites and further utilities Pre-requesites • IBC • backend : I have no worry on backend. Berlin Gmbh is doing a great job on implementation. But I also think there should be a good discussion process to expand the utility of IBC. I imagine that we will have much broader range of capability for IBC in future, and a lot of them will be implemented from community’s help. So I think there should exist a guided process to discuss, design, and implement such expanded IBC features from the community. Well structed process is as important as the implementation itself, which is the crucial part for community to easily approach and participate. Interchain Account is a great example of community-driven-IBC expansion. • frontend(relayer) : I think the relayer implementation is much less emphasized than what it should be. We know that the team invested a lot of effort to provide the stable Tendermint node client. Compared to that, relayer client is implemented by one person who were also busy for so many things. I think stable relayer client is as important and difficult as the stable Tendermint…

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If you send more to the chain then the value of assets at stake the validators instantly have incentives to misbehave - that is lethal in case of DeFi I 100% agree with this statement. Defi needs at least 3~5 times more collateralized security than deposit asset size. If the hub receives more than $200M deposits, we can say that even the hub security is not enough to hold such deposit. This is the direct reason why Atom price should be appreciated higher. (Token price directly correlated to the success of Defi on the Hub, therefore branding and marketing for Atom price is also crucial factor for the success of Defi on the Hub.) Only way to solve this issue is shared security for the cosmos hub, and for that we will need CosmWasm and improved gov so hub can move towards shared security model efficiently. • I think CosmWasm is not the necessity condition for shared security. Shared security implemented on IBC and staking module can improve the security of Defi zones without utilizing CosmWasm. • I think shared security is NOT the only way to increase security of Defi zones. zk-rollup technology also provides layer-1 security to the Defi zones. It solves layer-2…

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bharvest: Large amount of native-token delegation cannot be liquidated in short time and it will cause a lot of market impact if delegators want to liquidate it. Point of multi staking is that all of the assets at stake are liquid through 1:1 derivatives which powers the underlying DeFi app, so that point is not correct. bharvest: I think multi-token dPoS is relatively weak security compared to native-token dPoS. There is still a native token, the MBPoS is a an extension of n/bPoS, so claim that native dPoS is more secure simply does not make much sense from logic perspective, as it can only exceed the security, not decrease. Furthermore governance of the network controls which assets can be staked and what % of rewards can be shared with such assets - this induces both liquidity and security into the network. It also does not influence the voting power - only value of assets at stake. bharvest: But All other-token delegation can be easily undelegated and exit the network without any troubleness of market impact. So can the native token in b/nPoS thought the CEX’es, and there is always an unbonding period regardless which asset you…

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Why multi token staking model is not ultimate solution to expand security : • if a whale wants to liquidate his/her native token(10% for example), 10% of native token should not only be unbonded but also be “sold” in market, which is almost impossible without significant market impact. So the 10% of native token can be viewed as midterm to longterm security. • if btc or eth is staked into a network via multi-token staking, this can be simply unbonded and pegged out to the original blockchain to be sold at market with relatively much less market impact. Therefore it is seen as temporary short term security which can be disappear in 2 weeks because of any economic/political incentives of the holder. So I think multi token staking is not the solution to achieve enough security for the Defi zone. Also, for the hub, it will not work as reliable security enhancement solution because of the same reason. It should add the security but the quality of security is much lower than native token staking. This analogy is similar when we consider shared security. A zone can be supported by shared security from the hub, but the decision of shared security can be withdrawn by…

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bharvest: 10% of native token should not only be unbonded but also be “sold” in market, That is a false statement. Unbonding and waiting 21 days have nothing to do with selling the asset. If you want to instantly unbound by selling and paying a premium to traders then you would place an order on the bonded vs unbonded token order-book, so only that order book would be affected and it has nothing to do with that asset market price of that token. That is the most basic staking derivatives use case and something that every CEX already allows… bharvest: if btc or eth is staked into a network via multi-token staking, this can be simply unbonded and pegged out to the original blockchain to be sold at market with relatively much less market impact. Therefore it is seen as temporary short term security which can be disappear in 2 weeks because of any economic/political incentives of the holder. The holders are the ones controlling which assets can be staked and which not and what % of rewards is distributed - this is used to attract liquidity coming thanks to those foreign assets being deposited - and effectively make the income from the network fees - this in…

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Unbonding and waiting 21 days have nothing to do with selling the asset. When we think of quality of security, we should think about how much it is easy to be liquidated to other assets(fiat or other tokens). He can unbond and not sell the token, but then the capital is locked so it cannot be utilized for other economic purposes. So, how much it is easy to sell and liquidate the assets is the core factor for the quality of the security. If you sell only 1% of atoms on the market, the market impact will as large as 10%, which is more than current slashing rate. What it means is that, for large holders, the liquidity risk is much larger than the slashing rate. And this liquidity risk is the core reason why staked atom provides midterm-longterm stable security. I think you don’t recognize how important is this liquidity factor for larger holders. If the staked assets are pegged btc, then even $10M of pegged btc can be easily unbonded and pegged out, and be sold in CeX, causing not much of market impact. Then the holder can utilize this capital for other economic incentives. So, in this case, staking is just a very flexible investment which can be turned into other investment…

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This post is to summarize what @okwme has explained about ICF’s effort for Defi of Cosmos and its ecosystem in Cosmos Governance Working Group telegram channel. Thank you so much for the transparency effort to community! • Uniswap : ICF funded IXO and SimplyVC to provide more generalized uniswap model PoC. • spec : https://github.com/ixofoundation/ixo-blockchain/tree/master/x/bonds/spec • the code : https://github.com/ixofoundation/ixo-blockchain/tree/master/x/bonds • importing the module on the Cosmos Hub is a governance decision to be discussed among community members. ICF is open to support a working group to discuss this matter. But it should be the community who really lead this movement. • ICF’s adversity to financial product • ICF lawyers advise extreme caution on activities around financial product • ICF would like to keep negative attentions away by avoiding funding projects with reguratory risks • Although ICF can fund something like building generalized uniswap PoC, it cannot fund for actual DeX product operation and it should be the community fund to support further step towards working solutions. • Better information delivery from ICF…

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bharvest:

When we think of quality of security, we should think about how much it is easy to be liquidated to other assets

I think you missed an important point that with multi staking it is not only possible to stake crypto like BTC but stablecoins and digital fiat. This means that regardless of the market movement your DeFi app built on top of MBPoS can offer you stable income regardless if you are long term holder of BTC or only speculator counting returns in USD - you can always swap staked BTC for staked eUSD. There is no real need to stop securing the DeFi app that brings you a stable income by you locking up currency that you really trust unless you are exiting crypto world entirely. The value of the native staking asset and block rewards alone is not the only thing that incentivises increasing the security of multi-PoS - it’s the fee rewards This kind of price movement economy and how it impacts security is a very very old and legacy approach at this point, and I do not think it works well for the interchain ecosystem that is way more impacted by honeypots than typical “master chains” from the old paradigm.

Brief summary of current status of Cosmos Defi ecosystem and beyond. Elements of DeX • eth peggy is almost PoC ready https://github.com/cosmos/peggy • but althea-peggy should be integrated to the main branch of peggy • btc peg PoC is ready implemented by summa-tx https://github.com/summa-tx/relays • uniswap like dex PoC is ready by ixo and simplyvc https://github.com/ixofoundation/ixo-blockchain/tree/master/x/bonds • chrome extension wallet by chainapis https://github.com/chainapsis/keplr-extension • it needs some functional expansion to handle arbitrary message type from cosmos-sdk custom modules? These 4 parts are the core softwares to build the most simple dex feature on the hub with erc20, btc and tokens from cosmos zones. So we are actually ready to move on! push forward Still each of the projects need to be took over by teams who have technical ability to push each PoC into production level solution and possibly also responsible for operation. Great candidates of teams from the community should step up for these crucial jobs. community fund, it is time to invest! Unless funded by AiB, it is now quite certain that these…

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I am peter jhon i have seen your post it is really great like The UK Solicitors

Thank you for starting this thread. I believe there is tremendous opportunity for the COSMOS ecosystem to grow and expand our mission and vision of an open and decentralized world if enough thought and resources is given to marketing not just COSMOS $ATOM specific projects but the entire ecosystem as well. There are so many good projects. There also needs to be a common repository of current and future projects esp. those funded by the community. Polkadot seems to be really doing a good job on this front (see here: General-Grants-Program/polkadot_stack.md at master · w3f/General-Grants-Program · GitHub ). Current price of $DOT is probably a result not just of potential deployments which are happening soon but there is so much clarity in terms of how progress and status of projects are communicated. I really love this post yesterday: https://blog.cosmos.network/the-cosmos-hub-is-a-port-city-5b7f2d28debf — we need more of these and we need to invite all players even from Ethereum, Bitcoin, and Polkadot to join the COSMOS ecosystem. It’s time to think exponential instead of linear. I hope this thread sparks further action from the community leaders and also from the developer…

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What about bridge between Cosmos and Polkadot. I think it will benefit everyone

It is under progress by Chorus One.

This old topic was really nice to read.
It is now 2022. How will the defi situation be once we get shared security?

bharvest:

When we think of quality of security, we should think about how much it is easy to be liquidated to other assets

I think you missed an important point that with multi staking it is not only possible to stake crypto like BTC but stablecoins and digital fiat. This means that regardless of the market movement your DeFi app built on top of MBPoS can offer you stable income regardless if you are long term holder of BTC or only speculator counting returns in USD - you can always swap staked BTC for staked eUSD.

There is no real need to stop securing the DeFi app that brings you a stable income by you locking up currency that you really trust unless you are exiting crypto world entirely. The value of the native staking asset and block rewards alone is not the only thing that incentivises increasing the security of multi-PoS - it’s the fee rewards

This kind of price movement economy and how it impacts security is a very very old and legacy approach at this point, and I do not think it works well for the interchain ecosystem that is way more impacted by honeypots than typical “master chains” from the old paradigm.

The present article aims to help you learn more about the decentralized finance basics, how to make a DeFi app, and other essentials: