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The Intersection of Filecoin and DeFi

During the launch week of Filecoin, Colin Evran of Filecoin had a conversation with Stani Kulechov, founder and CEO of Aave, Loong Wang, CTO of Ren Protocol, and Corbin Page, product leader of ConsenSys Codefi, and discussed Filecoin’s role in the DeFi ecosystem. status.

In order to better understand what Filecoin’s main network release means to the fast-growing DeFi world, here are some highlights from the conversation.

What do you think of the intersection of Filecoin and DeFi? What instant use cases do you think Filecoin will open?

Loong Wang, Ren Protocol

A long time ago, a meme about decentralized applications and the ability to acquire these dapps and put them on the chain was popular. Our idea is to replicate the Web2 ecosystem in the decentralized Web3 world.

Soon, this idea was restricted in two ways:

  1. Data storage
  2. A large number of on-chain costs of transactions. Filecoin solves half of the problem, the storage part. Others have also begun to address another part of the problem, namely transaction costs.

Today, the best dapps we see are financial applications. The reason lies in the cost of transactions on the chain. If you pay a few dollars every time you want to perform an operation, then you have to make sure that you get value from the action in a very straightforward way. You want to engage in trading, borrowing, or producing agriculture because you want to make sure you can make up for the losses caused by taking action from the start.

I think the big data set in finance is an obvious use case for the intersection of Filecoin and DeFi. A lot of trading capabilities and investment knowledge come from the access and analysis of large data sets. As part of the Web3 ecosystem, Filecoin does open up opportunities for a new class of DeFi applications that can utilize a large amount of data that has not been able to be used on decentralized protocols until recently.

Corbin Page, ConsenSys Codefi

The state of Ethereum is full. With the launch of Filecoin, we can now transfer storage to Filecoin to complete some heavy tasks, such as payment schedules and token binding curves. Most importantly, DeFi applications can access these heavy data tasks. I think we will see a complete oracle ecosystem switching back and forth between the Filecoin storage network and the Ethereum DeFi ecosystem.

I think one of the shortest use cases for Filecoin and DeFi is simply hosting the front end. Many DeFi and Web3 applications are completely disallowed on their back end, but their front end must still be hosted on AWS or Azure. With Filecoin, you can now have an unlicensed front end that matches the unlicensed back end of these DeFi applications.

The closest analogy I think of is that owning FIL is like owning an IOU to Internet real estate. If you own Filecoin, you know that you can upload data to the Filecoin network at any time in the future. This is the first time to use it, which makes it different from any other crypto assets on the market today, which naturally makes DeFi very interesting.

If you tag FIL on Ethereum, you can now put it in a bucket with tokenized BTC, tokenized ETH, governance token, or any other type of encrypted asset. Over time, these assets will be completely irrelevant. For example, if you mark FIL in the bond lending market, its behavior will be different from other assets in the market. For those of us in DeFi, this is a very exciting opportunity.

Part of the Filecoin agreement is to require miners to purchase and deliver FIL as collateral to run their mining operations. How do you think DeFi will help miners obtain FIL liquidity?

Stani Kulechov, Aave

Mortgage is the basis of the DeFi agreement. This is the best way to release liquidity. Users use valuable assets as collateral to release liquidity and promote the borrowing of existing DeFi applications. In other words, any valuable asset in the agreement can be borrowed and pledged in a highly available system. In this example, the available system is Filecoin mining. I can imagine this is an interesting use case for lending. In fact, I will see it soon.

Recently, we have seen a large number of liquidity pools like Uniswap appear as a viable alternative to centralized exchanges. What change do you think has led to the exchange of liquidity from centralized to decentralized, and what similar changes do you think will happen in the future encryption field?

Loong Wang, Ren Protocol

In the final analysis, it is ease of use and composability. If you want to participate in a centralized exchange (CEX), you must constantly balance your liquidity on these platforms. They may have different deposit and withdrawal times, and there is an additional concern that they trust your data to people who may not be trustworthy.

CEX seems to be a better experience; you may get smaller spreads, greater liquidity, faster transaction speeds, and more traditional trading mechanisms, such as limit orders. However, in the final analysis, cooperation with CEX will still generate greater friction. If you put your password in a wallet, the “distance” from the wallet to CEX is greater than the “distance” from the wallet to the decentralized exchange (DEX).

Compared with completely decentralized transactions, CEX is actually quite limited. You can perform many different financial operations in a single chain transaction. This type of composability is significant for automated market makers (AMM), DEX and other Web3 applications.

I think we will see in the future that DeFi activities will spread to multiple blockchains. Different chains will develop and specialize in unique functions. They will make trade-offs, and consumers will choose among these trade-offs for different reasons. Therefore, you will need interoperability between chains to maintain the composable nature of DeFi. Just as we see the migration of liquidity from CEX to DEX, we will see liquidity spread and grow in multiple chains at once.

Corbin Page, ConsenSys Codefi

Composability and usability are a major advantage of DEX and other Web3 applications. Many people call them “Money Lego” because you can put different combinations together. For example, the dream of an engineer is to figure out how to merge a loan platform with a flash loan system. Mechanisms like flash loans are even impossible to implement in a centralized encryption platform like CEX.

Now, we are adding the information and data terminals of the Internet to the existing Internet value. Because we are developing more and more building blocks every day, we will gradually have more unique applications that can only run on blockchain protocols; there will be no centralized alternatives. We will have all these types of new experiments and applications, because of this unique composability, this is a system that really excites our developers.

Many DeFi builders are considering DeFi solutions for Filecoin. When developers start exploring the intersection of Filecoin and DeFi, what advice do you have?

Stani Kulechov, Aave

I want to emphasize that we are very grateful for the tools that support the network. This is why the Ethereum ecosystem has developed so fast compared to a few years ago. A few years ago, without these tools and libraries, it was extremely difficult to build things. This is my recommendation; I recommend building tools and libraries to help other developers and users.

Loong Wang, Ren Protocol

Embrace the composability of Web3. One unique aspect of composability is that it is ultimately better for users, because you can’t keep users just by building a moat. So you have to build something fundamentally better.

With FIL, we saw for the first time the tokenization of assets that are not essentially a financial instrument. FIL is actually a functional instrument. Developers can and should think about it in a completely different way and build applications that we cannot even think about today.

What does it mean to lend out storage? Is this functionally different from financial asset loans? In order to build and provide something completely different from what we see today, developers should consider these types of issues.

Corbin Page, ConsenSys Codefi

  1. Build things that cannot be achieved today. Encryption and the Web3 ecosystem are evolving so fast that you should spend 6 months really understanding where things are going. I encourage developers to have surreal creativity in the solutions they come up with.
  2. This seems contradictory, but I also recommend solving the real problem. Our ecosystem spends a lot of time in the creative space, which is interesting and amazing. However, in the final analysis, if we want these things to have an impact, we must solve the problems of people in reality; many of these people live outside our cryptographic realm. There are many problems to be solved, so we must put all these creative ideas in reality to build the solutions that people really want.

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