"Even in a long crypto bear market, it is possible to obtain solid returns. If you have a deep enough understanding of the crypto industry, you can even obtain excess returns by arbitraging one crypto event after another." Cobo co-founder and CEO Shenyu summarized the sources of its excess returns in the past year.
Another guest, Super Guy from the Benmo community, as a hidden practical expert, said bluntly , "I never look at the market, and I never get excited about any new trends or projects. I only look at whether there are any arbitrage opportunities." ” , it can be said that he is a very focused event-driven master.
Unlike Super, Arthur, CEO of DeFiance Capital, talked about a project that excites him - the recently popular social application friend.tech, and praised it without hesitation as the most exciting application after YFI.
The above content is excerpted from a roundtable sharing gathering of practical experts at the "Singapore DeFi Day" hosted by Cobo and co-organized by NEO on September 11. Cobo co-founder and CEO Shenyu, DeFiance Capital CEO Arthur, Benmo community founder Super Jun, Tokka Labs CEO Wee Howe Ang, iZUMi Finance co-founder Jimmy and Solv Protocol CEO Ryan and many other first-line industry leaders and DeFi experts generated high-quality discussions and dialogues around "DeFi's revenue opportunities and challenges", and the topic covered last year The sources of everyone’s basic returns and excess returns during the year, what risks they encountered in their respective fields, what new and exciting trends there are, etc.
At this event, Cobo co-founder and CEO Shenyu summarized the new features launched by Cobo Argus in the past year. All these new features are based on his immediate needs as a big DeFi player, that is, "get a good night's sleep" sleep" .
The content of this conversation is long, and the above summary cannot cover everything. I would like to know which tracks these smart DeFi players are paying attention to? Which Alphas have the most potential and certainty in this industry? As well as what everyone is most interested in - how high are the market outlook and profit expectations for next year , please see the following summary of the highlights:
About the sources of basic returns and excess returns
Super guy:
First of all, basic income mainly comes from DeFi mining . PoS interest on Ethereum can generate about 4%~5% of the basic income, and DAI on MakerDAO generates 5% of the U.S. debt income. The two together add up to double tax and debt collection, and when combined with DeFi liquidity mining rewards, it will It was a good basic income, which was also our dig, raise and sell strategy at that time.
The excess return part mainly comes from event-driven on-chain arbitrage and bear market discount purchase and lock-up token arbitrage.
Divine fish:
The basic income comes from Ethereum PoS income + on-chain U.S. bond income.
As for excess returns, the entire blockchain is still an event-driven market, and there will be profit opportunities generated by various events . If you have a deep understanding of the nature of things and the operation of the protocol, then when something big or small happens, During the event, there will be various arbitrage opportunities. If you have enough awareness, it will be a good income enhancement.
On this basis, we can add leveraged instruments or derivatives instruments to amplify the returns, and it is still relatively easy to achieve an annualized return of more than 5%.
Wee Howe Ang
Basic income mainly comes from transactions in major currencies . Although the price volatility of mainstream currencies has become smaller compared to last year, the overall income is still positive.
The excess returns mainly come from the spread arbitrage of small currencies in decentralized and centralized transactions.
Jimmy
The source of excess income mainly comes from airdrops and meme tokens.
Airdrop: By providing liquidity, you can earn various handling fees and obtain higher (2 to 3 times) income opportunities than traditional mining income.
Meme token benefits : In the early days, on-chain robots could rush in. Even if the cost was only $10 when they rushed in, it would cost $10,000 when they came out.
Whether it is an airdrop or a meme token, it is a kind of asset creation. Doing this type of transaction is essentially a porter of information and asset liquidity. As long as you are close enough to asset issuance, you can get good returns whether it is an airdrop from a public chain or a meme token originally issued on these public chains. Earnings growth.
Ryan
The first source of income is the dividends on various public chains , including some high-quality early projects and airdrop opportunities. The second is the handling fees generated by Perp DEX on the chain, which can be hedged by decentralized exchanges , which will be a local short-term Alpha opportunity.
Arthur
Overall, the distribution of the return on investment in the primary market of Web3 is becoming more and more like that of Web2 . If you do not invest in the top three head projects in a certain track, there may be no return at all.
At this stage, compared with primary investment, secondary investment can more flexibly respond to market changes and make strategic adjustments. Therefore, this year we established a new fund specifically for secondary investment, which can better make investments based on market feedback.
The return rate of DeFi still exists this year, but the risk has become higher. We will be more cautious when investing in DeFi. We will only enter the market when we see very good investment opportunities.
About risks and benefits
Risks of on-chain derivatives
Ryan
The first category is the risk of hacking at the smart contract level; the second category is the risk at the operational level; and the third category is the risk of the investment strategy.
The second type of operational risk can be solved by Cobo Argus . For derivatives transactions like ours, synchronization delays may occur when doing arbitrage strategies between centralization and decentralization, which requires a lot of professionalism. strategy. Through Cobo Argus's permission access control scheme, risks can be isolated, business operations can be entrusted to professionals, and limited permissions can be ensured to ensure the security of assets. This means that whether the asset owner operates it himself or leaves it to a professional, the operation can be guaranteed to be safe.
Risks of DEX
Jimmy
In order to ensure security, we will select emerging public chains that are larger in size, have relatively mature technical solutions, or are relatively large.
As a DEX, another thing to pay attention to is the risk of cross-chain bridges , because users will involve cross-chain transactions of funds when operating, which is essentially equivalent to leaving assets on its official bridge, or on a cross-chain bridge provided by a third party. Chain Bridge, and then get a mapped asset issued by the official/third-party bridge of this chain, how to ensure that the assets you deposited can be withdrawn, there is a cross-chain bridge asset redemption risk.
From this point of view, risk can be avoided from two aspects, mainly depending on the mechanism of the chain itself and the corresponding audit, as well as the TVL of the chain.
Risks and risk control of high-frequency trading
Wee Howe Ang
The main risk is the risk of smart contracts , because we mainly trade small currencies, and the risks of many small currencies and related protocols are in smart contracts , which is difficult to analyze. There is currently a lack of a complete framework in the market to assess risks in this area.
The best risk control plan at present
divine fish
In the past, when many funds were used to mine DeFi, it was difficult to entrust it to subordinates or third parties because the asset size was too large and the authority distribution was complicated. In response to this pain point, after one to two years of accumulation, Cobo has implemented some very fine-grained risk control at the contract parameter level through the Argus system this year. The funds are placed in a multi-signature wallet, and then limited permissions are allocated to There is no need to pay special attention to the actual owners of funds among different people . In this way, different single-signing users are assigned this authority and can customize operations within the authority, and executives such as CTO and CIO do not need to manage it. The operational details of investment greatly release the energy of these executives.
On the second level, a problem that has been bothering me for a long time in the past is that a large number of on-chain security changes occur in the middle of the night, making people unable to sleep well. DeFi has also experienced a lot of twists and turns this year, with a large number of security incidents occurring and even the programming language itself being hacked. As a DeFi user, we must always monitor some on-chain indicators. Basically, our mobile phones are reminded by various alerts of different priorities 24/7, and because hackers have time differences with us, they tend to choose weekends or in the middle of the night. When carrying out attacks, a large number of alarms often sound in the middle of the night. When you get up in the middle of the night and are still not quite awake, you have to figure out what the situation is, and then solve and deal with it.
In response to such a personal pain point, we made some solutions. By dividing the permission granularity very finely, we allowed the robot to automatically monitor various changes on the chain 24/7, and at the same time established risk execution Some strategies. By assigning permissions for specific operations to online robots, observing changes on the chain, and immediately retreating once any disturbance occurs, and withdrawing assets from the pool for multiple signatures as soon as possible, the problem of sleep quality can be well solved.
To sum up, one is to decentralize DeFi funds - different team members can obtain corresponding permissions and perform more efficient operations. We have made a breakthrough at this level; at the same time, we have done various internal Robots are used to ensure the safety of assets and maximize the rate of return . In the past, you might not dare to raise the leverage ratio very high in order to get a good night's sleep, but now with these robots, the leverage ratio can be raised relatively high, because the robots will handle these operations for you.
About the risks of DeFi investment/mining
Arthur
DeFi mining not only looks at the rate of return, but also pays attention to Risk Adjustment. Some protocols are more complex. You not only bear the risks of the protocol itself, but also bear the risks outside the protocol. This year, the return rate of DeFi mining is still very impressive, and the risk is not high. If you are optimistic about a project, just buy the currency directly. Generally, the more time-tested protocols and platforms are, the safer they are.
About market forecasts and new trends
Arthur
If TVL is used as an indicator, TVL is currently about 4 billion to 5 billion U.S. dollars, and one year later it will be in the range of 10 billion to more than 100 billion U.S. dollars. Future development depends on how many real-world assets can be brought in. I think there are three potential tracks, namely decentralized contract trading, Liquid Staking and real-world assets . At this time next year, Ethereum will be at least 3,000 USDT.
divine fish
There is a general direction at this stage, which is the development of asset trading from centralization to decentralization . Especially after a series of events such as FTX, it has almost become an industry consensus.
The second point is more important for the growth of this industry. There are two sources, one is user growth, and the other is the inflow of traditional legal currency funds. The latter is more affected by macro policies. Regarding user growth, in the next few years, with the performance improvements, the launch of second-tier networks and the development of smart wallets, users will be able to use the underlying blockchain technology and private key encryption principles without being aware of it. You can have a blockchain wallet account and interact with the blockchain. Although the standard protocol layer has not yet been unified, it can bring in a large number of incremental users. It is still unclear where the money is, but the user entrance is relatively clear as a general direction.
At this time next year, Bitcoin has already halved. Bitcoin will be at a position of 40,000+, within the range of 40,000 to 60,000, and ETH should be almost the same multiple.
Wee Howe Ang
We are optimistic that Intent based, a new transaction method , can improve the transaction experience of Web3, giving it a chance to compete with Web2, or even surpass it.
Regarding new opportunities, it depends on whether the development of the entire infrastructure can bring about some innovative applications.
In the next cycle, mainstream currencies will depend on capital inflows and leverage ratios. A key point that determines the future price of mainstream assets is the birth of emerging assets.
After the shock period is over, Ethereum will reach 2000~3000 USDT by the high point at this time next year.
Audience questions
May I ask Shenyu, there is a voice saying that Unibot, a new trading model, will replace CEX. What do you think of Unibot, a new robot trading product? And what do you think about dYdX, a derivatives trading platform, becoming a separate Layer 1?
divine fish
Unibot's mechanism solves the user experience problem very well at the current stage. It provides users with another entrance. Through a simple robot interaction interface, ordinary users do not need to deal with complex cryptography knowledge or learn how to properly keep assets. , you can perform DeFi operations. But there are issues with its security, especially private key protection. I think that the direction of transforming the transaction interface through Bot is the right direction, but while improving the user experience, how to improve security is a problem that needs to be solved. Considering the current development and construction of Telegram on the blockchain, this direction will continue to iterate, and new interaction methods will evolve in the future.
dYdX essentially places the transaction matching off the chain, and then puts the settlement of the transaction on the chain. This method perfectly combines the performance of centralized exchanges with the decentralized real-time delivery characteristics of the blockchain, but is there any I personally have doubts about the need to make a Layer 1 myself.
What does Arthur think of the recent popularity of friend.tech?
Arthur
I personally am very optimistic about friend.tech. I think this is the most exciting product since YFI mining .
friend.tech solves the most difficult problem of social networks - the cold start problem. In addition, through the innovation of the economic model, real "friends" are screened for you. Only those who really want to interact with you and think your content is valuable will spend money to buy your Key.
In addition, friend.tech uses a Web2 front-end, allowing users to register using email or mobile phone numbers, lowering the entry barrier while ensuring that users have wallet control. Although friend.tech still has some problems at present, these problems can be solved in the future.
So far, friend.tech is only a relatively new product. Considering that the current TVL is only 20 million, there is still a lot of room for growth in the future. It should not be a problem for the TVL to reach 50 million.
