DeFi from KSwap’s view

‘Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.’

— — Sir Winston Churchill

KSwap as a DEX supporting OKExChain ecosystem needs to understand DeFi deeply to make the product solid and strong, also having a good direction to contribute more and more. Here we shared some view with our community.

Why do we choose to build something in financial area? Finance is the flows of money between different systems in the society. Its essence is to re-allocate resources and values ​​across time and space to make the whole society/ system run better and that’s why people say money is smart.

The aim of finance has two factors: one is to realize the efficient allocation of capital and resources and to solve the needs of development; the other is to help humans fight against or make the balance with the uncertainty in the universe. People are always searching for certainty and safety like KSwap, we take the safety and stability as our priority to take care of our users seriously, like we researched successful products or platforms and make them as our model, also we create more beyond them. Standing on the shoulders of the great makes you greater.

DeFi -not just a ‘decentralized finance’

As we all know, DeFi is a decentralized finance. In this stage, we explained ‘decentralization’ in this way: Trust less, verify more. Decentralization does not mean to remove intermediaries completely, but to weaken the some factors or elements in the existing system so that system running can rely more on objective and rational judgment and proof which is also key factors of KSwap. We weak the intermediaries trust, no more high listing fee. Anyone can list on KSwap. We just verify the truth or not. But good or bad, the investors they should have their own judgements. Excellent team should not be limited by the high listing fee. Traders or users should have less platform system risks.

Why does traditional finance need an intermediary? Does financial institution provide people more objective and rational judgment and proof? It is truly difficult to generate trust between two different strange parities. Without trust, the most common instant transactions are difficult to complete, not even to fulfill the aim of relocate the funds and resources across time and space. The trust in a traditional way needs to be built on mutual trust so that they need an intermediary and the institutions. This kind way originated from passive attachment to power or the rich — a typical story why banks need to fancy decoration, and then gradually evolved into a subjective belief in a promise. Once the promises cannot be fulfilled, the trust system built by this intermediary will gradually collapse.

On KSwap, we take care user experience. What we want is to make the transactions with trust based on the rational tech but not relying on the expensive, inefficient financial intermediary. We offer liquidity from users and share the transaction fees with our users also. We are with our users together.

The meaning of decentralized finance-still for essence of finance

There are several cases to make the public to think twice about the stability of centralized finance. For example, one is that a financial crisis is often preceded by, accompanied by, or followed by periods where there are widespread credit problems. The 2008 Global Financial Crisis was no exception. It was largely precipitated by a massive boom in subprime mortgage lending, which created a large stack of mortgage loans that were virtually doomed from the start to end up in default. We see this kind of financial crisis is a trust problem. The other kind financial crisis is like COVID-19 caused the crisis for people losing their jobs.

Everything changes except the laws of mathematics. The laws of mathematics are not only constant, but also precise. Traditional intermediaries reply on power endorsement and management. Some people say that management is an art, which shows that management is highly complex which contains culture, individual emotions and many other factors. Emotional factors and complexity also mean uncertainty. Financial intermediaries themselves have become highly uncertain due to the weakness of human beings and management problems.

Every time mathematics is introduced into the intermediary management system in history, business and civilization which brings up the huge changes. For example, the double-entry accounting method uses mathematical principles to weaken some elements of the trust system that rely on people, which makes Business has entered the era of large-scale development, so double-entry bookkeeping can also be regarded as a kind of decentralization, and blockchain technology will carry out this decentralized revolution more thoroughly.

Decentralized finance must chase after the essence and goal of finance which must remain unchanged, that is, it is still to provide mankind with efficient resource allocation and financial transactions. DeFi fight against uncertainty, for ensuring the stable and orderly development of human civilization, that’s what we also chase after.

As the bottom layer technology has changed which also changed the trust mechanism, the financial industry also has great influences. Those redundant institutions and regulations that cope with human weakness may no longer be needed, and all kinds of obstacles hinder the reasonable financing of funds the barriers can be removed, management difficulty and costs will decrease exponentially, but financial efficiency will increase exponentially.

KSwap wants to improve efficiency with low gas fee. Lower gas fee and more efficiency are the key for our users which are also our key characteristics.

Decentralization-not 100% freedom

Some people think that decentralization requires the complete removal of intermediaries and resistance to the review and supervision of any authority. We think this is an overcorrection after breaking away from the shackles. Free market can indeed greatly improve the efficiency of resource allocation to a certain extent. This is in line with the original intention of the financial industry, but laissez-faire freedom will bring chaos and unfairness.

There is a saying liberalism related to the freedom. However, everyone has to admit the basic assumptions of liberalism economic theory are not realistic. It is not that everyone is rational enough, and people do not remain rational all the time. That way, it is machine.

Moreover, there are great differences in the mastery and understanding of information among individuals engaged in economic and financial activities. Individuals have different judgements in facts. In a laissez faire free market, people who are engaged in economic and financial activities follow the primitive and low-level jungle law, that is, the law of the jungle.

KSwap now is beginning to contribute its unlimited power with our users and we build things on rational rules, KSwap relocates its profits with our users to make transactions in a fairer world.

KSwap is an AMM-based token exchange protocol for OKExChain ecosystem.