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Elastos 4th Anniversary WeChat AMA ｜Song Shijun
On August 30, Song Shijun, Head of the Elastos ecosystem project FilDA, was invited to share his ideas about the relationship between DeFi and Web3 with the Chinese community. According to Song, Elastos is the simplest and most convenient way for ordinary users to get into the Web3 world. Also, DeFi can serve as the engine of Web3 by driving the development of applications.
The following is the translated transcript:
Hello everyone, my name is Song Shijun. I’m very glad to communicate with you on the special occasion of “Elastos Web3 4th”. The DeFi projects we developed over the past year include TokenSwap, ShadowToken and QuickSilver. We can exchange tokens in the Elastos ecosystem through TokenSwap; via ShadowToken, we can use cross-chain to Ethereum and HECO; QuickSilver is a loan project which was initially put into a trial operation on the test network of Elastos, but was later published on HECO with its name changed to FilDA. Supported by Rong Chen, Feng Han, Elastos Foundation, Cyber Republic and the community, these projects were successfully launched.
Elastos is a Web3 project. What is the relationship between DeFi and Web3? It’s easy for everyone to understand running code that is decentralized by blockchain confirmations and smart contracts. For example, Hive can realize decentralized storage and Carrier can achieve decentralized communication. Many people think that DeFi is just a financial game, or even regard it as a Ponzi scheme. So today, I will mainly talk about the relationship between DeFi and Web3.
In the past, we encountered some difficulties while promoting Elastos, and we’ve been constantly studying why the Internet and traditional enterprises succeed. We found a pattern: whether a new technology can enjoy popularity lies in whether it can help people make money. We often criticize BAT or various apps for infringing user data, which is also the main reason for the launch of Web3. Then this becomes the question—Why do we still agree to provide these apps or Internet companies with private data such as geographical location information and mobile phone numbers? Can’t we just refuse it?
Once we refuse it, we can’t enjoy these services. Why don’t business owners provide services in a different way? Because if they don’t use the Internet, they will be unable to provide products for such a large market and definitely can’t make money. In a few words, we prefer wealth to rights, information, privacy and freedom. Therefore, with Web3, data can be private, communication can be free and smooth, and property rights can be protected. However, if we can’t make sure that users “earn money” in Web3, everything will be merely empty talk. There is no market for Web3 in some poorer countries such as Africa.
From this point of view, DeFi is a relatively good solution at our current stage. First of all, it has a low access threshold, which means that everyone can use it; secondly, all information is open and transparent on the chain. With DeFi, people can earn money without having to sacrifice any privacy.
Many people will ask, is DeFi a Ponzi scheme and how does money and interest get generated? It makes people money in at least two aspects. On the one hand, it lends assets and collects interest; On the other hand, it takes advantage of price differences between two or more markets. At present, there is Huobi, Binance and Ethereum. Different assets have different flow speeds, supply-demand relationships and use case scenarios in different markets, resulting in different prices, which provides opportunities for people to conduct arbitrage between these markets.
By providing liquidity, the available assets in the market can be increased, the cost to use the assets will be lowered, and the circulation speed can be increased, which makes it easier to establish transaction behaviors and business models on this basis. Moreover, through arbitrage, the price difference between different markets is eliminated, so that business activities can take place in different markets rather than only in a few markets. I’ve found an interesting phenomenon. Products used to be sold at higher prices in physical stores than online, but now this phenomenon basically doesn’t exist, because the price difference between online and offline has also been removed.
For the above applications, DeFi helps to eliminate the price difference between different markets, which provides abundant liquidity, and we can build more complex and extensive applications based on them. It is the same when it comes to Taobao and the current Internet-based commercial environment. Taobao cannot exist without online payment, and neither can e-commerce survive without developed logistics. Web3 is a general term, and is a new industry based on blockchain technology, smart contracts and decentralized storage. Just like e-commerce arose from the internet, a new industry is now being built on the blockchain. DeFi is playing the same role as Alipay and express delivery services, which is to provide the financial foundation for Web3 business.
For ordinary users, DeFi is a very simple and convenient way to enter the Web3 world. As mentioned above, if we can’t help users make money, our technology won’t last long, and its value will be rather limited. There is a book named Capital in the Twenty-First Century. When mentioning the root of the gap between the rich and the poor, the author points out that the cause lies in their different income sources. The poor make money with their labor, while the rich make money with their capital. That is to say, the poor work to make money, while the rich become richer with their money. Making money is also one of the most important sovereign rights a person has. Without private property rights and economic independence, personal sovereignty cannot be realized.
In the traditional world, if we want to open an investment account or a bank account, there are various requirements which are relatively easy to meet. However, if we want to participate in some equity investments or private funds, the requirements will be much stricter, which may require us to possess assets of 500,000 or 3 million yuan. It’s really confusing. I’m poor, but I’m not stupid. Why are poor people not allowed to participate in high-return investments? These systems, which seem to protect investors, actually widen the gap between the rich and the poor.
Nonetheless, in the DeFi world, no matter if you have one million or only one yuan, you can make an investment and get a higher rate of return like everyone else. If you are smart enough to be an investment expert, you can soon accumulate 1 million yuan with 100 yuan. Of course, I’m not persuading you to make investments here. It’s difficult to make money by investing. To make money, we must improve our abilities through constant learning and training. What we emphasize is that I can’t stop you from getting in a car and learning to drive just because you can’t drive. If you want to learn to drive, you must get in the car to practice, otherwise it will become a paradox.
Let’s talk about the investment in DeFi again. If you deposit stablecoins in FilDA, you can get an annual yield of about 16%. I’m not sure about the average annual income of your investments in funds. In DeFi, it is relatively a low-risk income. Hence, DeFi offers the poor an opportunity to make money with low-risk investments. We used to rely on everyone’s faith in Bitcoin, Ethereum, the spirit of Web3 and the concept of Elastos to attract people to the Web3 world. Frankly speaking, this can only attract a certain amount of people. However, we can attract more people if we can help them make money without loss.
To sum up the above viewpoints, DeFi helps users make money in the Web3 world and it endows individuals with the ability of economic independence, which is also the foundation of personal sovereignty. Like Alipay and logistics, DeFi is the basic financial component of the Web3 world.
Secondly, DeFi can also become the engine to promote the development of Web3.
Recently, there has been a voice in the domestic mainstream media, saying that everyone should make greater efforts to develop chips and the manufacturing industry rather than invest money on the Internet, consumption and entertainment, because the industrial base is the foundation of a country. I think people who hold this view may have subjectively simplified the world. Why do people manufacture so many things? Why should we develop science and technology? The ultimate goal is to produce fun and interesting products to satisfy the demands of users. If the products can’t be sold, these projects will become poverty alleviation projects or scientific research projects with no return on investment. The CR also faces this problem when approving projects. Should this project be rewarded or not? Can society afford to invest in R&D regardless of cost?
Everyone should be given the right to consume and express themselves in both the entertainment industry and the consumption industry. Consumption is the heart of the whole production chain and the link that pays for the whole chain. It provides the initial profit source for the entire industrial chain, without which there would not have been the upstream and downstream distribution of the industrial chain. Without the seemingly useless drivers of consumption, entertainment and the Internet, what do we need mobile phones for? Without mobile phones, there would be no demand for chips. China has never had a successful operating system because there is no rigid demand at the demand terminal. Without rigid demand, it’s impossible for manufacturers and suppliers to make money. Thus, they have no choice but to rely on state investment and subsidies, which is definitely unsustainable. Therefore, while selecting the projects for investment, I prefer to invest in the sectors of terminal consumption, because only consumption applications can drive the entire industrial chain. Investing only in infrastructure will be as laborious and thankless as building an operating system. In the end, no one will use the operating system, and the technical team will end up running out of money without achieving any adoption.
The Metaverse is a frequently mentioned concept nowadays. You can develop new businesses in the world of games. For example, there may be game prop shops, various artistic creations and advertising demands, which constitute a parallel world corresponding to the traditional world. Can we implant some of our technologies and solutions by constructing such virtual scenes, games and worlds? If users can get benefits and business owners can make money from it, the ecology will prosper and attract more people. By then, even if CR or EF is no longer providing financial support, all upstream and downstream business owners will invest, and the technical solutions will naturally be perfected. Ethereum is a typical example. It has achieved a great effect now. Developers all over the world provide improvement schemes for Ethereum.
DeFi can provide better financial services as well as various types of support for these application scenarios, thereby playing the role of financial leverage to circulate artworks and NFT assets like bitcoins. DeFi serves as an amplifier of all these assets. The wealth effect will attract more people. Consequently, the market and ecology will become more prosperous. By driving the development of the underlying technology with the attraction of making the ecology more prosperous at the terminal, we can not only yield twice the result with half the effort, but also achieve sustainable development. I think this is a great idea to promote Elastos and Web3.
Taking FilDA as an example, it has been established for 8 months, generating interest revenue of more than 18 million US dollars for all participants and providing loans of more than 10 million US dollars for ELA users. 2.5 million ELAs have been locked during the peak on the sidechain of Elastos, and there are still about 1.5 million ELAs at present. There are about 30,000 deposit and loan users, half of whom have loans, and there are about 3,000 independent visits every day. This is very interesting.
As a matter of fact, DeFi is not just a financial tool. I prefer to call it a “financial model”. We can connect DeFi to different types of assets and contents to make the application scenarios more attractive, thereby promoting the popularity of Web3 technology and playing the role of DeFi as an amplifier. This is the theme of my talk today: DeFi gives Web3 wings.
That’s all for my presentation today. Thank you very much!