Bitcoin’s Function of Hedging Is Questioned? DREP Promotes High-Quality Development of DeFi
In the financial crisis of 2008, Bitcoin was born and its founder Satoshi Nakamoto wrote a sentence in the genesis block: “The Times 03 / Jan / 2009 Chancellor on brinkof second bailout for banks”.
Bitcoin Is Considered to Be A Product of Financial Crisis and Has Financial Hedging Function as “Digital Gold”
Peer-to-peer, not controlled by the government, relatively anonymous, and difficult to track, as well as deflationary economic model, all the philosophy of Bitcoin is completely opposite to the current legal currency system by government. Therefore, the financial crisis caused by monopoly and oversupply in legal currency system won’t happened in bitcoin. Bitcoin is considered to be a complement to the current monetary system. Someone call it “the product of financial crisis”, and someone also call it “digital gold”. They all think bitcoin has the value of asset storage and hedging.
Until then, Bitcoin has been doing well in value storage. The initial price of Bitcoin was $ 0.0025, and it had a big surge after its first halving in 2012. In December 2017, the price reached a peak of $ 20,000, with an increase of 8 million times. After the highest peak, the price of Bitcoin started to fall and it was back to $ 9,000 last week.
The Financial Market plunged, Bitcoin’s Hedging Function Is Questioned
On 8th March, the global spread of COVID-19 and the battle over crude oil prices resulted in the financial market crash.
Compared with gold, whose price reached $1,700 in 9th, Bitcoin didn’t perform its hedging function as “digital gold”. Instead, as the stock market plunged, the price of Bitcoin slumped from $ 9,000 to 7,900, with 12% decrease.
Some believe that this crash is because PlusToken traders sold a great deal of Bitcoin, while others believe it is caused by the capital outflow under the poor global financial market.
However, some analysts believe this Bitcoin plunge is in accordance with the law of price. In the end of February, Bitcoin price broke through the support line, signifying a downward trend of Bitcoin market. Thus, the recent decline is just a normal performance, meanwhile, it does not rule out the possibility of a sharp rise due to Bitcoin halving.
As a decentralized electronic currency, Bitcoin has completed part of its historical mission. It makes people re-understand the monetary system and lead to the emergence of DeFi; At the same time, it is also an experiment in financial revolution and we will witness the result of this experiment.
The Shortcomings of Bitcoin and Ethereum in The Field of DeFi
If Bitcoin is the pioneer of DeFi, then Ethereum is the developer of DeFi. Most financial protocols are issued on Ethereum because of Ethereum’s first application of smart contract. There are already considerable DeFi activities including asset issuance, asset exchange, stable asset generation, borrowing, etc.
Facing the challenges in the large-scale application of DeFi in the future, Bitcoin and Ethereum have the following shorcomings:
1. Insufficient Performance
The TPS of Ethereum (about 15 transactions per second) cannot meet the needs of large-scale DeFi applications. When there is a popular application, it will cause network congestion. For users and applications, more improvements are needed in usability and experience.
2. High Gas
When it comes to transaction fees for cross-border transfers, the gas in Bitcoin and Ethereum are acceptable. However, when it is applied in DeFi applications, the gas will be too high during the high-frequent transactions, and affect user profits accordingly.
3. Ecology Barriers
As initial public chains, Bitcoin and Ethereum have formed their own communities and ecosystems. On the one hand, the certain interest groups maintain the development of ecology; On the other hand, it prevents some emerging applications or users from entering the ecosystem. For example, the proposal of upgrading from POW to POS was opposed by Ethereum miners.
DREP Lays a Solid Foundation for The Next Generation of DeFi
DREP is committed towards building Connectors and Toolkits based on Blockchain technology, providing solutions that promotes the ease of use, flexibility and frictionless integration. With the technologies behind DREP Chain, ID, Reputation Protocol and SDK, DREP aims to build an open data ecosystem thereby disrupting the current status quo of segregated users and synchronizing fragmented data found on multiple chains.
From the perspective of positioning and technical characteristics, DREP is a suitable underlying infrastructure for DeFi. It has the following outstanding advantages:
1. High Performance, Low Cost
DREP has proposed an alternative method to improve scalability via the development of the “Smart Pipeline” technology, which is similar to a Layer 2 solution, to improve batch data processing capabilities.
DREP Chain takes form as a dual-layer structure constituting the main chain and sub-chains to improve scalability and the efficiency of the blockchain infrastructure without affecting security or decentralization. In DREP’s open-sourced Testnet, DREP Chain achieved peak TPS of over 12,000 in a public benchmark test conducted on January 8th, 2019.
2. DREP DID Supports Cross-Chain and Cross-Platform Asset Management
DREP ID supports multi-asset payment and exchange through the DREP Client application, giving users access to a convenient one-stop account management. In addition, binding different platform addresses to DREP ID allows cross-platform transfer by way of cross-chain interoperation.
Such functionality is not just confined to blockchain. For traditional/centralized platforms within the DREP network, cross-platform management such as asset and data integration, encryption of information, etc. is also available through DREP ID without any interference on the existing numerical systems, loyalty point system, economic system or other aspects of the original platform, thereby forming an interconnected decentralized ecosystem.
3. DREP SDK Lowers the Threshold for DeFi Development
The DREP SDK supports a wide variety of DApps. With DREP SDK, DeFi application developers are able to deploy on multiple public chains with relative ease, and develop customized SDKs for vertical domains.
DREP SDK for blockchain games has the following features, including but not limited to:
· Gaming account module: Cross-chain DREP ID removes segregation of user base across different public chains;
· Payment & trading module: The built-in payment and trading engine can further improve the experience of trading digital asset;
· Digital operation module: Visualization of operational data and in-game economic system, ensuring transparency and allowing configurability.
We believe that the development of DeFi will not stop because of Bitcoin fluctuation. And during this process, with its technology and community advantages, DREP is ready to lay a solid foundation and facilitate the new generation for DeFi.
About DREP Foundation
DREP is committed to building “connectors” and “toolkits” based on blockchain technology, providing solutions that combine ease of use, flexibility and frictionless integration. Based on DREP Chain, DREP ID and DREP SDK, DApp R&D teams are able to release multi-public-chain asset versions, built-in wallets and asset trading platforms with one-click.
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