DeFi's Chinese translation is "decentralized finance", which is gradually developed with the maturity of blockchain technology and is a typical distributed economy (DeCo for short). Deco is born out of the concept of market economy and is a form of market economy. Therefore, its two core mechanisms are similar to the market economy: one is the price mechanism, which gathers information through prices and plays a leverage role in the allocation of economic resources; The second is economic incentives to regulate the behavior of participants. Deco takes the blockchain as the infrastructure and realizes the management of public affairs through decentralized community autonomy. The development process of DeCo can be divided into four stages:
The first stage is DeCo 1.0, which is based on the economic activities in the public chain. Around the distributed ledger, stakeholders will jointly maintain the consensus mechanism of the network and provide incentives through "inflation tax" and handling fees. The economic activities in the public chain are relatively simple, and the core problem is how to motivate the block nodes in a decentralized way to maintain the distributed books. It mainly uses two economic tools: one is remuneration and the other is transaction fee.
The second stage is DeCo 2.0, which is based on public chain and introduces smart contracts around blockchain applications. At this stage, smart contracts are taken as a decentralized autonomous organization framework, and distributed autonomous mechanisms are explored, and commercial applications are carried out based on blockchain. At this stage, the concept of Distributed Autonomous Organization (DAO) appeared, which is an attempt to connect the vast economic scene with the blockchain. For example, blockchain is used for applications such as computing power, storage space, loans, and file and data sharing.
The third stage is DeCo 3.0, which is the recently emerging "DeFi" (decentralized finance). In the DeCo 3.0 era, digital contracts, digital currency and digital assets are very cleverly concentrated. Only at this stage can the importance of blockchain as a decentralized value network be truly reflected. At this time, the whole system of digital currency was perfected, and a stable currency appeared. The use of a stable currency as a medium of payment and transaction in blockchain economic activities has improved the price fluctuation in digital currency.
The fourth stage is the upcoming DeCo 4.0, that is, the distributed economic ecology. First, a truly decentralized trust network will connect various economic scenarios and establish a decentralized trust relationship. Second, take the form of an association or alliance as an organization, such as forming an association with other enterprises like Facebook, and each organization has only 1% voting rights. Third, a new economic topic has emerged-"the interests of shareholders are no longer the business goal of economic organizations".