Here’s why Bitcoin-obsessed China is not seeing a DeFi boom, yet 🚨 This article is 4 years old...
Here’s why Bitcoin-obsessed China is not seeing a DeFi boom, yet
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Updated: Jul. 20, 2020 at 8:48 am UTC
Photo by Avery Steadman on Unsplash
Decentralized finance (DeFi) applications are driving growth in the cryptocurrency market in 2020. Some projects launched this year have posted both billion-dollar valuations (based on market cap), multi-digital user growth, and a rise in trading volumes.
But one crypto-obsessed country is absent from the action — China. While being very stringent on cryptocurrencies, the country dominates Bitcoin and Ethereum mining, pours millions into crypto projects, and is leading the world’s blockchain and digital currency efforts.
Yet, there is no prominent Chinese DeFi project or any tangible metric proving the region’s interest in DeFi-assets. However, one fund manager might have insights in this regard.
Fund manager gives the lowdown
Dovey Wan — known for her expertise on the Asian crypto industry — said today a mix of prior “liquidity mining” experiments, limited publicity of Ethereum in the region, and English-centric UI applications contribute to a lack of Chinese users.
Defi, itself rooted in the Ethereum community, is very non-Chinese centric. “Plus ETH community is not as strong/well organized as EOS and many other “local ETH competitors,” said Wan in a tweet:
2. Defi itself, rooted from the entherum community, is very non Chinese centric, plus ETH community is not a as strong/well organized as EOS and many other “local ETH competitors”
Hence Defi popularity and awareness among avg Chinese crypto users/traders are relative low
— Dovey 以德服人 Wan ?? (@DoveyWan) July 19, 2020
Lack of Mandarin support in popular DeFi applications is next. Wan says applications for yield farming are relatively complex, compared to accessible, user-friendly products made for Chinese crypto users. Ones they can “jump right in.”
She then draws comparisons to the exchange-led “trans mining” boom in 2018. “The “rewarding token” that you mine can’t sustain the price, it’s vaporware anyway, but the farm/exchange, in this case, earn the actual transfer in BTC/ETH/USDT form,” notes Wan.
Wan said the above is why the DeFi “bubble” could soon burst:
5. Defi farming might bust for the same: say I collerteralize my $ETH for $BAT and lock in at Compound to make interest out of it (Compound now holds most of BAT) + $COMP as long as the farming reward in the form of $COMP can cover my cost of capital in ETH to BAT it can sustain
— Dovey 以德服人 Wan ?? (@DoveyWan) July 19, 2020
This sentiment is shared by others in the crypto industry, such as FTX founder Sam Bankman-Fried.
Steps to prevent a price bust
To counter a price plunge (or an eventual bust), Wan calls for sustainable practices. Steps to smoothen out sell pressure from liquidity providers and yield farmers are among the biggest concerns, she noted.
8. The key difference, it’s at least unlike cefi they can exit scam with your real crypto deposit, you have control over you asset on Defi
Caveat: as long as there is no security bug in the code to be exploited with, which is a big IF
— Dovey 以德服人 Wan ?? (@DoveyWan) July 19, 2020
“Finally, there are many clever “Ponzi” designs or “growth hacking” in the Chinese consumer internet domain, like there is an app that rewards you vapor token in the name of incentivizing healthy behavior.”
She concluded:
“Ponzi design is a great growth hack in the consumer internet sector as nowadays the cost of user acquisition is insanely high.”
In the world of cryptocurrencies, projects often turn to financial rewards as a marketing tactic. Much of DeFi is based on similar features—raising concerns amongst some veterans like Wan.
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Ethereum is a decentralized, open-source blockchain platform that enables the creation of smart contracts and decentralized applications (DApps).
Dovey Wan, as the Managing Director of DHVC, has established herself as a prominent figure in the cryptocurrency and blockchain industry.