AMA RECAP: Why am I optimistic about the track of synthetic assets on Polkadot?

Hi everyone, my name is Ericsson, founder of Coinversation Enthusiast Community. Thanks to the CryptoGeek community for inviting me to represent the Coinversation enthusiast community to talk about the topic of synthetic assets on Polkadot.

Synthetic assets have huge potential

In the past 2020, the external world has experienced ups and downs. The currency circle has experienced a trough in March of 2020. I believe that the performance of the entire blockchain industry last year exceeded many people’s expectations. In addition to the external digital feedback of currency prices, capital volume, and circulation pools, more benefits come from the rapid evolution of various ecosystems.

Defi is sought after, Ethereum’s Defi projects this year are eye-catching, and SNX is a typical example. Then there is Polkadot. After Polkadot went online in July, the entire ecosystem has performed very well, and many new projects have been added quickly. Gavin also mentioned in his letter two days ago that Polkadot is now the 2nd most active Defi ecosystem after Ethereum. The Defi track must be the Red Sea, but there is a blue ocean track. Many people didn’t pay much attention before, and only after SNX soared did it attract some attention-it is a synthetic asset.

What kind of track is synthetic assets?

It is a track that can solve real problems. It can solve the problems of traditional centralized exchanges, such as security, transparency… and can quickly establish its real value after landing, and it is possible in terms of user needs. expected. Almost all financial products in the traditional financial world can be chained to achieve barrier-free transactions, so its image is very rich, and reality is tangible and achievable. Such a track is a very high-quality track. Mable, the executive director of the well-known investment institution Multicoin, also mentioned the track of synthetic assets at the end of the year. Synthetic assets include native on-chain assets and stocks that can be traded on decentralized derivatives exchanges.

And such a track will blossom and bear fruit in various ecology because there is a relationship between supply and demand.

Then, it depends on which ecologically friendly degree is higher, which ecological tolerance and foundation are easier to provide development space for the track. The most typical synthetic asset project is Synthetix. Its overall performance is also good and its market value has soared. But in fact, the problem is obvious, that is, the gas fee. This problem does not come from the project, it is an ecological problem. This problem is also an old problem of Ethereum. Therefore, which project on the track of synthetic assets can run out and become a star project has a decisive relationship with the underlying structure of the ecology. At this point, Polkadot’s underlying construction and cross-chain mechanism can solve this practical problem well. And this question determines how many users will come to play in the future. From this point of view, the potential of Polkadot on the synthetic asset track in the future is huge.

Can the synthetic asset project on Polkadot surpass SNX on Ethereum?

The reason why I launched the Coinversation fan community is out of recognition of the Polkadot ecology and this track.

First of all, Coinversation is the first synthetic asset project in Polkadot ecology. Coinversation is a synthetic asset issuance platform and a decentralized contract exchange. It is a project similar to SNX on Polkadot.

From the perspective of Coinversation’s economic model, first of all, it can solve many problems in traditional centralized exchanges, such as security issues and transparency issues. If exchange funds are stolen or the exchange runs off, investors will suffer heavy losses. At the same time, high exchange rates are also an old pain point; exchanges embezzle users’ coins for short selling to manipulate the market is also an old problem. Therefore, Coinversation is a decentralized exchange to solve the core problems of traditional financial exchanges.

Secondly, Coinversation has to solve the problems of “traditional decentralized exchanges”, which are transaction speed, depth, and liquidity issues. Through the design of the mortgage pool, the user mortgages the token CTO or Polkadot DOT to generate synthetic assets, and the user’s loan accounts for a certain proportion of the entire system debt, and then the user’s profit and loss is calculated through this ratio. In this way, you do not need to have a counterparty when trading, nor do you need to consider the depth of the transaction, you can directly form a transaction.

Coinversation’s profit model is very clear. Coinversation’s token CTO can obtain transaction fees. In other words, our tokens are like the shares of the entire project, and the holders of the tokens are like shareholders of a company and can get the dividends of the transaction fees generated by the exchange.

So, Coinversation is a truly viable decentralized exchange with a clear profit model. Last month, Coinversation also announced its participation in Polkadot’s slot auction, allowing more investors to participate in Polkadot’s slot auction, which will be more conducive to Coinversation’s future open source and community construction.

Many community friends came to ask me before, isn’t the CTO benchmarking SNX in the future?

First of all, Synthetic Assets is destined to be a Red Sea track in the next three years, and there will not be only one or two projects like this. Secondly, the coexistence of projects is inevitable, and the development path of each project is different. At this stage, it is indeed benchmarking, but in the future, because of the different ecology, the path will inevitably have its characteristics.

For example, SNX only supports players using SNX to stake. In terms of the richness of mortgage assets, Coinversation should be more open. Not only is it friendly to the assets on the primary chain. Coinversation is still in contact with the consortium chain. In the future, off-chain assets like bills on these consortium chains are expected to participate in the entire synthetic asset game as collateral.

Synthetic asset track, which ecology should invest? Polkadot or Ethereum?

The bull market is here, and everyone is actively investing and eager to try. Recently, many investors came to ask these Red Sea tracks, which ecosystem should I invest in? Who will be the winner, Polkadot or Ethereum?
First, we compare the two ecologies. This is the value flow map of Defi ecological tokens in Ethereum.

Vertically, user rights and interests are tokenized layer by layer from the underlying assets, and the rights and interests are displayed through different tokens, and finally left to the top to meet the various transaction needs of users. From a horizontal perspective, DEX and oracle run through the basic application modules of all projects. Decentralized exchanges provide token exchanges, and oracles provide price mechanisms for various Defi protocols. It can be said to be an ecology with rich dimensions.

Just looking at the fields of mortgage, lending, trading, and synthetic assets, a large number of star projects have emerged on Ethereum: mortgage projects MakerDAO, loan projects Aave and Compound, DEX projects 0X, and Synthetix, which is asset synthesis, have all grown crazily in market value. Especially SNX can be said to be insane. The market value of LINK has also ranked 10th, and it is also on the Defi express train. LINK, MakerDAO, Kyber, and 0X have been online for 17 years. They are the foundation of Defi. Therefore, the reason why the Defi track is so popular is not an unprovoked outbreak, but the construction of track infrastructure in the past 3–5 years as a foundation.

Let’s look at Polkadot again. The picture above is an overview of Polkadot ecology.

We can see ImToken、Cobo Wallet etc. However, these projects exist in the ecology of each public chain, not exclusive Polkadot. In terms of ecological development maturity, there is a considerable gap between Polkadot and Ethereum. But this is a problem of the time difference, and Polkadot has only been online for half a year.

Polkadot’s technical framework details and implementation ideas are excellent. I even think that Polkadot’s technical implementation framework can surpass Ethereum. It realizes the expansion of the blockchain by bridging heterogeneous blockchains and using parallel chains to communicate with other blockchains. If you put it in the perspective of Web 3.0, that means unified. In terms of technical implementation details, review Gavin Wood’s experience. For example, pulled Ethereum out of pits. It can be predicted that Polkadot’s technical implementation details are likely to be better than Ethereum.

Looking at Gavin’s persistence and pursuit of decentralization, there is a high probability that this ecological foundation is very solid. The concept of Web3.0 is that the next generation Internet must be an Internet-based on decentralized protocols. At the same time, the Polkadot team conducted a lot of on-chain governance exploration. For example, to solve the problem that the number of voting results may not be 100%, an adaptive voter bias setting is adopted; the time lock voting mechanism is introduced to allow token holders to increase the voting weight of some of their proposals; there are also familiar ones. Council mechanism and so on. These are all Polkadot’s bold innovations in governance mechanisms. It reflects Polkadot’s absolute adherence to the underlying logic of decentralization.

It can be said that the pursuit and understanding of decentralization is the core of the development of the public chain, which determines what framework this public chain adopts, what technology will be implemented, and what kind of ecology will be shaped. Many teams have very good technology, but the deviation of the team’s understanding of decentralization leads to deviations in the project. For example, EOS is typical.

Therefore, looking at the entire public chain field, the current competitors of Ethereum are only Polkadot. But who can lead in the future? It depends on the progress of Ethereum 2.0, which will become Polkadot’s biggest challenge in the future. Only running fast enough does not need to chase or look back at the opponent. The underlying foundation of Polkadot’s ecology is good, but because of the late start, many underlying infrastructure applications need to be built quickly to build a good foundation for the projects in the later stages. For Polkadot, the foundation construction in the next 3–5 years is very important. On the one hand, we need to develop technology quickly; on the other hand, we must attract more projects to settle in the ecology, and build a foundation for future projects.

At this stage, although Web2.0 is like a mountain, from the perspective of the overall ecological layout, governance mechanism, and overall development, Polkadot is still very promising in the next three years.

From my logic, ecology is not an alternative game. What should we do is choosing a valuable track based on its value. So you asked me whether to vote for Polkadot or Ethereum? Then I want to say both. These are two big ecologies. In ecology, we must focus on the track. I only vote for the track with practical value.

That’s why I started the Coinversation Enthusiast Community. First of all, I am optimistic about the Polkadot ecosystem, and at the same time believe that the track of synthetic assets is a foreseeable future. Therefore, I am optimistic about the Coinversation project, and I also hope that more people will join in and become a member of the community.

Many friends ask me which ecology will become an oligopoly. I think it depends on the core problems of their respective ecology and the growth speed of the project. But there is no doubt about the infinite potential of the synthetic asset track.

About Coinversation

Coinversation Protocol is a synthetic asset issuance protocol and decentralised contract trading exchange based on the Polkadot contract chain.

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Coinversation Protocol is a synthetic asset issuance protocol and decentralised contract trading exchange based on the Polkadot contract chain.

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