So, in the end, we set a few requirements: 1) it must be composable, 2) EVM compatibility and can be deployed quickly. The logic here is that if it is EVM compatible, it would accelerate the deployment process where other products can also deploy quickly. This will accelerate the growth of the entire ecosystem tremendously.
Lastly, we hope that this plan is feasible and can be ready in a short time. After much evaluation, we decided the Arbitrum is the L2 solution that fits our criteria. During the time of evaluation, we also looked at optimism, but we felt that it was far from being completed, and the progress gap was quite huge. We also tested it and the gas fees were ten times more expensive than Arbitrum. Of course, things may be slightly different now.
From the perspective of product readiness, Arbitrum would be the best candidate. Yesterday, I even saw the Uniswap community was also voting on a proposal to deploy on Arbitrum.
Yes, you just said that you decided not to go to L1. Many people who didn’t think it through still don’t have the courage to make this decision.
This decision is still very interesting. We see that products like Perpetual Protocol are using xDai. It is unlikely to use the price of Uniswap (oracles) and it may utilize Chainlink on xDai. If you deploy on an L2 solution which has the composability, you can overall gain opportunities. However, I feel that perpetual swaps are not too dependent on external. Otherwise dYdX probably would not have chosen starkware.
L: Yes, when I was doing a show with the dYdX team, their members mentioned that there was no better solution at the time and thus they decided to use starkware.
M: Generally speaking, you are still more willing to choose rollups that can be deployed quickly. I think your perceptions and views on arbitrum are accurate. No matter how you are driven by ideology, if a rollup is easy to deploy and everyone else is on it, you will still choose to deploy on the rollup.
Uniswap’s decision to deploy on arbitrum really surprised me. The speed was very fast, indicating that the Uniswap community is still very pragmatic.
M: Next, I want to talk to you about the advantages and disadvantages of being a Chinese team in the DeFi. There are very few Chinese teams, like MCDEX and dForce. So I want to ask — what are the strengths and weaknesses of a team like you on the global arena?
L: Let me talk about the disadvantages first — it is more apparent. Our disadvantages can also be understood as the threshold to be crypto native. For example, if your product is great, but your overall operation, community building, and values of the products are not crypto native, it will be difficult to gain recognition on the world stage. I am still constantly learning about the ways to be a crypto native. This is a challenge or a weakness for us. Our understanding of this matter is not as good as it should be. The Chinese developer team is far from this crypto nativeand this understanding still needs to be deepened.
In terms of advantages, our developer capabilities are very strong. The developer team is highly effective — they are fast learners and have quick-development capability. Afterall, we have worked on traditional technology for many years.
But when mentioning developers, we can talk about developers in major regions of the world, such as developers in the United States. The developers there are excellent — they even built projects like Arbitrum. There is also Eastern Europe, Russia, and Ukraine. In these countries, their internet industries are underdeveloped, which leads to few choices for devs. As such, there are many excellent hackers, or developers in the blockchain industry.
Looking at China, We have a well-developed internet industry, but many Chinese a misunderstanding of the blockchain industry. Another disadvantage of our industry is that those who are capable and could develop infrastructure like Arbitrum have not yet been able to enter the blockchain industry.
M: This is very interesting. The opportunity cost of entering this industry is too high. After all, the big players of the internet industry provide very lucrative compensation. It will take some time for the talent to migrate over to the blockchain industry. As you have mentioned, I too, believe that there are gaps regarding talent and operational infrastructure. However, I believe that the future of Chinese teams is still very optimistic, especially the long-term development of apps like web3.
L: Yes, we have our own executional advantage in this field.
M: What areas/sectors do you feel are the most undervalued or have the greatest potential?
L: I think there are still many opportunities in DeFi as DeFi has only been for the past two or three years. It takes a lot of time for each product to gain adoption (even for Uniswap) or other projects that are less mature.
Someone used to believe that Uniswap V2 is successful and that there is nothing else to be improved for DEXes. Thereafter we witnessed the launch of Uniswap V3. Is this the end? Of course not. There is still a long way to go for DeFi and DEXes and that makes DeFi so exciting. Is it impossible for a product to defeat Uniswap today? I don’t think so. If the product is innovative and the team has fast execution, there is a great chance for a project to erode the market share of Uniswap.
Adding on the ideas that I have shared,I don’t think the decentralized derivatives has reached the scale of other larger sectors. This is a result of the lack of infrastructure as L1 cannot support such a large scale at the moment. Different infrastructures can support different applications. For instance, without 4G, there would be no TikTok.
The improvement of infrastructure will bring more opportunities to DeFi. What are the other opportunities available in DeFi in the future? I think that in addition to the enhancement of sub-fields, the issues surrounding assets and capital will provide some opportunities as well.
On the capital end, I think there will be better products. We all know that YFI is one of the products that is dominating the market now. This sector of asset management can still be improved. Currently, there are smart contracts that help users to do liquidity mining but these are not good enough as they still incur high cost for users.
If we look further, wallets are a product that is the closest to users. Although there are many teams developing wallets, I feel that there is no such product similar to Alipay which dominated the payments scene in China. When users use Alipay, they do not need to understand whether Alipay is implemented through cloud computing or a distributed system. In the blockchain industry, our wallet still reveals to users a lot of things or information that they do need to understand. Ultimately, this makes the entire process of adopting DeFi more complicated for a retail user.
For example, users have to manually adjust whenever they are using the wallet in different chains. If the blockchain wants to gain widespread adoption, these processes have to be simplified. There are definitely a lot of opportunities in this space as well.
On the asset end, I think there are even more opportunities in that sector. For example, structured finance products have already been developed by some teams. We can see that such products can maximize the composability of DeFi in the long term.
Just to provide you with a few examples — the basis trading based on MCDEX v3. As long as you stake the money in the smart contract, it will automatically help you to arbitrage in the spot and futures DEX market. In addition, there are some products that we will be cooperating with which makes the product extremely interesting as there are different tranches of risk-reward that users can benefit from. This allows users of different risk appetites to benefit from our MCDEX products.
M: I see, we will eagerly wait for your announcement! I have another opinion on this topic, such as the Melon project that started in 2017. On hindsight, this project may have started too early and the issue was mainly regarding timing. This may be the difference between pioneers and martyrs.
L: Yes, timing is still very important.