The Prospects of DeFi Development and the Importance of Social Trading After the Ethereum London Upgrade

Ethereum completed the London upgrade on August 5, 2021, introducing the ETH burning mechanism. As of August 11, over 20,000 ETH have been burned, worth over 60 million dollars. The main sources of the burn come from platforms like OpenSea, a certain DEX, and Axie Infinity, reflecting the vast trading volume of the Ethereum ecosystem.

The prosperity of Ethereum also reflects the vigorous development of DeFi. The number of users in the DeFi market reached 1.7 million in the first quarter of 2021, an increase of 50% from the beginning of the year. As crypto assets are accepted by more investors, the number of users and asset liquidity in the DeFi market is expected to grow further.

However, DeFi currently still faces some challenges. First, existing data is difficult to truly reflect the development status of DeFi. Indicators such as the number of active addresses and TVL may be inflated, making it hard to accurately measure user activity and engagement. Second, the forms of user participation in DeFi are relatively singular, mainly following the "mining-withdrawal-sale" model, which lacks long-term appeal.

In this regard, social trading may become a catalyst for a qualitative change in DeFi. The development process from Web 1.0 to Web 2.0 shows that social attributes play a key role in the explosive growth of the internet ecosystem. Social interaction not only brings together a large number of users but also empowers other business segments.

In the DeFi field, building a decentralized "small group" social ecosystem may be the direction of the future. Users can not only trade but also engage in on-chain communication and data analysis to support trading decisions. This will diversify the DeFi ecosystem and attract more users to participate.

Overall, with the integration of social attributes and cross-chain trading capabilities, DeFi is expected to achieve new breakthroughs. Future DeFi platforms may include two types of roles: investment managers and ordinary users, utilizing smart contracts to enable open and transparent operations. The underlying infrastructure needs to provide support for trading components, on-chain data, community governance, cross-chain functionalities, and more. As users become more accepting of on-chain products, the fusion of "trading" and "social" will bring a whole new experience to the industry.