What will be the Crypto industry images in 2023 to continue to attract new users after an unsuccessful year with a series of collapses?
Security is probably the most mentioned phrase whenever users think of Decentralized Finance when a series of vulnerabilities in systems are exposed. 2022 marks a series of hacks with an average of 32.6 million USD stolen (according to Eliptic data) and BNBChain is in 2022 when it surpasses Etherum to become the most hacked network by hackers. (in which in 2020 only Ethereum is hacked the most). This proves that Ethereum has made efforts to protect users’ assets on this network.
Read more of hacks in: Crypto Recap 2022.
Hacker’s ‘hot’ methods in 2022 include:
Attacks over Bridges between networks: This is the most prominent and obvious trend in 2022. Bridges are services that allow users to exchange cryptocurrencies between networks – understand a simply “jumping the chain”. Bridges are slowly gaining popularity because of the lack of ID verification required to swap assets. When users decide to convert assets, these smart contracts lock the assets on the original blockchain and release the equivalent amount of assets to be converted on the target blockchain. This leads to a large amount of liquidity locked up in smart contracts.
For hackers, a poorly secured smart contract is a bargain. Specifically, the BSC Token Hub, Ronin, Wormhole, Qubit, Harmony and Nomad hacks are cross-chain bridges. More than $1.85 billion was stolen from these services in 2022 – almost 70% of all hacks this year. This is more than double that of 2021, when bridge attacks cost only $640 million.
Any solution for the security of the Bridges? Regarding users, the risk of using Bridge is considered low. When using Bridge, users usually receive their funds immediately. The risk here, if any, is when users use non-transparent Bridges.
About the Bridge itself, strengthening the security system is a prerequisite. For a centralized bridge (with a centralized element like the Binance Bridge), security revolves around the operation of the exchange. However, after the FTX incident, the way the floor operates is getting more attention than ever. For decentralized bridges, timely sealing of security holes must be emphasized.
DeFi has been bringing users fast and convenient experiences. Big contributors to that experience are dApps. A huge amount of transactions are done via dApps, some prominent names like UniSwap, PancakeSwap, etc. In addition, user-favored dApps are blooming on sidechains, Layer-2 networks due to their advantages. points for speed and transaction fees.
On Ethereum, Arbitrum, Polygon, Optimism are attracting large volumes of transactions, generating transaction fees greater than Layer-1 as a whole. As Swap dApps proliferate, other applications of lending and especially derivatives trading take the throne as a necessity. Users can now trade futures contracts in a decentralized manner.
This year, Aave and Uniswap launched the protocol on many emerging networks and quickly dominated their segments in volume and TVL. This shows that most users are redirecting to the top applications, instead of the original chains for lending and DEX.
Currently, users in any network are fully capable of using all the benefits that the network offers. Just look at how massive Layer-2 Ethereum’s dApps are, there are even services and names that users haven’t used yet. The explosion of dApps allows users to interact with the network using everyday devices such as laptops or smartphones.
Real Yield: DeFi Trending
If DeFi 1.0 makes users really surprised when reading the huge tokenomics models of projects. When the reality of the model was still untested, the inflow of money caused the token price to skyrocket. The choice at this time has only 2 options: 1 is to lose money, 2 is to research and miss.
The weakness of the DeFi 1.0 models was soon revealed. APY is high but the reward is the native token of the project. When users sell reward tokens to stable coins, it will lead to a long-term downtrend in the price of the token.
DeFi 2.0 with Real Yield was born, which has solved this weakness and is predicted by many to become the future trend. So what is the difference of this model?
Users will get a share of the project’s real yield, not just incentives.
The real profit of the project will come from sustainable economic models such as exchanges, AMM, NFT, lending protocol, derivatives protocol, etc.
Real yield brings better capital efficiency
With the strengths of real yield, this will certainly be one of the trends of the future. This is also an opportunity for investors to seize for the next uptrend season. A typical project of this trend is GMX, a decentralized Derivatives exchange project invested by Binance.
That is not to say that Real Yield is perfect. Real yield is only part of the problem. Some protocols may design tokenomics following a real yield model but actually use token emission to pay the user, which can often happen in cases where the yield is generated from a combination of sources. Investors should question whether the protocol can attract users and continue to generate profits if token incentives are removed. Another problem that real yield projects face is the balance between the distribution of profits to investors and the reinvestment, research and development. Therefore, investors need to consider when protocols that pay high APY do not mean superior performance compared to protocols with lower APY. Besides, protocols that pay users of stablecoins and major coins like BTC or ETH will often be preferable to paying native tokens because they can help native tokens of these protocols reduce price fluctuations.
-To be continued-
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