aelf COO Chen Zhuling speaks on DeFi
In the past few months, everyone in the blockchain industry has been talking about DeFi. The arrival of DeFi has excited many people, yet some people say it is just a super bubble. Nevertheless, it did bring a lot of innovation to the entire blockchain ecosystem, but there are also some problems. So, how did DeFi go viral? What practical use does DeFi have? What can platforms and projects do specifically for DeFi? With these questions, COO and co-founder of aelf Chen Zhuling accepted an interview with Vernacular Blockchain. Let’s see what he said.
Question 1: What positive influence did DeFi bring to your current product (project)?
Chen Zhuling: DeFi has natural competitive advantages over the traditional financial system, such as custody-free security, convenient peer-to-peer transactions, and so on. Any DeFi innovation is dependent on strong technical strength, which is why we chose to quickly launch a DeFi project-Sashimi on Ethereum. Relying on the team’s accumulated experience in the development of aelf and AESwap, we quickly deployed Sashimi’s trading functions, liquidity mining functions, etc. A decentralized trading platform with high liquidity and high returns has been established, where users can smoothly purchase tokens. In the first two days of its launch, Sashimi has recovered 500 million US dollars of liquidity for Uniswap.
Sashimi just released version 2.0, which added many functions such as asset management. SashimiSwap Investment is the first contract that maximizes the use of funds in the trading pool. This contract will invest 90% of the funds in the trading pool through different DeFi products, allowing these idle assets to enter a safe financial market and earn higher returns for liquidity providers. This is something that other DEX products cannot do. It can be said that Sashimi 2.0 is an innovation of DEX products and is completely changing the way the industry develops.
Question 2: DeFi has seen many innovative models, but they are not perfect. What do you think are the flaws and side effects of these new models?
Chen Zhuling: First of all, taking AMM as an example, its biggest problem is slippage and losses without compensation. When the liquidity is not good, if you change a certain amount of money, you will lose a lot because of it, and it will also have a big impact on the price. In addition, since you are providing liquidity, if the token price on the external trading platform drops sharply, the value of the liquidity you provide will also go down significantly.
Then there is the contract issue. It will have some loopholes, or some technical experts will deliberately take advantage of ordinary users’ ignorance of technology and steal their tokens quietly.
Question 3: When did you and your team really start paying attention to DeFi and why?
Chen Zhuling: Actually, we started pay attention to it last year, because we know that the demand for DeFi is real and huge, and many people need decentralized custody mechanisms and so on. In building the aelf ecosystem, we have developed various DeFi applications for the future.
Question 4: Can you talk about the use of DeFi in some products or solutions of your project and platform?
Chen Zhuling: Like the Sashimi project we developed for the community, in addition to providing liquidity mining and AMM, its biggest advantage is using the funds invested by users to invest in other DeFi protocols. For example, a valuable function such as lending promotes economic development and ensures maximum benefits for user. Our protocol is an ingenious design of economic systems and governance model, so that people are motivated to maintain the healthy operation of the entire protocol, thus creating value for more people.
Question 5: DeFi is very popular right now, but will it remain so?
Chen Zhuling: After a period of exponential development, the DeFi sector is slowly back to normal. The emergence of any concept is blindly sought after and hyped at the beginning, and chaos grows. Then as innovators continue to develop new products and more participants came on board, the market will gradually reshuffle, then it will slowly discover the true value, and now DeFi is in this period. Like I have just mentioned, part of the true value is to perform the traditional financial function in a decentralized way. This is undoubtedly promoting the economic development, and the value flow between blockchains, which has made the blockchain ecosystem richer. So the question should not be whether DeFi will remain popular, but whether DeFi will continue to develop healthily as an indispensable part.
Question 6: Because of the rise of UniSwap, many public chain ecosystems have launched similar Swap and liquidity mining products. What’s your take on this?
Chen Zhuling: In the future evolution of Swap, there will be two directions. The first is to shift from the original imitation based on Uniswap to focus on functional innovation, just like the new SashimiSwap Investment financial platform introduced by Sashimi 2.0, which has become the super platform of Uniswap+YFI. Second, Swap will be transferred to other public chains to enjoy better performance. For example, TRON’s Justswap makes its transaction fee affordable to everyone. As mentioned earlier, Swap itself is used as a tool for token exchange and interest generation. This is a driving force for value transfer and will create new and unique opportunities for public chain projects that are good at different things. For example, aelf is good at cross-chain and high-performance processing, which aelf’s DeFi strategy focuses on. They can reduce transaction fees, and quickly process each single business, and then promote the ecosystem growth of the entire industry through cross-chain.
Question 7: For some existing problems of DeFi, has your team come up with any innovative solutions? Can you briefly introduce them?
Chen Zhuling: For the liquidity on AMM, Sashimi innovatively completed SashimiSwap Investment, so that the locked liquidity can be used for risk-free borrowing, thereby generating interest. For example, there are 2 billion US dollars worth of liquidity on Uniswap, but the liquidity is only used for AMM in transactions. SashimiSwap Investment can use 90% of its liquidity for risk-free borrowing while ensuring the same liquidity. Assuming a 10% annualized return on the borrower, Sashimi can generate an annualized profit of US$180 million more than Uniswap does under the same liquidity conditions. What’s more, SashimiSwap Investment uses pure smart contract logic to complete the investment of users’ deposits. There is no third-party operation and the process is absolutely transparent and fair. This not only ensures maximum interests for investors, but also makes this model increasingly popular.
Question 8: Has the arrival of DeFi affected the future roadmap of your platform and project? If so, how will you make targeted decisions in the future?
Chen Zhuling: The aelf team has been very actively involved in the building and design of the DeFi ecosystem. Various DeFi protocols such as DEX and lending have been included on the aelf testnet for users’ convenience. Recently, we conducted a public beta of AESwap, which was well received by the community. At the same time, SashimiSwap built by the aelf team on Ethereum has always been committed to technological innovation and adding liquidity. We believe that DeFi will be an important landmark in the blockchain industry, and the core competitiveness is technical strength and liquidity. Aelf is already in a leading position on these two tracks.
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