DeFi Research: Exchange Industry September 2020

DeFi Summary

1. DeFi continued hot, late August Lock amount of $ 8.3 billion . Among them, the daily trading volume of DEX hit a new high of US$1.436 billion on September 1.

2. After the price of Bitcoin ended sideways, the derivatives and spot markets resumed vitality, and the trading volume increased and entered a state of volatility, but the upward trend was not as good as DeFi.

3. DEX still cannot compete with centralized exchanges in terms of volume. The average monthly trading volume in August is only 0.68% and 1.15% of the average monthly trading volume of spot and derivatives.

4. Centralized exchanges are actively deploying DeFi, which is mainly reflected in currency listing, investment and integration of DeFi elements.

5. The mainstream exchanges in the whole market are generally actively listing coins. As of August 28, only 5 major exchanges have not yet launched any DeFi tokens.

6. Centralized exchanges prefer to launch mainstream hot DeFi assets, among which DEX, lending and infrastructure projects are most favored by exchanges. And Chainlink is the DeFi currency with the most online exchanges.

7. Large exchanges, based on their own capital and strategic advantages, are more prominent in their investment in DeFi and long-term strategic layout. Multiple exchanges have launched their own public chains to support DeFi positioning.

8. The integration of DeFi elements is mainly reflected in the marketing or business of introducing DeFi to the platform. Some exchanges launched DeFi index contract products.

9. The total number of DeFi tokens listed on OKEx and the proportion of DeFi tokens to the total online tokens are both high. The listing strategy focuses on the choice of high-quality assets.

10. The ZT exchange has a large number of online tokens, and is more active in the market promotion of DeFi, and strategically focuses on user experience perception.

11. HBTC has a layout in DeFi project investment and public chain support, and plans to integrate DeFi elements to launch wealth management products.

1. Market Analysis

“The popularity of the DeFi market has continued to soar since the second quarter of 2020, and many exchanges have started to deploy in this field.

1.1 Market overview

The DeFi market has achieved explosive growth this year. Since the second quarter, new gameplay in the industry has appeared frequently, driving the market to experience wave after wave of climax. The DeFi lock-up value (TVL) has experienced multiple increases since April, from 700 million US dollars at the beginning of April to 8.3 billion US dollars at the end of August, which has attracted strong attention from the industry.

DeFi TVL, source: DeFiPulse, TokenInsight

As the main field in the DeFi industry, the popularity of decentralized exchanges (DEX) continues to rise. With the use of compound liquidity mining in June, YFI in July, YAM in August, recent SUSHI, and the continuous emergence of multiple forks of YFI, the daily trading volume of DEX continues to achieve new leaps. In September The daily trading volume exceeded 1.4 billion US dollars.

According to TokenInsight Research’s observations on the DEX market, since July, DEX daily transaction volume, daily transactions and daily active users have increased significantly. Although DEX trading volume fluctuated greatly in August, as of August 31, the average DEX trading volume in August was 2.5 times the average trading volume in July. At the same time, the number of transactions and the number of active users also hit a new high at the end of August, reaching 211,504 and 39,884 respectively.

DEX trading volume, number of transactions and number of active users, source: DeBank, TokenInsight

In contrast, the development of the spot and derivatives markets of centralized exchanges is more stable. The trading volume of centralized exchanges rose as Bitcoin’s sideways trade ended in late July. The spot trading volume ended the downward trend since May and entered a period of turbulence; the derivatives trading volume hit a new high in July and August, but the upward momentum was not as good as DeFi.

Comparison of spot, derivative and DEX trading volume on centralized exchanges, source: DeBank, TokenInsight

Although DeFi continues to be hot, DEX still cannot be compared with centralized exchanges in terms of volume. Even after the development in June and July, in August when DeFi was still hot, DEX daily trading volume reached only 2.2% of spot trading volume and 4.6% of derivatives trading volume. The average monthly trading volume of DEX in August was only 0.68% and 1.15% of the average monthly trading volume of spot and derivatives. [1]

[1] Monthly average data calculation data until August 30

Dex August trading volume accounted for the percentage of spot and derivatives trading volume, source: DeBank, TokenInsight

Therefore, both in terms of user base and capital scale, centralized exchanges have a greater advantage. In addition, although the rise of DeFi has made it a slice of the pie from centralized exchanges several times, the two are not completely mutually exclusive.In fact, the large-scale business model and stable cash flow of centralized exchanges can give it enough resources to integrate DeFi elements into its own business and ecology, and help its own development while also promoting the growth of DeFi and boosting The entire industry has achieved a more orderly and good development.

In addition, some centralized exchanges misappropriate user assets for liquidity mining. In the market expansion stage, short-term misappropriation will not cause losses to users; however, once the value of mortgage assets drops, revenue decreases or projects collapse, users may not be able to withdraw coins, or even experience extreme situations such as exchanges running away .

1.2 DeFi layout of centralized exchanges

The hot market of DeFi has not only attracted a large number of users, but also attracted the attention of institutions. The public exchanges have launched the layout of DeFi, hoping to share the dividend of DeFi fever, and carry out a strategic layout for the future market.

According to TokenInsight Research’s observations on the organization’s layout in the DeFi field, the current centralized exchange’s layout for DeFi is mainly reflected in three aspects: currency listing, investment and the integration of DeFi elements. Among them, the exchange platform supports the trading of DeFi tokens; investment is the exchange’s investment in DeFi projects and the establishment of DeFi project investment and research teams; the integration of DeFi elements is more diversified, mainly reflected in the participation of platform coins in liquidity mining. DeFi conducts market education and promotion and introduces DeFi-specific attributes into its own business.

1.3 Listing

After the rise of DeFi, most centralized exchanges in the industry have been more active in listing DeFi currencies. TokenInsight conducted a survey of more than 30 major major exchanges in the market and found that as of August 28, only 5 exchanges had not launched any DeFi tokens. [2]

The number of DeFi tokens on centralized exchanges accounts for the proportion of total online tokens, source: TokenInsight, 2020.08.28

Among the exchanges that have listed DeFi tokens, there are more than 40 listed currencies including OKEx, Huobi, Gate and MXC. At the same time, Coinbase and Kraken have only listed 10 DeFi tokens, but in terms of the number of DeFi tokens listed on the exchange, they rank among the top. Among all exchanges, OKEx, Binance, and Gate have a large number of online tokens and DeFi tokens, while HBTC has a general total number of tokens but a relatively high proportion of DeFi tokens. In addition, among the exchanges that focus on a certain market, ZT Exchange has been more active in launching DeFi, with 41 DeFi tokens already online. [2]

[2] The statistical source of platform tokens is the active market on CMC

The number of DeFi tokens listed on centralized exchanges, source: CoinMarketCap, TokenInsight, 2020.08.28

Centralized exchanges prefer to launch mainstream DeFi tokens with a good user base. It can be seen from the distribution of the online DeFi tokens that Chainlink is the most exchange-supported token, with an appearance rate of 5.1%. The platform token for DEX projects is the most exchange-supported token type. Followed by loans and infrastructure, accounting for 19.62%, 18.35% and 14.56% respectively. The high proportion of DEX and lending tokens is mainly due to the large number of these two types of projects, the more mature development, and most of the lock-up value of DeFi. However, synthetic assets are currently relatively rare on centralized exchanges.

Distribution of tokens listed on centralized exchanges, source: CoinMarketCap, TokenInsight, 2020.08.28

1.4 Investment

Compared with the generally more active listing of DeFi coins in the exchange industry, exchanges have different performance in the investment layout of DeFi. Due to their own capital and strategic advantages, large platforms generally perform well in the investment layout of DeFi. Among them, Coinbase and Binance have invested in a number of high-quality DeFi native projects; OKEx’s focus is to deploy DEX on the public chain OKChain developed by itself; Huobi recently established DeFi Labs, focusing on investing in projects in the DeFi field.

Investment behavior in the DeFi field of various exchanges, source: TokenInsight

1.5 Integration of DeFi elements

In terms of integrating DeFi elements, various exchanges have used their imagination to create diversified gameplay. In general, the current integration of DeFi elements is mainly reflected in the integration of marketing and platform services, and the overall goal is to better attract and serve users.Compared with the long-term strategic layout behavior of investing or setting up DeFi projects, which is more costly, integrating DeFi topics into the market promotion of the exchange platform can play an immediate role in attracting traffic in a short time. Therefore, this has also become a common method used by various exchanges. Since the DeFi boom, various exchanges have launched market education articles about DeFi and DeFi online exchanges.

Among them, ZT Exchange, as one of the few exchanges on the market that focuses on the spot market, has established an investment and research department, and is active in the promotion of DeFi.At the same time, in order to provide customers with a better service experience, each exchange has also integrated DeFi elements into its own business system. Both OKEx and Huobi have opened the DeFi section to optimize user experience; while Binance has recently launched DeFi index contract products.

Among the derivatives exchanges, except for FTX, it has launched DeFi index contracts and several types of synthetic asset contract products. Its CUSDT/USDT trading pair integrates common “interest-bearing” elements in the DeFi industry, enabling users to convert USDT Earn interest for CUSDT.For further research, TokenInsight Research selected OKEx, ZT, and HBTC among mainstream exchanges as the research objects, and made a detailed analysis of the layout of the three exchanges in the DeFi field and the strategic positioning and ecological construction of the exchange itself.

Platform Analysis

2. OKEx exchange DeFi layout

“OKEx focuses on the selection of high-quality DeFi assets and launches multiple high-quality DeFi projects.”

Based on its leading position in the industry, OKEx can better mobilize resources to deploy DeFi. OKEx’s DeFi layout is reflected in many aspects, and it hopes to build its own DeFi ecosystem from a long-term strategic plan.

2.1 Strategic layout

One of OKEx’s long-term strategic layout for DeFi is the open decentralized exchange Opendex launched on its public chain OK Chain, allowing users to use the technology and infrastructure provided by OKEx to independently build DEX on the public chain.

As the initiator of Opendex, OKEx has built a decentralized exchange OKEx DEX on its own public chain. In addition, OKEx also conducts continuous research on the DeFi industry and projects, and its research focuses on exploring valuable DeFi projects to facilitate long-term investment and deployment of high-quality DeFi assets.

2.2 Market tracking

In terms of following the trend of the DeFi industry and market hot spots, OKEx’s layout is mainly reflected in its currency listing strategy. OKEx has set up a special team to track the DeFi field in the screening of listings, focusing on selecting popular DeFi projects with high user attention and growth value. At the same time, OKEx is one of the few mainstream exchanges that specialize in opening the DeFi section on the official website trading page, and the exchange will display the DeFi projects on the platform in one section, which can give platform users a more convenient operation experience.

In addition, OKEx recently launched a DeFi mining product, accessing the Compound protocol to help users mine COMP tokens on its platform.As shown in the table below, as of August 28, OKEx has listed 40 DeFi tokens, and the number of online DeFi tokens has reached 24.8% of the total number of online tokens on the platform. The number of DeFi tokens and DeFi tokens on the platform accounted for Belgium ranks among the top exchanges.

DeFi tokens are listed on OKEx platform, source: TokenInsight, 2020.08.28

TokenInsight Research further analyzed the DeFi tokens listed on OKEx. The distribution of the types of DeFi tokens listed on OKEx is basically the same as that of the types of DeFi tokens listed on mainstream exchanges in the industry. The platform has higher than the industry average for DEX, infrastructure, stablecoin, aggregator and asset management projects, and lower than the industry average for lending and oracle projects.

Comparison of the distribution of tokens listed on OKEx and the distribution of tokens listed in the whole industry, source: TokenInsight, 2020.08.28

At the same time, as of September 1, OKEx had a total of 6 DeFi projects that were first launched projects on large exchanges. Among them, 4 projects increased in price within a single day after OKEx went online, and the average increase in a single day after the launch of OKEx was 14.44%. In addition, OKEx continues to list DeFi currencies. Statistics on September 1st show that, with the exception of the synthetic asset Wrapped BTC, the DeFi currencies listed on the OKEx platform have covered the top 10 projects in the market with the market value of DeFi currencies.

The price fluctuates within one day after OKEx’s first DeFi project goes live, source: TokenInsight, 2020.09.01

*Statistics for infrastructure projects include public chain projects with a clear DeFi layout

3. DeFi layout of ZT exchange

“ZT Exchange is actively carrying out the ecological part, comprehensively researching the DeFi industry and conducting timely market promotion of DeFi hotspots.”

3.1 Basic ecological construction

As an exchange focusing on the spot market, ZT Exchange has developed relatively steadily since its establishment based on its strategic advantages in products and services. Unlike the comprehensive ecological layout of large exchanges, ZT does not carry out other ecological businesses such as derivatives.The product aspect has not been fully rolled out, but in other aspects, ZT Exchange covers as much as possible within its own scope to support the development of the industry.

Internally, ZT has established multiple departments such as ZT Capital and ZT Labs, including research and market education on the blockchain industry and projects. The main purpose of ZT’s internal ecological construction is to track the market comprehensively and support the external ecological layout. At present, according to ZT’s disclosure, it has a layout in DeFi, Polkadot, and storage fields. For example, the platform has launched Polkadot ecological projects such as DOT, and will open Polkadot and storage areas and launch several Polkadot ecosystems in the near future. project. The details of the departments are shown in the table below.

Internal construction of ecological layout, source: TokenInsight

ZT Exchange was established in June 2018 and is a digital asset trading platform under ZT Global, with its registered address in Seychelles. The platform currently supports spot, ETF, wealth management and OTC transactions. The service supports 7 languages, including Chinese, English, Japanese, Korean, Thai, Vietnamese and Arabic. The platform is positioned in the global market and has cooperation with overseas media Bitpush.news.

At the same time, according to the platform, its registered users have covered 158 countries and regions around the world, with the number reaching one million.The platform currently provides 202 transaction currencies including Bitcoin, Litecoin, Ethereum, etc., with a total of 234 transaction currency pairs, including 24 EFT products; wealth management services include current wealth management products and regular wealth management products of platform currency ZTB . The platform has targeted OTC services in RMB, Japanese Yen, and Thai Baht, but the current OTC channels for Japanese Yen and Thai Baht lack suppliers. In addition, ZT has obtained the MSB license issued by the Financial Criminal Enforcement Network (FinCEN) on August 17 this year and successfully registered as a capital service provider.

A more comprehensive ecological layout and internal department construction have created a good foundation for ZT to keep up with the DeFi wave. Since the beginning of this year, ZT Exchange has also actively deployed in the DeFi field. The layout of ZT Exchange’s DeFi is mainly reflected in the platform’s research on DeFi projects and currencies, currency listing based on DeFi research, and science popularization and market promotion for DeFi.

3.2 DeFi Investment Research

ZT Research Institute was established in January 2020. ZT Investment Research has conducted research on the global DeFi market and project overview. According to TokenInsight Research’s research on the content of ZT’s investment research work, ZT Investment Research tries to sort out and track market hotspots such as DAO and NFT in the DeFi industry as much as possible, thereby supporting the currency listing. At the same time, ZT Capital established a special fund of 20 million US dollars, which will focus on investing in projects in the DeFi field, including DAO and NFT. The latest media reports on September 4 also show that ZT will allocate 5 million US dollars to support TRON DeFi. Ecological construction.

3.3 Listing

According to statistics from TokenInsight Research, as of August 28, ZT has launched a total of 41 DeFi currencies. Among the exchanges in the entire market, it is a platform with more currencies. At the same time, the ZT exchange is faster to list coins, and the launch of DeFi tokens generally precedes the large exchanges such as Binance and Huobi. The fast currency listing is characterized by being able to cater to user needs more responsively, enabling platform users to latent high-growth projects earlier. For example, the price of the oracle Tellor on the day Huobi went online was 11 times higher than the price on the day ZT went online.

But at the same time, the fast listing speed also means that the relatively simplified listing process within the platform and the relatively early listing of tokens have a certain degree of risk. When the market is rapidly expanding and new projects emerge in an endless stream, it is inevitable that there will be some cases of low quality and moral hazard in the team.

DeFi tokens are listed on ZT platform, source: TokenInsight, as of 8/28

3.4 DeFi marketing and business integration

In terms of science popularization and market promotion of DeFi, ZT has established a DeFi learning exchange group in the community and opened a Defi live broadcast room. It broadcasts popular science and Q&A about DeFi from time to time and publishes information about DeFi in the community and media platforms. Hot articles. In addition, ZT will launch a $1 million liquid mining product in the near future, and plans to support its platform currency ZBT in the future.

In general, the ZT platform’s layout for DeFi is more reflected in the listing of coins and the development of DeFi hotspots for science popularization and drainage, and the effect is also biased to focus on the optimization of the layout of the transaction and operating experience that users can directly perceive. The future ecological construction of the exchange and whether it can continue to explore the value of DeFi and use it for its own use are closely related to the comprehensive development of the exchange platform itself. To this end, TokenInsight Research also conducted a basic analysis of the operation of the ZT exchange platform.

3.5 Compliance License

The ZT Exchange is registered in Seychelles, except for the Estonian digital asset license in 2019, and has now obtained the US MSB license. After verification by TokenInsight Research, ZT has indeed obtained an MSB license.

ZT MSB license, source: ZT, TokenInsight

3.6 Information disclosure

In terms of information disclosure, ZT publishes separate reports on its own media platform when it launches strategic plans and other important nodes, and makes timely disclosures on operational dynamics, product releases, and currency listings. Except for the temporary silence from early 2020 to mid-August, ZT is more active on the Medium platform.

3.7 Risk Control

The ZT platform risk control measures are relatively complete. Know that Chuangyu, Cloudflare, Alibaba Cloud and AWS provide security service measures including CC defense, DDoS defense, intelligent speed limit, and black and white lists.

3.8 Product and service experience

ZT platform trading page has comprehensive technical indicators and rich drawing tools. There are a total of 81 technical indicators. K-line charts have 11 types including hourly, hourly, daily, weekly, and monthly levels; drawing tools include trend lines, bifurcation lines, brushes, rulers, etc., and the trading indicators are complete and The professional level of candlestick chart is the same as that of Huobi Exchange. In terms of handling fees, ZT does not adopt the tiered fee rate system adopted by most exchanges on the market.

The fee rate for all users as Maker and Taker is 0.2%. In terms of customer service, the platform experience is better. The customer service team is online 24 hours a day. After testing, the ZT online customer service response speed is within one minute. In terms of account and transaction services, the platform uses account security assurance tools such as login password, fund password, email and mobile phone binding, Google authenticator, anti-phishing code and log-in time record. When a user logs in, a login password and a verification code are required for dual-factor authentication; a certificate number and Alipay FaceID face recognition dual identity authentication is required to create a transaction.

The Alipay FaceID recognition function makes the user authentication operation relatively convenient. In general, ZT trading platform account security assurance tools are more comprehensive and consistent with most exchange standards. At the same time, the user experience of the platform is better, and the detailed design of the platform meets the needs of users.

4. HBTC exchange DeFi layout

“HBTC has in-depth cooperation with many projects in the DeFi industry, and will soon launch liquid mining wealth management products.”

HBTC is more diversified in the layout of DeFi. Like most projects, HBTC established HBTC labs to mine high-quality projects in the blockchain industry, including the DeFi field. The public chain HBTC Chain under the platform actively supports the development of DeFi. At the same time, HBTC has in-depth cooperation with some projects in DeFi in various forms; in terms of facing C-end users, the platform plans to launch DeFi currency liquid mining and wealth management products in the near future.

4.1 Project investment and cooperation

HBTC labs has invested in Bella Protocol. The platform’s in-depth cooperation projects in the DeFi field include Nest Protocol, Serum, Themis, dForce and Oikos. HBTC cooperates with the project by operating nodes, joint publicity and community cooperation. At the same time, according to HBTC’s disclosure, the platform currently does not charge fees for project listings to encourage popular DeFi projects to be listed on the HTBC platform.

4.2 Public chain support

HBTC Chain’s support for DeFi is mainly reflected in two aspects. First of all, HBTC mainly promotes cross-chain functions to open up the ecology between various chains to help DeFi’s ecological development on other chains outside of Ethereum. Secondly, the Opendex built by HBTC on the public chain has launched a testnet, and the module components are under development. According to the platform, it will be officially launched in the fourth quarter. HBTC will also establish a decentralized exchange with an automated market maker model on Opendex.

4.3 Liquidity mining and financial management

Since direct participation in the DeFi field is relatively complex in operation and requires participants to have high requirements for the industry, HBTC plans to launch liquid mining and wealth management products in the near future to help users through centralized exchange platforms in the form of wealth management products. Participate in DeFi. But the specific product form of this product is still under design.

5. Future Outlook

With the intensification of homogeneous competition in the centralized exchange industry, the rise of DeFi provides space for exchanges to develop differentiated competitive advantages. How to seize the rising tide of DeFi and integrate DeFi into its own ecology and future development in order to consolidate or develop its core competitiveness has become a major test facing all exchanges. The hard work and innovation of various exchanges based on DeFi can not only introduce market traffic to the exchange platform, but also lay a solid foundation for achieving long-term strategic goals, thereby promoting the overall development of the industry.

On the other hand, the centralized exchange is a more mature industry field. The collective launch of DeFi mainstream tokens by the head platform undoubtedly shows that the industry recognizes and attaches importance to DeFi, an area that was once popular only in niche communities. Among them, the listing of DeFi tokens on Coinbase has a particularly significant impact on token prices. Take the five non-stable currency DeFi projects that Coinbase launched this year as an example. On the day Coinbase officially announced the news, the average increase in the tokens of the DeFi projects launched was 82%. However, it is worth noting that Kyber Network, which was launched in February when the DeFi market was relatively quiet, did not see a significant price increase on the day of official announcement and the day of official launch.

Coincidentally, on the day Coinbase announced the launch of Augur in 2019, the Augur token REP rose by only 1.74%. In addition, Coinbase launched Maker for the first time in 2019, but due to limited liquidity, no actual transactions occurred. This is a very different situation from the 40% price increase when Maker was relaunched after the DeFi boom at the end of May this year. Such signs indicate that the support effect of centralized exchanges on DeFi projects is more inclined to icing on the cake. The mutually beneficial relationship between DeFi and CeFi is the result of DeFi and CeFi complementing each other based on their own advantages.

The impact of Coinbase’s launch on DeFi tokens, source: TokenInsight

6. Summary

Although the competition between Centralized Finance (CeFi) and DeFi has existed for a long time, and at present, CeFi is still significantly better than DeFi in terms of user experience, performance, and liquidity, but centralized exchanges are actively deploying DeFi.

It proves that CeFi and DeFi can also promote the harmonious relationship between each other.Therefore, it can be expected that in the future, the gap between CeFi and DeFi, centralized exchanges and DEX will gradually narrow. CeFi players with large-scale funding and user bases will continue to explore DeFi including the development of DEX and oracles. DeFi projects and DeFi elements will also be more integrated into the CeFi ecosystem and even infrastructure. However, the essential difference between CeFi and DeFi determines that this will be a difficult and long process.

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