After creating the basic "token", the encrypted digital currency community wants to decentralize some financial transactions, which is the origin of DeFi.
The biggest difficulty of financial decentralization lies not in technology, but in what to replace "credit derivatives"
The transfer of basic bitcoin and Ethereum is the transfer of ownership. I "own" a bitcoin, and I transfer it to you, so the ownership of this bitcoin belongs to you. The nature of this transfer endows cryptocurrency with the characteristics of "assets" and has a strong ability to resist censorship and supervision. Because the loan relationship is easily controlled by the government, as long as Zhang San's account is frozen, Zhang San can't use the money in the bank.
But unless someone forces Zhang San to transfer money by physical means, Zhang San has several bitcoins, and he always has several, which will not be interfered by other external forces.
However, moving this set to finance will lead to a question: how to play the multiplier effect of ownership? We borrowed money from the bank and knew that the money in the bank belonged to the customer. We don't think banks will borrow too much, because banks have reserves and are supervised by the central bank. Therefore, the bank has 6.5438+0 million in hand and can borrow 3 million. We're not worried. Anyway, everything is a picture.
But ownership is not like this. I have a camera. I can lend it to you. Now you want to borrow three cameras from me, and you said you would give me five when you finished shooting. Where can I change it? Even if I buy it, how can I guarantee that you can give it back to me? Can you afford it? Anti-censorship and supervision, which used to be an advantage, has now become an obstacle.
DeFi is trying to solve this problem. It is necessary to simulate the financial transactions we usually see in the blockchain, such as the most basic loans and various advanced financial derivatives.
Advanced financial derivatives are not complicated from the perspective of blockchain, because they are all contracts in essence, and they can always be decomposed into the most basic loans, mortgages and ownership transfer in smart contracts, so the core becomes a centralized "credit derivatives", which solves this problem, and the rest are done by people in the computer department.
At present, DeFi solves the mortgage through cross-chain, leverages through the margin system, and finally achieves the same operation as credit derivation.
Let's take Bitcoin and Ethereum as examples. If the name of the cross-chain is XX chain, then the currency on the XX chain is XX coins.
For example, if I want to mortgage Bitcoin for Ethereum, I can:
1. Lock Bitcoin at a specific address, a pseudo
BTC，
2. Then I mortgaged this pseudo BTC with the smart contract on the XX chain, and generated the corresponding XX coins;
3. Then I bought a certain amount of fake ETH with XX coins.
4. Then release the collateral ETH corresponding to these fake ETH, and the transaction is over.
The whole process is completed by smart contracts, and no one is involved. And if I don't pay it back when it expires, then the bitcoin I mortgaged will be gone. When the smart contract expires, the bitcoin I mortgaged will default.
This can achieve equal mortgage, but the charm of finance is small and wide, so it needs excessive mortgage. That is hope.
You can mortgage 1 bitcoin and temporarily borrow 2 bitcoins or even 10 bitcoins for speculation.
Suppose there is a bank on the XX chain. If everyone is okay, you can lock Bitcoin and send it to this bank through pseudo BTC. The question now is, with the pool of funds, how can this bank lend money, how can it generate interest and how can it not generate bad debts?
Decentralized lending has zero tolerance for bad debts-because there is a little possibility of bad debts, then in a world without credit, this 0 will become 100%. This is actually quite Taoist: the avenue is abandoned and there is righteousness; Wisdom comes out with great fallacies; Six parents are not harmonious and have filial piety; In osawa, there are loyal ministers. It is precisely because of "martial arts" that people without virtue will have bad debts.
If the system is designed to prevent anyone from becoming a traitor, there is no room for bad debts.
How can there be no bad debts? That is the forced liquidation of smart contracts.
The advantage of intelligence is that everything is in the chain, and the chain can be automated. You take 1 BTC as collateral, and I can lend you 10 BTC. However, after lending it to you, if the value of assets in your account is lower than 9.05 BTCs due to any operation, I'm sorry, the contract will be automatically executed and your collateral will be confiscated.
This is actually the same as the margin of stocks, futures and foreign exchange, but it is implemented centrally in the chain.
Of course, if we really want to do this, there are still many hidden pits in technology. For example, hackers can artificially block the blockchain and delay the execution of smart contracts. In the process of delay, the price may change, resulting in bad debts and deficits.