DeFi’s Natural Choice: Survival of the fittest

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Compiled:Block unicorn

 

Foreword

NaturallyYesCold and ruthlessYesIt has no emotions, no feelings, no attachments, it has only been a permanent test: whether this design is worth living。

The same is true of financial markets, which, over time, will phase out weak designs, weak structures and strategies that fail to take full account of risks and integrate effective ones. That is the essence of the natural choice — a cruel and constant test to ensure the survival of the fittest。

DeFi is no exception to the fact that, after years of experimentation and thousands of agreements, one pattern is already clear: each extinction is more a case of "black swan"Nature chooses to eliminate the weakTo ensure that only the strong survive。

Aave is a typical example。

Despite numerous industrial extinctions such as the Luna crashFTXAnd the most famous effective altruists in encrypted currency, Aave, still holding tens of billions of dollars in deposits, is still ahead of DeFiTVLI don't know。

The survival and dominance of Aave is not an accident, but a composite return of conservative parameters and a culture that assumes that the counterparty will fail and plan accordingly。

This brings out the natural choices of Stread Finance and the latest round。

Stread Finance

Stream Finance positioned itself as a source of proceeds by issuing synthetic assets (xUSD, xBTC, xETH), which users could use to make in deposits and then deploy newly found synthetic assets to DeFi. These synthetic tokens are widely used as collateral and are embedded in the lending market and the select vault。

When external managers responsible for overseeing part of Stream ' s assets reported losses of $93 million, Straam was forced to suspend deposits and withdrawals, xUSDDecoupling from United States dollarsandYAM$285 millionUnited States dollar loans and stable currency exposure are linked to Stream-related collateral, covering Euler, SiloMorphoAnd deUSD and so on。

This is not a failure of smart contracts, but of architecture and design, due to a lack of transparency and:

• ResourcesKimCommissioned to external managers

• xAsets are used as collateral in multiple locations

• The selected "separate" vault consolidates these xassets and the radical re-committal cycleBasic assetsMultiple claims。

It was supposed to be a completely isolated system, but in fact closely aligned. When Stream's trust funds disappearAnd when xUSD breaks downI don't knowLosses are not isolatedInstead, it spread to markets and platforms based on the same bottom collateral. The original stand-alone treasury+ trustee model has lapsed, and a single point failure that should have been isolated has become a web-wide problem。

Segregate Treasury+HostPeopleMode

Stream is exposedFor the momentSegregate Treasury+HostVulnerability of the human model, which operates as follows:

1. A non-licensed original borrowing language (e.g. MorphoLabs) serves as the base level。

2. On top of it is oneHostLayerHostPeople operate “separated” vaults, setting parameters and promoting “selected” revenue paths。

In theory, every vault should be isolatedLayerTrusteeYeahIt's an expert with the necessary experience and field knowledge, and finally, the risk should beTransparent and modularYeah。

However, this was not the case, and the bankruptcy of Stream revealed three main shortcomings:

1. Synthetic assetsExisting DistributionSquareWindRisk:An isolated vault that accepts synthetic assets like xUSD would expose itself to distributionSquareLevel of upstream risk。

2. Incentive error:HostPEOPLE COMPETE WITH TVL THROUGH APY = HIGHER MARKET SHARE = HIGHERHostPeople are rewarded and there is no first lossTrusteeWhere self-interest is linked to market interest), all downside risks are borne by the provider of liquidity。

3. Circular and re-commitment:The same synthetic asset was reused and placed as collateral on the lending market, packaged into another stable portfolio of assets and then recycled through a select and managed vault, leading to multiple claims for the same underlying collateral. In short, in times of pressure, foreclosures may exceed available collateral and “separate vaults” suddenly become non-separated。

Natural selection

Nature is the best teacher. The lesson is clear: based on the common goodSegregationIt's kind of..FantasiaFeel。

Stream Finance is the result of a natural choice to do its best by eliminating weak designs that prioritize growth over resilience, preference gains over transparency, and give priority to market shares over survival。

Block Treasury+HostThe human model itself is not wrong, but for the time being it cannot pass the most basic test ... Can it survive? When the issuer fails, the collateralevaporationCan the chain claim survive when it reveals that “separation” is only a marketing tool

Aave survived because it was fakeSetFailed; Stream crashed because it was fakeSetTrust。

As in the past, the market has expressed its views through cruel natural selection laws — effective and ineffective laws. Agreements that externalize risk, leverage non-transparent collateral, pursue annualized rates of return rather than survival, and that can be used as a tool for the futureThey..Without a second chance, they will be liquidated and their total locked value redistributed to truly valid agreements。

DeFi does not need an endless bragging of the proceeds mechanism, which requires more rigorous design, more transparent collateral and more risk-taking by policymakers. The agreements that can survive will be those that can deal with counterparties ' defaults, assume market pressure rather than stability, and transform conservativeism into dominance。

NATURALLY, IT DOESN'T CARE ABOUT YOUR TVL OR YOUR ASY, IT JUST CARES IF YOUR DESIGN SURVIVES THE NEXT EXTINCTION。

And next time it's coming。

 

RECOMMENDED READING:

A billion dollars of stability evaporation, the truth behind DeFi's serial explosion

MMT ROVER EVENT REWINDING: A WELL-DESIGNED ROUND-THE-CLOCK MONEY GAME

UNDER THE BRUTAL HARVEST, WHO'S EXPECTING THE NEXT COAI

 

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