Dialogue Island: DeFi Scientists, Community Building and YSD

This article is an original piece by Chain Catcher, authored by Loners Liu.

With the booming concept of algorithmic stablecoins, a new wave of DeFi mining has emerged. However, the frequent congestion on Ethereum and the emergence of numerous new products and strategies have made traditional aggregators increasingly unable to meet the needs of miners in this new cycle. The YFII Moon Landing Plan was born out of this context, with the YSD project, as a mature stablecoin trading medium, being a key focus of the YFII Moon Landing Plan.

The developer of YSD, Xiaodao, is a well-known figure in the industry. From early game development to now working on Unisave and Matataki, he maintains a unique perspective on the endless stream of new developments in the industry. This time, Chain Catcher engaged in an in-depth conversation with Xiaodao, discussing his views on DeFi, public chain development, and the construction of developer communities.

DeFi Scientist and Development Experience

Chain Catcher: When you were in university, you spent time in the library reading "Hackers and Painters." What insights from this book have been useful for your entrepreneurial journey?

Xiaodao: The three main takeaways from "Hackers and Painters" that have benefited me the most are: First, the ten hacker principles, one of which states that "any information should be free." I believe this aligns with the design in blockchain; for example, if you want to check what actions a scientist has taken on-chain, you can do so through various methods. Second, the book provides some fundamental understanding of startups. Third, it discusses methodologies for development, such as how to approach hacking and how to solve problems through hacking techniques.

Chain Catcher: Speaking of scientists, how do you categorize DeFi scientists in your mind?

Xiaodao: There are differing definitions of what constitutes a scientist. Some say you need to hack, while others believe that simply being able to manipulate contracts with code qualifies you as a scientist. I belong to the latter camp.

Scientists can be classified broadly and narrowly, or they can be divided into several levels.

The first type is someone who can interact with contracts using Etherscan. For example, if a Uniswap website goes down or blocks access from certain countries, one might want to release liquidity directly through Etherscan. This is a relatively simple type of scientist.

The second type is someone who can use scripts to interact with contracts. For instance, when EOS first launched, some scientists would batch-generate accounts. Similarly, if Uniswap conducts an airdrop and users create multiple accounts, each account engaging in a transaction, that can also be considered a scientist.

The third type is someone who understands how to read smart contracts and can analyze what they are doing.

The fourth type consists of white-hat scientists or hackers who can foresee hidden dangers in contracts. This type belongs to the top tier of scientists.

Chain Catcher: You have previously worked on many projects, including games, Y3D, and Unisave. Reflecting on your past development experiences, are there any lessons or insights you can share with us?

Xiaodao: I now summarize that if you want to learn about smart contracts, the best method is to create a clone. If you can innovate based on that clone, it shows you have truly grasped the concepts. The crypto industry has so much to learn, with innovations emerging daily. You can also follow some super scientists, like YFI founder Andre Cronje, who selflessly shares his new ideas and insights on projects in his blog before they are released.

Additionally, engaging more with the community helps you understand what kind of products they need and where the pain points are. Many retail investors face high transaction fees while mining, and they also have to endure price drops, so they need a significant amount of capital to make a profit. This creates a demand for products like yield farms. Our YFII Moon Landing version has also created a dedicated yield farm for mining.

Chain Catcher: Recently, on-chain transaction fees have surged. What solutions does YSD offer? What was the original intention behind YSD?

Xiaodao: High on-chain fees have always been a problem throughout Ethereum's lifecycle. I now lean towards viewing Ethereum's fees as part of its moat, which plays a positive role in maintaining the health of the Ethereum ecosystem. Projects can also migrate to Layer 2 solutions, including the recent Binance Smart Chain, Huobi Eco Chain, and OKEx Chain. For us at YSD, we might first launch on BSC and then migrate to Ethereum once it matures, to avoid making some mistakes.

The original intention behind creating YSD was our recognition of the urgent need for a neutral stablecoin to serve as a trading medium between stablecoins. If you want to provide swaps between different stablecoins, you need to establish trading pairs for both stablecoins, which can lead to fragmented liquidity. We hope to connect all stablecoins through a trading medium to provide users with a better trading experience, and algorithmic stablecoins can fulfill this role.

Currently, algorithmic stablecoins are still in the experimental stage, lacking real-world application scenarios. Most use cases involve users purchasing their own bonds. The core function of YSD is to act as a medium between stablecoins, and mining also uses YSD and other stablecoins in LPs, treating YSD as a currency rather than a speculative object.

Market Opportunities and Risks

Chain Catcher: The founder of YFI quickly merges several projects. How do you understand the value and risks of composability?

Xiaodao: For example, if our Unisave token is mined within dForce, and dForce is doing lending within Cream, everyone rushes to mine, causing the borrowing rate for USDT to spike to 100%. This would render Unisave unable to trade for a short period because USDT has been borrowed out.

Therefore, for Unisave, the underlying cannot rely entirely on lending-type DeFi products, as it may become trapped during periods of extreme volatility. If we were to create a trading pair between USDT and ETH, and USDT becomes unavailable for trading, it would invalidate that trading pair, leading to price discrepancies and losses for traders.

Thus, regarding composability, its value lies precisely within the risks. As a developer, you must have a clear understanding of the functions and risks at each layer, how to minimize those risks, and ensure that they remain within a controllable range, such as avoiding using lending-type projects for underlying mining, etc.

Chain Catcher: You initially developed on EOS, which has been on a decline over the past two years. What are your thoughts on this phenomenon?

Xiaodao: This is an interesting question. As a developer, I hope to remain neutral towards public chains and focus solely on technical design. However, the story of EOS teaches me that the success or failure of a public chain is not solely related to technology; it also involves token holdings, distribution, distribution logic, community building, and whether the core team is actively working, among many other factors.

I believe EOS's decline is the result of long-term accumulation, with the primary issue being whether Block.one genuinely wants to improve EOS. Block.one has not made substantial progress in the past year or two, which is disproportionate to the amount of funds they raised.

The best strength of the EOS community is that they have projects like DFS (Big Harvest) and have recently pushed for genuine progress in EOS. However, I believe that Block.one bears significant responsibility for EOS's decline.

In comparison, Tron has been much more proactive than EOS. We can see that Sun frequently participates in various AMAs, maintaining close interaction with the community and the developer community. I believe the biggest issue with EOS is that its development team has become somewhat complacent, which is the core problem.

Chain Catcher: Why does Ethereum have the most active developer community in the crypto world? What activities does the YFII community have for developers?

Xiaodao: This is closely related to their long-term promotion of various developer activities. Comparing it to EOS, when EOS first launched its mainnet, it held four EOS events in the first year, but by 2018 and 2019, they had not organized any developer activities, only a very unsuccessful meetup. In contrast, Ethereum holds at least 5-6 events each year in various cities and countries. Even this year, despite the pandemic, Ethereum still organized the ETHOline event.

EOS only performed well in its first year, scoring about 80 points, but their focus shifted away from properly engaging with the community afterward. Moreover, the various supernodes of EOS operate independently, draining resources from the ecosystem without uniting to contribute to it.

For a public chain community, having something like Ethereum is already quite impressive. In our YFI community, we hold a committee meeting every Sunday to discuss development matters, and every Tuesday we have an open AMA where we invite various projects to present and discuss what our ecosystem is doing. The active nature of the YFII community reflects the ideal decentralized community I envision.

Chain Catcher: Last year, several NFT games gained popularity. Is it due to players placing more importance on their in-game assets, or are there other reasons? What are the key conditions for the explosion of crypto games?

Xiaodao: From a broader perspective, as Bitcoin prices continue to break through, more and more users are becoming aware of the entire blockchain industry, and they are increasingly valuing asset ownership. The only issue might be the high entry barrier for ordinary players, along with high on-chain fees. This has led to this niche area of DApps not being as popular as DeFi during this cycle, but it is something that will definitely happen in the future.

The first key condition for the explosion of blockchain games is the need for a mature Layer 2 solution. Additionally, there should be a relatively low entry barrier for small users, and the UI/UX should be very friendly for casual players. Currently, BSC looks promising, with relatively low barriers and fees, good compatibility with Ethereum, and users can easily transfer their NFT assets to BSC.

Chain Catcher: Where do you think the innovations in the DeFi space might occur in 2021?

Xiaodao: Algorithmic stablecoins and social tokens. I believe social tokens are a very important direction, as they can open up an incremental market for the crypto community. The biggest challenge now is how ordinary users will accept such new concepts.

An intuitive idea is that, driven by the ongoing wave of individualism, people are increasingly expressing themselves publicly on the internet and sharing their creative content (blogs, tweets, short videos). However, most of this user-generated content (UGC) does not receive the rewards they deserve. Particularly in the Chinese-speaking world, where there is no tipping culture, the value created by most creators is essentially captured for free by platforms, while a few creators can only survive through advertising or sponsored content.

What we are currently doing with Matataki is to attract independent-minded creators around interesting topics and deep thinking, building a unique content value network, and using unique algorithms to surface quality content, allowing creators and participants to receive continuous rewards through digital currencies and fan tokens.