Academy Industry Analysis Article

WaykiChain Co-Founder on DeFi, Traditional Finance and a Killer DApp: AMA Recap

2020.06.12 Olivia Capozzalo
AMA recap image

On Thursday, June 11, OKEx hosted an ask-me-anything (AMA) event with the co-founder and CEO of WaykiChain (WGRT), Gordon Gao. WGRT is the latest project to be added to OKEx’s token sale platform, Jumpstart. The WGRT sale will take place on June 17  and market the 14th project to raise funding on OKEx’s platform.  

During yesterday’s AMA, Goa fielded questions on the role of decentralized finance (DeFi) vs traditional finance, decentralized applications (DApps) and blockchain in the current economic climate.

DeFi and DApps: Twitter Q&A 

DeFi vs. traditional finance

OKEx: Let’s start! The first question: DeFi is one of the hottest topics in the blockchain space right now. Can you share your opinions on DeFi? Do you think that DeFi will disrupt the existing financial system? What is WGRT’s approach towards the DeFi sector? (Question from @erol1763 on Twitter)

Gordon Gao: I think there are four major differences between DeFi and traditional finance:

1) DeFi can change the role people play in the financial system. In traditional finance, as an ordinary user, your role and participation process are very limited. However, this limitation is determined by all aspects, such as the credit problem, the threshold of the number of funds, as well as the license and the threshold of political power, and so on. Such limitations often make ordinary users vulnerable groups in the financial system. And under the rules of the top class, wealth will always flow to the top.

We can only see that the world keeps issuing money, and the money in our hands is depreciating, while there is nothing we can do. But DeFi is different. Let me give an example. With WaykiChain DeFi’s governance coin WGRT, the holder has both the power of governance parameters and the benefits of the interest and penalty fee of the entire system. This is a role you cannot play in traditional finance. 

2) DeFi can reduce financial costs. Since the beginning of the industrial era, the global financial structure has remained unchanged, relying heavily on various intermediate institutions. Central banks, investment banks, commercial banks, securities companies,  etc. It can be said that any financial activity needs to have more than one intermediary profit from it.

For example, in addition to the loss of the price spread, a transaction also includes brokerage commissions, exchange transaction fees, stamp duties of regulatory authorities, etc. The price difference earned by these so-called “middlemen” makes them the richest class in the world. However, DeFi adopts an open protocol and provides low-cost financial services for everyone at low cost, which greatly reduces the cost of transactions.

3) DeFi can improve the efficiency of finance. Blockchain enables financial transactions to achieve transaction settlement at the same time the transaction is confirmed. It has gone beyond the traditional settlement and liquidation system of financial institutions. When it comes to cross-border transactions, in terms of the wire-transfer, a cross-border transfer can sometimes take several days, but in a blockchain system or DeFi system, the actual ownership of assets has changed when the transaction occurs.

4) There’s one more point that I want to mention — DeFi can derive something that traditional finance doesn’t have. For example, the constant product market maker is an innovative product in the field of DeFi. We believe that DeFi is not just acting as an improvement of the original traditional finance but also [there are] more innovations to be discovered. The CTO of our team wrote such a sentence in the introduction of WaykiChain code: “the only limitation of the blockchain is our imagination.”

As for WGRT, it is the governance coin of Waykichain’s lending protocol. WGRT holder is like the shareholder of central bank. They will benefit from the interest and penalty fee generated by the lending protocol. 

WaykiChain in the DeFi space

OKEx: Thank you for the explanation about the difference between DeFi and traditional financial system. Next question: many public chains are pushing towards DeFi. For example, TRON also launched its JUST project this year. What do you think are the advantages and opportunities of WaykiChain in this space?

Gao: We are professional and we focus on this runway. Whether it is an economic model or a technical system architecture, WaykiChain’s DeFi system is professional and can withstand scrutiny. We have made many innovations that are not on the market, and these innovations are able to find their rationalities in the traditional financial system. 

We have explored some [other] areas in the past, such as betting and game ecosystems, but since last year, we have [been] all-in DeFi. The collateral assets on WaykiChain have exceeded 36 million WICC, accounting for 17% of the total amount. This ratio is the highest among all public chains. Btw, for ETH, the ratio is around 1%. 

Global economic volatility and DeFi

OKEx: Congratulations on the achievement! Question three: The opening of 2020 is very chaotic with the coronavirus pandemic — all kinds of assets experienced significant shocks, oil prices plummeted, gold prices suffered volatility, and U.S stocks experienced several trading curbs, etc. What do you think about the influence of these unusual events on DeFi?

Gao: I think it’s the best thing that can happen to DeFi. Because all these things help expose underlying problems, such as [an] economic bubble, indiscriminate leverage, credit crisis, which can cause people to distrust the financial system. And DeFi is the revolution against the traditional financial system, it is a complete subversion. 

Paul Tudor Jones thinks that the government over-issued currencies, so he needs to transfer his asset[s] to Bitcoin. Crisis means opportunity. The traditional financial system has long existing problems. Most of the assets were made by capitalists, some in reasonable ways, while the others are simply robbery. 

But most of the people didn’t realize it. Henry Ford said,  Americans didn’t know how banking really works, because if they did, “there’d be a revolution before tomorrow morning.” [this was a paraphrase of Ford — OKEx]. Now all kinds of black swan events can make people aware of risks, and before the final risk comes, they will choose a more transparent and fair way to participate in finance.

WaykiChain’s goal with DeFi

OKEx Alright. Question four: WGRT is the governance and equity token of WaykiChain’s decentralized collateral lending platform, and it is said to be an important part of the decentralized economic system. Then what’s the initial goal of WaykiChain deploying DeFi system?

Gao: To be honest, at first, we just wanted to deploy the collateralized stablecoin and lending market. At that time, there was no word DeFi, or there was already, but the word was not widely spread.

Last year, we discussed the landing of the blockchain. In order to land, we must aim at the hard demand of users. Then the financial attributes of the group of blockchain users are very strong. If you want them to play games and go to e-commerce, these are not what they need. To make money, and borrow money is what they need. So we started the All-in option, along with some initial progress made in the business, such as the collateral amount of our DeFi system reaching 36 million, accounting for 17% of the total amount of WICC, which verified our original idea. 

Bitcoin just made a currency or asset, so the introduction of a public chain with smart contracts is to make rules between assets and currencies, isn’t it finance? From this aspect, if DeFi can’t succeed, then the landing of blockchain is a pseudo-proposition.

WaykiChain’s security and DeFi hacks

OKEx: Great. And finally the last question in this session: DeFi is called the next revolution of the encrypted world, whether it is the recent surge in hacker data on DeFi projects, or the black Thursday that MakerDao experienced before, DeFi’s security has been widely criticized. How is the security of WaykiChain DeFi set up?

Gao: Security is very important. And that consists of two parts, economy model risk control and technical security. I will introduce the the economy model risk control first. Nearly all the Defi protocols starts from some level of collateralization. So we believe DeFi platform should be strong under price collapse. 

On March 12th this year, the entire crypto currency market suffered from a severe downturn. Bitcoin’s price dropped over 50% within 24 hours. During this time, one of the largest DeFi protocol on Ethereum, MakerDAO’s liquidation system was not functioning very well, due to traffic congestion of the ETH network and some flaws in their model design. 

The protocol was nearly closed and generated over $4 million in bad debt. This bad debt needs to be removed through auction. And this is saying the entire MakerDao’s community and MKR holders should cover the lost. However, at the same time, Wayki-CDP, which is a similar lending protocol with MakerDAO, was running as normal with 0 bad debt. Here is the data comparison:

We designed 4 mechanisms to make sure the system will work under different situations: Over collateral mechanism, liquidation mechanism, risk reserve fund and system suspension to avoid risks. And with those mechanisms, the model can deal with over 99.9% of the market conditions. 

We also made a lot of improvements to enhance our technical security. First of all, we made some improvement on the oracle and price feeding is completed by the block producers. Then the final price will be adopted through a moving-median algorithm. This is saying, unless you launch a 51% attack to the blockchain, the price will not be manipulated by hackers.

Also, we defined 5 different assets standards on the bottom layer of blockchain, which are original assets, pledged assets, cross-chain assets, smart assets and user-generated assets. Therefore on WaykiChain, you don’t need to worry about the compatible issues because the standard works across the ecosystem. 

However, on Ethereum, there are a lot of attacks related to the assets standard incompatible issues. For example, the dForce and Uniswap attack happened this year. 

Killer DApps and project vision: Live Q&A

Gao: I saw so many questions but there are some categories. Vision, relationship between WICC and WGRT, future plans, killer dapps:

In terms of long-term vision: we are actually making the world-first integrated DeFi blockchain, which is different from Ethereum’s approach. This is saying we can provide one-stop experience financial services and open protocols to the public. And these services include lending, saving, investing opportunities, assets trading and financial derivatives.

Relationships between WICC and WGRT: We are making this model to make two coins generate some synergy. WICC’s market value is like th GDP to a country. And WUSD is like a currency. Then a WGRT holder is the shareholder of the central bank. This is saying WGRT holders will enjoy all benefits generated by the currency (WUSD) activities on the blockchain.

Future plans: We will launch a new product called “WaykiX” at the end of July. This is a synthetic assets trading platform that allows users to trade nearly all synthetic assets in the world. After that we will try to bring some real-world assets on the blockchain such as real-estate assets or T-bonds. And those assets will give the community diversified opportunities to invest.

Killer Dapps: Where will the next killer Dapp be? I believe in finance. Waykichain has experience in developing a betting platform and a gaming platform, however we finally chose DeFi. We realized that the biggest motivation for people to join blockchain is lending money and making money. This industry is full of speculators and investors. And providing service to those people is  the closest way to success. 

I believe the next killer Dapp will be a DeFi app. And the next bull market will be led by a DeFi coin.

Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involves significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.

This AMA has been edited and condensed for clarity.

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