Sunday, April 11, 2021

Elaphant Team and Elastos DeFi

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Translated by Joel M.

Edited by Kenneth K

Good evening, everyone. First, let me introduce myself. I am a partner of the Elastos Foundation, helping Elastos to expand its ecosystem. I am also leading the two project teams of Elaphant and Elabank which have been merged into the Elaphant Team.

Our team is a community team, currently operating part-time, and our members are distributed in China, the United States, the United Kingdom, Australia, Austria, Canada, etc., and are not part of the Elastos Foundation. The project we are currently doing is a project for the ecosystem based on Elastos. It does not belong to the Elastos Foundation, nor is it a project led or controlled by the Foundation.

Today I would like to share with you my views on DeFi and why we are creating a DeFi project. The content discussed today only represents my personal views and has nothing to do with the team and the project.

Opinion 1: DeFi signifies that blockchain has moved from concept to practicality

Unlike 2017, when projects used white papers for ICOs, today’s blockchain is emerging from the virtual to the real. If you are an engineer, whether you recognise the value of BTC/ETH or not, now there is demand to exchange ETH and BTC, and you can earn a fee from that. But is a real application to have smart contracts for digital currency exchange? Is this what real demand is? The answer is obvious. Do Tencent engineers love to play games? Do iQiyi engineers like to watch movies? Not necessarily. Therefore, from this perspective, today’s dApps and smart contracts in the DeFi field are real needs and real applications. This is different from 2017 with just white papers on various concepts.

Some people have seen DeFi token prices rise hundreds or thousands of times, even with the unit price outpacing BTC. They think it is MLM. They are useless coins without any usage. This view is the same as how people in the traditional field view BTC. They only see the crazy side of capital and not the other side of value. Take this round’s market influencing project COMP token as an example. It is a governance token with only voting functions and no revenue. With COMP, you can vote to adjust interest rates and add currencies.

If we want to add ELA to Compound, we need to get enough COMP to vote. This approach is the same as using HT to vote for coins. Is this a purpose? Does it work? Usage means value. For you, you don’t need to vote for the listing, it doesn’t appeal to you; but it is needed for others and these people must find a way to get more COMP. The cheapest way to get it is to buy COMP on the exchange. As a result, a secondary market is formed. Some people might not need COMP in the first place, they will invest in it to make money by buying low and selling high. COMP reached up to $180, and after this round of retracement, it still holds around $130 today.

Let’s talk about Uniswap. It is a project from a young man who just graduated from university and did not find a suitable job. He just built the platform intermittently in one or two years. Several hundred lines of contract code have done the work of traditional banks. The great thing about it is that it replaces exchanges and allows  on-chain exchange. A lot of DEX projects came out in the past two years, but they are not considered successful compared to Uniswap. I think the difference here is that Uniswap is more efficient, more automated, lower threshold, and simpler in AMM mode. This feature is very suitable for employing smart contracts. Contrasting with the traditional order book method, each additional trading pair requires a series of operations, and the high threshold for listing cost. At the same time, it needs to attract users and traffic, otherwise no one will participate without trading depth. That is why everyone likes to trade on Huobi. The AMM method is different. As long as someone creates a trading pair pool, transactions can occur anytime and anywhere, even if only one person buying/selling causes a change in prices. The deviation of price from other exchanges creates room for arbitrage. It will attract a second person to make a second transaction for arbitrage. As long as there is a price difference between Uniswap and other exchanges, there will be continued arbitrage and trading will continue. Going back to what I said earlier, do you think Uniswap’s governance token UNI is useful? Should it be valuable if it is useful?

Opinion 2: Smart contracts are the future interface of Internet transactions

In addition to Compound lending and Uniswap token swaps, many interesting projects have also been produced, such as the popular “farming” projects, which often require users to add liquidity to Uniswap, and then corresponding to the scale of liquidity provided they receive Token rewards. There are also some “machine gun pool” projects, such as YFI, the first project in history with a unit price of tokens exceeding BTC. Users put funds into YFI, which then arbitrages other projects to give rewards to users. The combination of these projects is vividly referred to as “DeFi Lego”.

One dApp can read all the data in another dApp, can share that data with all users, can use all assets, and can reuse all the functions of another dApp. The degree of integration of this combination far exceeds the interactions between traditional Internet apps. This is precisely the value of the Web3 concept. All users are wallets on the chain and belong to the chain. All data belongs to the wallet, and all assets are controlled by the user’s wallet. Users have the greatest autonomy here. Users’ data and assets have the greatest degree of freedom, and dApp smart contracts have the greatest degree of openness. All dApps are user-oriented services. As long as the user is authorized, one dApp can use the user data and assets in another dApp without authorization of the called dApp.

Today we can see the emergence of new projects every now and then, and innovative projects are emerging in an endless stream. We have seen a lot of clones on Tron at the beginning of the DeFi boom, but today it is not viable to do so. Smart contracts on Ethereum are like genetic codes, endless permutations and combinations, and interoperable without thresholds. They are the foundation of ecological vigor and innovation. This foundation cannot be imitated. Not only other projects, but also today’s traditional Internet, are also impossible to imitate.

So where is the ultimate of the Internet? I think it is “service contractualization”. The call and payment of traditional Internet open APIs are separated, and payment needs to be made asynchronously. At the same time, users and data are separated. These hinder the optimal allocation of resources and increase transaction friction costs. And DeFi has fully demonstrated the value of interoperability. Take Filecoin mining as an example. Many miners build IDC mines for mining. The risks involved are not discussed. If we can open up these computing capabilities like Alibaba Cloud for the rental market, and go a step further, tokenize computing capabilities so that they can be used by contracts, then we can realize the arbitrage between spot and futures market of FIL coin based on the contract. When the price of FIL coin fluctuates or the computing power of the whole network fluctuates, the smart contract quickly buys the “computing power token” and performs mining to obtain FIL. When the market opportunity ends, then “computing power token” is sold to complete the arbitrage. Hash service providers help idle computing power to earn rent. Investors earn the spread. This process has helped Filecoin ecology to smooth out computing power and token prices.

You may have noticed that flash loans were mentioned in the recent hacking attacks, which was following the same logic.

By extension, can Alibaba Cloud and AWS contract their cloud services? Can Alipay or DECP open the contract interface? Today, all existing service capabilities and service interfaces on the Internet can be contracted. Through contracting, “pay for use” can be realized. This method allows Internet services to be quickly reused and combined. Some services can also be contracted to provide profitability, i.e. financialization. Only after contractualization can service capabilities be added to the world’s large markets and large cycles. Especially in the context of today’s Sino-US and even Sino-Western trade frictions.

Before, everyone also discussed centralized exchanges and DEX. If Huobi and Binance directed the traffic of centralized exchanges to decentralized swaps, will the advantages of uniswap still exist? This may be a powerful response of the centralized exchanges.

Opinion3: The public chain should be repositioned and then set out

The storage value of BTC and the programmable transactions value of ETH have basically established their position and role in the blockchain world. At this time, there is almost no chance to challenge them like in 2017. It is basically unrealistic to abandon the traditional public chain, i.e. to form a system on its own, and become its own country. EOS used to be such a promising project, but in essence it did not surpass the field of “programmable transactions” provided by ETH smart contracts. Unless there is a project to create a new field, it is impossible to surpass ETH.

From a large perspective, I personally think that Elastos’s vision of data privatization and data protection, and making “data programmable” is a potential feasible application area. This is a feasible development direction of ELA in the long run.

From the current status quo, there are many layer 2 solutions on ETH. Expansion of ETH is a just-needed scenario. The Elastos side chain is faster, cheaper and more scalable, and can become a solution for ETH’s upper-layer network. Similarly, Elastos integrates BTC ledger, Hive storage, and carrier messaging, which can expand dApps to more capabilities and scenarios.

Therefore, I think DeFi is a new starting point for blockchain contracts. It has successfully introduced funds and user traffic. The next challenge is who can better expand contract capabilities and start projects on this new track. I suggested interacting with the ETH ecosystem in the near future, complementing one another; and creating a new field of data programming in the long term that can build healthy competition.

With the above points of view, let me introduce a few projects currently being worked on:

The first one is TokSwap: https://tokswap.net 

We copied the Uniswap contract. Its value is to provide AMM token swap services for the Elastos ecosystem and help ELA as a traffic tool. At the same time, it can also be used as a token issuance tool. For example, we have issued Elaphant coins and fruit coins as an example.

Let’s expand a bit. Many people have asked what is the use of joining WEF. WEF carries out projects to aid underdeveloped regions such as Africa. Due to local government efficiency, capacity, corruption, and other reasons, the use of poverty alleviation funds, transparency, fairness and efficiency are all facing problems, including local government currencies. So through WEF projects, is it possible to issue shoe tokens, wheat tokens, and seed tokens there, and then use these tokens to exchange for physical objects? These Tokens are not exchanged with fiat currencies, but exchanged with each other through Swap.

Earlier, we said that ancient currency was used as an intermediary to improve the efficiency of commodity flow. However, how much currency is needed in the market is always a mystery. Hayek suggests that countries open up their currencies and let currencies compete with each other to see who can better track market demand.

In Swap, A can be exchanged for B, B can be exchanged for C, C can be exchanged for D, then A can be exchanged for D through routing, which gives us the ability to barter with high efficiency and low cost. Why do we need a currency as an intermediary? In the time when everything can be exchanged, when a token is favored, it may become a stored value and exchange tool, and different countries, different regions, and different groups of people may have different preferences and needs, so everyone can have different stored value tokens. This is the possibility that Swap can provide. After having Swap, the best currency is no currency. I look forward to the substantial cooperation between EF and WEF.

The second project is ShadowTokens: https://tokbridge.net 

This project comes from Token Bridge, a sub-project of POA Network. It can provide cross-chain asset wrapping. You deposit USDT on ETH, you can get 1 to 1 ethUSDT on ELA, and the reverse is also true. It bridges Elastos and Ethereum.

I have seen many people worry about whether ELA will lose traffic to ETH. My response is that the shift has already existed. What we have to do, for example, is integrate into the ecosystems of the Yangtze River Delta and the Pearl River Delta, like the strategies of cities in Suzhou, Kunshan and Dongguan. We should co-exist and prosper with ETH, considering how to cooperate with ETH ecology. For example, as mentioned above, we can deploy high gas consumption projects to the Elastos side chain instead, and map assets to the side chain through cross-chain contracts. Users operate with low gas on the side chain, and withdraw the assets back to ETH if needed. To sum it up: trading on ETH, calculate on ELA.

Because our sidechain EVM is fully compatible with Ethereum, rules on address and signatures are also fully compatible, and the cross-chain process and operation process can be done without users’ awareness. In addition, DApps can simultaneously handle assets of both chains and across chains, which also caters for more application scenarios. If we can’t stop the siphon, it is better to reposition and think about how to cooperate; ShadowTokens is that tool to bridge the divide.

The compatibility can be seen, for example, as the address of ETH and the address of ELA sidechain are exactly the same. If I want to give you airdrop ELA based on your activities on ETH, I can do it directly without binding any address.

The third project is Quicksilver: https://quicksilver.finance 

This project is copied from the Compound contract, and its function is that you can pledge ELA to the contract and borrow USDT. In a nutshell, it can turn low-speed assets into high-speed assets.

For us ELA holders, everyone can get liquidity without selling the coin. For the ELA ecosystem, more funds are introduced through borrowing, which will provide a financing basis for the dApp of the ELA ecosystem, and attract more dApps to the ELA ecosystem. More dApps can provide support for the value of ELA, and the increase in ELA price can generate more funds. This creates a positive loop. In addition, Quicksilver will also support FIL lending, which is the underlying agreement of the Filda project. This is also to increase the application scenarios of Elastos through interaction with Filecoin.

It’s like the country activates the economy by creating liquidity through the bank credit system. Quicksilver provides us with this source of funds to activate the ELA ecosystem.

To sum up, many people say that we always copy other people’s projects. I don’t know if you know that the genes of gorillas are as high as 99% similar to human genes. We completed three basic projects in two months, with contracts that have been proven effective. This saved us a lot of development costs and trial and error costs. Is this the right choice?

Of course we understand that we cannot surpass the original projects by copying, but our goal is the prosperity of Elastos, not a better swap or better lending project. Therefore, how to develop the 1% difference based on these basic agreements is the key. This requires EF, requires developers, and requires the joint efforts of the entire community.

Currently TokSwap and ShadowTokens have been launched on the mainnet, and Quicksilver is launched on Testnet. We welcome everyone to try these products. Many community members have not tried DeFi yet. I personally suggest that whether it is a project, a team or an individual, it is very necessary to participate in and actively learn; otherwise the hot spots in 2021 may be even more difficult to understand and step on. Therefore, we have deployed these three projects on Testnet. You can go to the faucet to apply for test coins, learning to understand through experience, and later we will find partners to make courses and provide basic training for everyone. Please pay attention.

Finally, let’s talk about our follow-up plan:

As mentioned earlier, we will officially release the Quicksilver project soon, which will support FIL and ELA lending, and provide support for it as the underlying protocol of the Filda project, expand investment channels for ELA holders, and increase ELA chain assets.

Quicksilver is different from the previous two projects in that it is a key project. This project will involve multiple parties to jointly provide support for the ELA ecosystem.

After that, we will explore smart contract wallets. Through the combination of smart contract wallets and ShadowTokens, we can realize seamless user experience in cross-chain transactions with ETH contracts. It facilitates ETH dApps to reduce gas, and realize ETH’s layer 2 network solution. In this way, we will not only see traffic leading outwards, but also inwards.

Let me introduce these first, and we can discuss with each other over specific issues. Just like the opinion I expressed for the coin burn proposal, listing and the burn are not the key. We must find application scenarios for ELA, and creating demand is the most important. Like everyone, I want to see ELA price go back where we once were, but there is no miracle and we can only rely on ourselves. I hope that like-minded community members can join us.

Thank you all.

Q&A

Q: May I ask Mr. Song, what is the focus of the next development of Elaphant Wallet? What functions are planned to be developed? Is there a project plan that ordinary community members can participate in and get rewards?

Elaphant Wallet has been community-based, with the support of CR. The current focus is on the Web3 engine, that is, to develop and support smart contracts and dapps that target users. Simply put, the first step is to replace metamask. In the next step, Elaphant Wallet enables ETH and ELA cross-chain transactions, which can be used as the operating environment for cross-chain dapps. We will explore the aforementioned ELA as the second layer network solution of ETH. The ELP token is currently launched, and everyone can participate.

Q: Can these services be integrated into elastOS and have a unified entrance? What are the difficulties of integrating into elastOS?

These are all dApps. Of course, we welcome the elastOS team or community team to help and support. For the time being, we need to solve the process of starting from nothing. We did not develop for elastOS, so we don’t know if there will be difficulties. I previously understood that the elastOS technical route is ReactNative, and the current dApp mainstream is H5 App, which may be different.

Q: Why not develop based on elastOS, the projects in the Elastos ecosystem do not use elastos to develop, who do we expect to use elastOS?

We are now completely developing based on metamask, which is an established de facto standard for dapps. If we want to integrate into a larger ecology, we cannot limit ourselves. We want to make a cross-chain solution, not just a small program. Our Elaphant wallet also has its own interface, which has been modified in accordance with the metamask standard.

Q: I would like to ask Mr. Song, how do you think DeFi in Elastos ecology attracts community members to participate, and does participation give community members a good return? What are the key factors for the success of Elastos DeFi?

I believe that everyone will automatically participate in projects that have a money-making potential. I think that the members of the community are trapped by the low ELA price, including myself. Therefore, the first step is to let everyone have “living money” available. If the community has money, it can naturally attract projects. When there are more projects, the best projects can stand out, and the value of ela can be increased. This may lead to a win-win situation for all parties.

DeFi has its own game rules. You need to try it yourself. You can’t understand it by just looking at it. I experience the defi projects on ETH and the gas spent is almost 2 ETH. Community members who are good at using DeFi tools can contact me. It is important how to put these ideas into operation.

Q: Mr Song, what about the future ELP plan?

The Elaphant Wallet is undergoing a revision, and the current applet list will be cancelled. This is required by the app store. All applets are changed to URL favorite list. Then there will be a built-in recommendation link. If you want to upload a referral link, you need to pledge ELP, which may be calculated by quantity, time and/or more variables. More scenarios will be developed in the future.

ELP is a practice of token models. Everyone can play it, but don’t get too involved. As mentioned in the group last time, I think we should add a token model to Elastos’s technical solution. New tokens instead of ELA, and then let ELA participate by providing liquidity and other values ​​through swaps. Drive ELA demand with applications.

The wallet is only the carrier to drive adoption. We are concerned about how to make the ecosystem prosper. At present, it is mainly the ecosystem of ELA coin. This is far more important than the number of users that the Elaphant wallet can obtain. This has long been a concern. Elaphant Wallet is a product carrier that has to be used when others have not yet supported ELA and cannot realize our cross-chain solution.

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