DeFi: An unstoppable trend
Source: defillama.com
Since 2018, when DeFi protocols first launched, DeFi has become an industry to be reckoned with, with hundreds of billions of turnover and total value locked. As an open, timely, accurate and traceable ledger, blockchain technology has enabled this new financial paradigm. Just on Ethereum alone, millions of builders are working on thousands of DeFi applications. Ideas and innovations are emerging all the time, and as the diagram below shows, the DeFi ecosystem is incredibly vibrant. Regardless of whether we support it or not, decentralized finance has emerged as a powerful and transformative trend that cannot be underestimated.
Source: The Block
With all the disruptions of centralized financial institutions, including Silicon Valley Bank as well as FTX, one of the biggest crypto CEX, investors are increasingly concerned for the safety of their assets. According to a survey from The State of DeFi (2023 version), asking investors what they value most when holding their assets, their top 3 concerns are:
1. Control: direct ownership of their assets.
2. Security: no third parties and self-reliance
3. Trust: transparency
What is the appeal of DeFi?
Besides the self-ownership powered by blockchain and crypto technology, as a decentralized ledger, public blockchains such as Ethereum enables assets to be highly programmable, and transactions can be settled with high efficiency and low cost, with transaction data recorded immutably, publicly, and in real time.
Tokenization enables DeFi applications to achieve various benefits compared to traditional financial services, including:
1. Fewer intermediaries, lower cost: regarding cost, as transactions are executed through on-chain smart contracts, assets settle and clear directly based on the smart contract’s logic, without cumbersome T+N settlement processes caused by complex traditional accounting methods and unsynchronized ledgers, thus removing most intermediaries in the process.
Source: Binance Research
2. Flexibility and interoperability: Once assets are tokenized, they can have high flexibility and interoperability, and can be seamlessly integrated with other on-chain financial applications, offering a better experience and lower cost for end-users. For example, an investor can acquire assets on a DEX, then use said assets for collateral in lending activities immediately after the execution of the transaction (which might take only several seconds), without the need to open separate accounts and transfer assets between different platforms.
3. Real time analytics: blockchain enables a timely, transparent, accurate, and complete on-chain data stream for real time monitoring and analysis.
In search of sustainable yield
During the crypto winter, the average DeFi yield for stablecoins was even lower than US Treasury bill rate, otherwise known as the “risk free rate”. Below is a screenshot of AAVE, the largest lending protocol on Ethereum, offering only ~3% APY for liquidity providers.
Source: aave.com (as of June 19, 2023)
DeFi yields are highly dependent on on-chain activities. Currently, DeFi yields can be obtained via three kinds of activities:
1. Staking depends on new token issuance, and it can be risky for staking token with small market cap.
2. Trading. Liquidity providers for trading pools can obtain yields through sharing in the trading fees of the pools. However, this depends on market conditions and on-chain trading activities.
3. Lending. As DeFi is a mostly an anonymous environment lacking credit creation, lending activities require over-collateralisation and generate only low interest rates during bear markets.
We believe that natively digital on-chain assets with no real-world ‘presence’ or use-case have limited fundamental basis for valuation and consequently exist in a bubble. In a crypto winter situation, with on-chain activities sharply declining, DeFi yields will correspondingly drop to an extremely low level. Real world assets can give DeFi a sustainable yield source which cannot otherwise be obtained – as an example, in the private credit markets, it’s not hard to find a risk-adjusted return of 10%.
Given that the fundamental role of finance is to empower the real economy, if we can bridge assets from the real world to the blockchain, we can give DeFi applications a sustainable yield source while increasing capital efficiency and lowering costs to support productive economic activities.
Bringing real-world assets on-chain
For real world assets, no matter a stock, a bond or something else, a legal entity needs to own or custodies the asset. During a normal tokenization process, an issuer will be responsible for tokenizing the real world asset (RWA) and mapping such RWA to the blockchain. Several DeFi projects aim to bridge the two worlds, bringing their processes and frameworks to make on-chain RWA happen. But most of them remain quite problematic.
Challenges with existing tokenization structure
We believe that decentralisation doesn’t necessarily equate to deregulation. With the demise of FTX, regulatory requirements are likely to increase in the whole crypto space, with regulators likely to impose new regulatory frameworks for dealing with cryptocurrencies.
The graph below is a US T-bill tokenization process used by one of DeFi protocols. The right part describes the normal T-bill market, which is fully regulated. The left side describes the tokenisation process, which is unregulated. Briefly, the issuer gets USD or USD stablecoins from investors and uses them to operate in the T-bill market.
Source: DigiFT
Many issuers in the space are not regulated, which means:
1. Issuance structure, process flow or risk management might be unsound.
2. Investors might not receive comprehensive information disclosure.
3. The executive team might lack professional finance know-hows.
4. Underlying assets might not be properly segregated.
With such framework, investors can only rely on the issuer’s reputation, which is a huge counterparty risk.
Best practices from a regulatory-compliant DEX
DigiFT has been in the DeFi space since 2020, building a regulatory compliant DEX for security tokens. The leadership team comes with extensive experience in financial services and blockchain technology, which is instrumental in addressing the legal and technical hurdles to bring RWA on-chain and be compatible with existing DeFi applications.
Source: DigiFT
DigiFT itself is a regulatory-compliant DEX and has no custody of neither users’ nor issuers’ assets. The off-chain assets are in third party custody and the on-chain assets are in users’ own wallets with their own control. All the issuers and investors will be required to pass AML and KYC, combined with other needed information.
The smart contracts are designed to support a fair, transparent, and orderly market, with mechanism to prevent disorderly trading and front running.
For the transaction and investor perspective, one of the major concerns is how to regulate investors and transactions, as the blockchain ledger is permissionless and anonymous in nature. The good news is that the ledger records all the transactions in a complete, accurate, and timely manner. The ledger is immutable and transparent, thus we can monitor on-chain activities in real time.
Combined with KYC (Know your customer), KYW (know your wallet) and wallet addresses labelling (coupled with third-party data analytics), we can achieve comprehensive risk assessment on the investor for AML and CFT purposes.
Challenges and future state
With the prosperous development of DeFi, an increasing number of professionals from traditional finance and web3 sectors are paying attention to this space to build bridges between the two worlds. Traditional finance and decentralized finance have never been mutually exclusive. However, in our practice we still face numerous challenges. For example, lack of standardized smart contracts, lack of clear regulatory framework for tokenization and trading, and limited institutional participation.
From paper notes traded at counters to electronic forms, financial instruments have continuously evolved as new technologies emerge. Now is time for RWA tokenization and DeFi to take centre-stage, in a regulated manner.
About DigiFT
DigiFT aims to provide regulated decentralized finance solutions on the Ethereum public blockchain. We are operating the first regulation-abiding decentralized digital asset exchange where asset owners can issue blockchain-based security tokens efficiently and cost-effectively. Investors can trade with continuous liquidity via an AMM mechanism and retain control over digital asset tokens in their own wallets. We are a global outfit backed by well-established venture partners. The founding team originates from international financial institutions and has deep blockchain technology knowledge.
For more information, please contact:
Disclaimer:
This article and its contents are prepared solely for informational purposes only and do not replace independent professional judgement. Under no circumstances should the information contained herein be used or considered as an offer to sell, or solicitation of an offer to buy any security. The content of this presentation is proprietary and no part of it may be reproduced or redistributed without the prior written consent of DigiFT Tech (Singapore) Pte. Ltd. (“the Company”). This article contains public information as of the specified date and may be stale thereafter. No representation or warranty, express or implied, is made as to the fairness, accuracy or completeness of the article and the information contained herein and no reliance should be placed on it. None of the Company, its advisers, connected persons or any other person accepts any liability whatsoever for any loss howsoever arising, directly or indirectly, from this article or its contents. All information, opinions and estimates contained herein are given as of the date hereof and are subject to change without notice. This material should not be viewed as advice or recommendations with respect to asset allocation or any particular investment.
DeFi 如何保持稳定收益？
去中心化金融：无法阻挡的趋势
来源：defillama.com
自 2018 年首个 DeFi 协议推出以后（借贷协议 Compound），DeFi已经成为一个不可忽视的行业，时至今日，链上交易额和锁定总价值（TVL）已经达到数千亿美元。作为一个开放、及时、准确和可追溯的账本，区块链技术使得这种新的金融范式成为可能。仅在以太坊上，数百万的开发者正在致力于成千上万个 DeFi 应用的开发。创意和创新层出不穷，正如下图所示，DeFi 生态系统非常活跃。无论我们是否支持，去中心化金融已经成为一个强大而具有变革性的趋势，不容小觑。
来源：The Block
在包括硅谷银行和 FTX 在内的中心化金融机构出现各种暴雷的背景下，投资者对其资产安全的担忧日益加剧。根据《DeFi 现状报告》（The state of DeFi，2023版）的调查，询问投资者在持有资产时最看重的是什么，他们的前三个关心的点是：
1. 控制：直接拥有自己的资产
2. 安全：无需第三方，自我依赖
3. 信任：透明度
DeFi 如何吸引投资者？
除了由区块链和加密技术赋予的自主权之外，作为去中心化账本，公共区块链如以太坊使资产具备高度可编程性，交易可以高效低成本地结算，交易数据被不可篡改地、公开地实时记录。
通证化使得DeFi应用相比传统金融服务能够实现多种优势，包括：
– 更少的中间商，更低的成本：在成本方面，由于交易是通过链上智能合约执行的，资产基于智能合约的逻辑直接进行结算和清算，无需复杂的传统会计方法和账本不同步导致的繁琐的 T+N 结算流程，减少了大部分中间商的参与，大幅度降低了成本。
来源：Binance Research
– 灵活性和互操作性：一旦资产完成通证化，它们可以具备高度的灵活性和互操作性，并能够与其他链上金融应用无缝集成，为最终用户提供更好的体验和更低的成本。例如，投资者可以在去中心化交易所购买资产，然后在交易执行后立即将这些资产用作借贷活动的抵押品（这可能只需要几秒钟的时间），而无需在不同平台之间开设单独的账户和进行资产转移。
– 实时数据分析: 区块链是一个实时，透明，完整，准确的数据流，能够允许链上交易数据的实时监控和分析。
稳定收益：DeFi 的探索之路
在加密货币的寒冬，DeFi 上稳定币平均收益率甚至低于被称为“无风险利率”的美国国债的利率，而考虑到合约和以太坊被攻击的风险，DeFi 上风险和收益完全不成正比。下面是以太坊上最大的借贷协议 AAVE 的截图，显示提供流动性的用户仅获得约 3% 的年化收益率（APY）。
来源：aave.com (数据于 2023.06.19)
– Staking，质押活动。 Staking 依赖于新代币的增发，或是其他活动带来的手续费收入。对于新代币增发， 考虑到小市值代币的波动率，质押活动可能会有较高的风险。
– Trading，交易活动。在去中心化交易所的交易池中，流动性提供者可以通过为交易提供流动性获得交易手续费的收入。这类收入高度依赖于链上的交易活动，因此在低迷行情中收益较低，也需要承担池中代币价格活动带来的无偿损失风险。
– Lending，借贷活动。 在大部分 DeFi 应用中，用户都是完全匿名的。在匿名的环境难以做到信用创造，因此链上借贷需要超额抵押，资本使用效率较低，在市场低迷时借贷活动不活跃，利率也会非常低。
我们认为，那些在区块链上原生数字化的，并且没有在真实世界“存在“或用途的资产，在基本面估值上基础非常有限，会容易存在泡沫。在加密货币的寒冬中，随着链上金融活动的急剧下降，DeFi 收益率也相应下跌到极低的水平，甚至低于无风险利率。
现实世界资产（Real World Assets，“RWA“），可以为 DeFi 提供可持续的收益来源，这是其他链上原生途径无法获得的 —— 以私人信贷市场为例，很容易找到 10% 左右的风险调整收益率。如果我们回头思考金融的本质，它的基本功能应该是为实体经济赋能，实现资源的最优配置。如果我们能够将现实世界的资产与区块链进行连接，我们就可以为 DeFi 应用提供可持续的收益来源，同时提高资本效率，降低成本，支持具有生产力的经济活动。
RWA：将现实世界资产带入 DeFi 的实践
对于现实世界资产，无论是股票、债券还是其他类型的资产，都需要有一个法人实体来拥有或托管该资产。在正常的代币化过程中，会有一个发行方将现实世界资产代币化并映射上链。目前有数家 DeFi 项目试图作为发行方来成为两个世界的桥梁，设计了他们各自的流程来实现现实世界资产上链，但其中大部分项目仍然存在很多的问题。
现存代币化结构的挑战
去中心化并不必然等同于无监管。随着 FTX 的倒闭，整个加密货币领域会逐渐趋向合规化，监管机构会对处理加密货币的新监管框架进行规定。
下图是某 DeFi 协议中使用的美国国债代币化的流程。图中右侧描述了完全受监管的正常国债市场。左侧描述了代币化过程。发行方从投资者那里获得美元或美元稳定币，并在法币出入金之后用于在国债市场进行操作，同时将对应份额的代币发送到投资者的钱包中。本质上，投资者购买的并不是国债，而是该发行方提供的某种以国债为底层资产的基金产品。
来源：DigiFT
该领域大部分发行方是不合规的，这意味着：
1. 发行结构，操作流程和风险管理可能是不完善的
2. 投资者可能没有途径获得项目方完整的信息披露
3. 执行团队可能没有足够的专业知识，没有经过专业的背景调查和审核
4. 底层资产可能没有做妥善的资金隔离，存在破产风险
按上图的不合规的框架，投资者的资产安全需要完全依赖于发行方的信誉，这可能是一个巨大的对手方风险。
来自符合监管的去中心化交易所的最佳实践
DigiFT 自 2020 年以来一直致力于 DeFi 和 RWA 领域，构建符合监管要求的去中心化交易所。领导团队在金融服务和区块链技术领域有丰富的实践和经验，理解其中的法律和技术难点，这对于将 RWA 引入链上并于现有的 DeFi 应用兼容非常重要。
来源：DigiFT
DigiFT 自身是一个符合监管的去中心化交易所，并不托管用户或发行方的资产。链下部分资产是在合规的第三方机构托管，链上资产直接在用户自己的钱包里，由用户自己掌控。所有发行方和投资者都会经过 KYC和 AML 流程，以及其他各类所需的审核。
DEX 的智能合约的设计目标是支持一个公平、透明、有序的市场，设计了一系列市场管控的机制，如避免抢跑交易等。
在交易层面，其中一个核心考量是如何监管投资者和交易，毕竟在链上是一个无需许可并天然匿名的环境。好在区块链这个账本完整记录了所有交易历史，并且做到实时、准确、不可篡改和公开透明，因此我们可以能够实时监控链上活动。结合 KYC（know your customer），KYC（know your wallet）以及和第三方合作的钱包地址标记技术，我们能够对投资者进行全面的风险评估，达到 AML（反洗钱）和 CFT（反恐怖主义融资）的目的。
未来和挑战
随着DeFi的繁荣发展，越来越多传统金融和 Web3 领域的专业人士开始关注这个领域，以在两个世界之间架起桥梁。传统金融和去中心化金融从来就不是相互排斥的。然而，在我们的实践中，我们仍然面临许多挑战。例如，缺乏标准化的智能合约、缺乏关于通证化和交易的清晰监管框架，以及机构参与的限制。
从柜台上交易纸币到电子形式，金融工具随着新技术的出现不断演变。现在是 RWA 通证化和 DeFi 以更合规的方式成为主流的时候了。
关于 DigiFT
项目介绍: DigiFT 由张之皓——前华美银行大中华区首席执行官、花旗银行和渣打银行中国区副行长，于 2020 年创立，其管理团队在传统金融机构和金融科技领域拥有丰富经验。 DigiFT 的愿景是整合中心化与去中心化金融的优势，是目前第一家，同时也是唯一一家进入新加坡金融管理局（MAS）金融科技监管沙盒的去中心化交易所。DigiFT 在以太坊公链上提供符合监管的去中心化金融方案，部署自动做市商（AMM）机制，促进由债券、股权等金融资产作为底层支持的证券型通证的二级市场交易流动性。
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