Mid term test blockchain group bears topic dao, defi, nft

DA NANG UNIVERSITY VIETNAM-KOREA UNIVERSITY OF INFORMATION AND COMMUNICATION TECHNOLOGY COMPUTER SCIENCE FACULTY MID-TERM TEST BLOCKCHAIN GROUP BEARS TOPIC: DAO, DEFI, NFT Members: Tran Thi Kim Oanh - 19IT3 Nguyen Trung Hieu – 19IT3 Pham Tan Truc – 19IT3 Truong Quoc Khanh – 19IT3 Visiting Lecturer : Truong Quoc Tuan Da Nang, January 2022 DA NANG UNIVERSITY VIETNAM-KOREA UNIVERSITY OF INFORMATION AND COMMUNICATION TECHNOLOGY COMPUTER SCIENCE FACULTY MID-TERM TEST BLOCKCHAIN GROUP BEARS TOPIC: DAO, DEFI, NFT Members: Tran Thi Kim Oanh - 19IT3 Nguyen Trung Hieu – 19IT3 Pham Tan Truc – 19IT3 Truong Quoc Khanh – 19IT3 Visiting Lecturer : Truong Quoc Tuan Da Nang, January 2022 CONTENT LIST OF PICTURES .4 DAO OVERVIEW .1 1.1 General introduction about DAO 1.2 DAO on the market .2 1.3 Pros and Cons of DAO 1.4 Potential of DAO: 1.5 How does DAO work ? DEFI OVERVIEW .5 2.1 General introduction about DEFI 2.2 Some applications of DeFi 2.3 Pros and Cons 2.4 Potential of DEFI: 2.5 How does DEFI work ? NFT OVERVIEW 3.1 General introduction about NFT 3.2 Application of NFT in the market 3.3 How does NFT work? 10 3.3 The potential of NFT 11 DEFI AND NFT 11 COMBINATION 12 5.1 Combination of DAO and DEFI 12 5.2 Combination of DAO and NFT 14 CONCLUSION 16 REFERENCES 16 LIST OF PICTURE Figure 1 Decentralized Autonomous Organization (DAO) Figure NFT Gaming Figure BitDao Y Figure DeFi DAO 13 Group Bears – DAO, DEFI, NFT DAO, DEFI, NFT Authors: Group Bears Date: 25/1/2022 Version: Version 1.2 Circulation: Internal, Project Partners, Public DAO OVERVIEW 1.1 General introduction about DAO DAO (Decentralized autonomous organization) is a decentralized autonomous organization, designed for automation and decentralization It operates as a form of venture capital fund, is based on open source code, and does not have a typical management structure or board of directors To be fully decentralized, the DAO was not tied to any particular country, even though it used the Ethereum network For example: with a company there is a CEO, and that director's decision will affect the entire company, and of course, that is also the weakness of the centralized model, but with DAO Otherwise, the decision-making power will be voted on by the majority, simply understood that all decisions and directions will be voted by the majority of investors Figure 1 Decentralized Autonomous Organization (DAO) Group Bears – DAO, DEFI, NFT The idea of DAO, when the operating apparatus of the whole organization is replaced by machines or code, DAO model is similar, a group of people pooling resources to accomplish a goal DAO smart contracts will be self-powered machines to achieve that goal All programming code will be public and testable by everyone Every action performed by a computer program will be recorded and cannot be modified These decisions will be voted on by a transparent majority In the DAO, the community can check where the middleman resources are received or transferred The community will decide who the resource goes to through voting, or verify the exact metrics of how it will go and how it will go In addition, the community can contribute comments and raise comments come up with ideas to improve the operating idea of DAO, this is considered as an advantage of DAO Basically, the DAO is a decentralized autonomous organization that is encapsulated in two terms: decentralization and self-operation For the centralized model, there is a triangular model, which means that the decision-making power will be concentrated on the person standing at the top of the person in charge who runs the whole decision As for the DAO model, all decision-making power will be counted on the majority 1.2 DAO on the market NFT Gaming: with the ability to make money from players, a new model was born related to NFT and gaming investment funds operating under the DAO model DAOs will generate revenue by increasing the price of NFTs when they buy from the beginning, or lease back to members of the DAO the NFT that the DAO fund buys Figure NFT Gaming Group Bears – DAO, DEFI, NFT For example, YGG is one of the first gaming investment DAOs in the virtual currency market, YGG customers will contribute assets of NFT tokens to the fund And this fund will be used to invest in NFT in games For each game, YGG will create a "supDAO" department to specialize in support and optimal operation as well as increase revenue for NFT tenants BITDAO: will invest in DEFI products in the ecosystem and support great potential projects The assets in the common fund will be exchanged with the project tokens that BitDAO is investing in, and at this time the common fund will be home to a large collection of tokens of different projects And the main revenue comes from the success of those projects and makes the token increase in price Figure BitDao 1.3 Pros and Cons of DAO Pros: o Voting rights are shared among members o Remove the trust factor, increase transparency o Applying the proposed game theory will create benefits for the majority o Concentrating the vision of many individuals, expanding the vision for the whole community o Investors sending money from all over the world can stay anonymous o All done automatically Cons: o Legality: some countries still not recognize or agree with the laws in their host countries Group Bears – DAO, DEFI, NFT o Likely to be attacked because there is no specific party to manage o Bad Decisions: Unprofessional decisions when the majority of unskilled community members are higher than the rest o Delayed: the operation time as well as giving a vote often takes a long time, causing damage to the participants o No privacy: potentially revealing strategy to rival companies o Centralization still exists in the decentralized community 1.4 Potential of DAO Currently, the development of DAO is said to be tied to blockchain and decentralization In addition, in the context that traditional organizations are recording many incidents related to the abuse of power and manipulation of assets, causing great damage to the whole business, the DAO model is more and more popular around the world most interesting world This market also opens up many opportunities for users to easily access and benefit, such as DeFi, NFT ,… DAO appears and is a place for users around the world to experience , financial, improvement ,… 1.5 How does DAO work ? DAOs, on the other hand, are decentralized, which means they aren’t governed by one person or entity The rules and governance of each DAO is coded in smart contracts on the blockchain and cannot be changed unless voted upon by the DAO’s members Instead of a select few having the majority of say, members of each DAO can vote on decisions together, typically on equal footing For example, PleasrDAO members collectively decided to buy the Wu-Tang Clan album After doing so, they created an NFT to represent a deed of ownership to the album The members of PleasrDAO co-own the NFT deed, and in turn, share ownership of the album Sometimes, in larger DAOs, teams may form to tackle different aspects of the organization with leaders that have been voted in That way, not every single member is needed to vote on every nuance Group Bears – DAO, DEFI, NFT DEFI OVERVIEW 2.1 General introduction about DEFI DeFi is an acronym for Decentralized Finance, roughly translated: Decentralized Finance This is the system by which financial products are available on a public decentralized Blockchain network This means they are open to anyone to use without going through intermediaries like banks or financial institutions DeFi is an overlapping network of dApps and smart contracts (Smart Contracts) built on the EThereum blockchain This model focuses on financial applications such as lending, exchange, derivatives and trading, etc DeFi can help you easily control your assets as well as being able to trade, lend, invest, and pay DeFi is considered a financial model that goes against the traditional (CeFi Centralized Finance) In CeFi, you hand over financial control to an intermediary (bank or financial institution) and trust that they will a good job of managing your assets DeFi aims to create a new financial system, democratize the existing system and make it more fair, through the use of open protocols and transparent data 2.2 Some applications of DeFi Although DeFi is usually placed in the field of Blockchain and cryptocurrency But the scope of application of this model is much broader Yield Farming: Yield Farming or Yield Farming is a term used to refer to people who try to make more profit from the cryptocurrencies they own In simple terms, if the farmer owns it land, they will lease this land for profit Similar to coin owners, they will lease coins to participate in the buying and selling market to fluctuate the price of a certain coin Margin Trading: Margin trading or Margin Trading is a term commonly seen in the Forex market In the cryptocurrency market too, you can trade more than you have in the exchange by borrowing from the exchange and have to pay it back when closing the trade Decentralized exchanges: At decentralized exchanges, you can trade yourself with others without an intermediary to reduce costs Because the exchange does not control your money, even if a hacker can hack the exchange, it will not be able to get the money Group Bears – DAO, DEFI, NFT Stablecoins: Without DeFi, it would be more difficult to bring Crypto as collateral to issue Stablecoins because of the need for many intermediaries In contrast, with DeFi, Crypto will be collateralized automatically and quickly by smart contracts Peer-to-peer lending platform: With a lending model when applying DeFi, without intermediaries As a result, the amount of money that the lender collects will be more, and at the same time, the interest of the borrower to pay is also less Prediction market: This is a betting activity applied Smart Contract, you can predict a price movement of a certain cryptocurrency, for example If the prediction is correct, you will have tokens, otherwise, you will lose tokens Decentralized insurance: Buying insurance for investors participating in decentralized exchanges is also an application of DeFi 2.3 Pros and Cons Pros DeFi makes entering the financial markets easier: In DeFi, there is no need for complete trust You not need to prove your identity or ability to repay the loan The rules of the game are given and the parties must abide by those rules And now, the smart contract is the arbiter to help maintain the rules of the game and ensure the interests of the parties No need for intermediaries: With blockchain technology behind it, DeFi eliminates intermediaries like banks or the Government Now anyone can access financial products and services without having to be authorized and regulated by these agencies DeFi pushes crypto prices up: Since DeFi was born, the market capitalization of large projects in the segment has increased significantly The price of some coins has even doubled in less than a year Increased inclusion of financial services: By making automated tools available to all, with transparent and non-discriminatory implementation Cons Scalability, throughput, and transaction fees for blockchain payment platforms are limited The use of energy also raises concerns about contributing to climate change Group Bears – DAO, DEFI, NFT Unrecognized legitimacy: DeFi itself or even blockchain technology is still a big question mark today In many countries around the world, blockchain and its products are still not considered legal This means that if there is any dispute, no one will guarantee or settle it for you Poor liquidity: The current DeFi market is still not as large as traditional financial systems So it can be difficult to put user trust in a sector that is not as profitable as the conventional financial sector Risk of centralization: Blockchain cannot access information off-chain So there is a need for a third party to provide real-world data to the blockchain, which makes the data centralized and susceptible to centralization-related issues DeFi attacks, hacks: DeFi projects are vulnerable The reason can be due to misuse of third-party protocols or business logic errors, coding errors, fast lending, price manipulation and miner attacks 2.4 Potential of DEFI: DeFi has a growing pool of resources over time Within a year, DeFi's total market cap grew 12 times and opened up many opportunities for investors In the future, DeFi will change and greatly affect the centralized financial model in many countries Many investors are growing tired of the centralization of the traditional financial system They want freedom, freedom and control, especially those who not have access to banking and finance Therefore, investors will tend to turn to DeFi to manage their personal finances without depending on a third party or other centralized organization But for DeFi to completely replace CeFi is unlikely due to many subjective as well as objective factors However, DeFi will certainly create a parallel playing field with CeFi, while focusing on the problems that the CeFi model does not solve 2.5 How does DEFI work ? Currently, most DeFi protocols and applications are built on top of Ethereum Ethereum is an extension of the technology and concept behind Bitcoin Rather than just a currency, Ethereum is a global, decentralized network of technology – meaning it is not Group Bears – DAO, DEFI, NFT owned or controlled by a central entity – that powers protocols and The application uses smart contracts Ether is the native cryptocurrency of Ethereum, and like Bitcoin, it can be purchased on a cryptocurrency exchange or mined (for now) It is important to note that currently, DeFi is largely unregulated and uninsured the way traditional banks are, so investors should their research and may just want to contribute assets they can afford In the crypto world, money and DeFi tokens are often referred to interchangeably And while they are quite similar, there are a few important differences What is DeFi Coin? Coin DeFi is like a digital version of a fiat currency – it transfers value during financial transactions DeFi coins are built upon and are often named for their unique, native blockchain networks In 2021, Maker, Compound, Uniswap, Aave, Chainlink and Ankr are among the most popular DeFi coins DeFi tokens also transfer value, but not necessarily always in a financial sense Utility tokens can be used as passwords to provide access to resources, asset tokens can be used to represent physical assets like real estate and of course there are non-fungible tokens (NFTs) that represent an assortment of “items” such as digital art (Example: Nyan Cat recently sold for $600,000) DeFi tokens are also different from coins because they can be built on top of existing blockchain networks DeFi offers: Much higher degree of autonomy with transactions; Permissions are not required to execute transactions and transactions can be structured without waiting time Better transparency on transactions and fees More trust in technology itself instead of intermediaries like banking institutions However, these perks not come with potential risks DeFi is still new territory, and it's also less private because transactions are displayed on the public decentralized blockchain Group Bears – DAO, DEFI, NFT NFT OVERVIEW 3.1 General introduction about NFT NFT stands for Non-fungible token, which is a unit of data on a blockchain digital ledger In a word, it is a type of digital asset present on a digital chain (blockchain) This blockchain acts as a ledger that ensures the authenticity of both the assets and the owners Most digital content and objects in the past are infinitely reproducible But with NFT it is different, each asset will have its own unique digital signature and therefore it is unique Each minted NFT token has a unique unique identifier and belongs to a unique owner As a digital asset, NFTs are also often traded in cryptocurrencies, but sometimes also in USD 3.2 Application of NFT in the market Thanks to these special properties, NFT is widely applied in many fields, notably in the fields of: digital artwork, collectibles, in-game items, and NFT sports o Art With NFT, a person can buy a painting, convert it into a digital file, upload it and attach it to a token on the Blockchain platform to prove their ownership This will help artists a lot when they often face problems related to copyright protection, from Painting, Music, Cinema Example: The work NFT - The painting Everyday: The First 5000 Days by artist Beeple sold for 69.3 million USD (nearly 1600 billion VND) o Gaming NFT is used to make it possible for players to actually own in-game items, characters, and trade with less risk For traditional games, publishers provide and sell items products in the game To own items, you need to recharge the game to buy them But the actual ownership is with the issuer (virtual item), your item may be lost if the server has problem or the account is hacked But with blockchain games with NFT apps, your item is tied to a data token You can easily exchange it for anyone who owns the underlying blockchain coin (like ETH) And the entire activity of that item is recorded and stored on the blockchain, no one can affect or change your item Group Bears – DAO, DEFI, NFT Example: According to Coindesk, a gamer recently sold a bunch of land in Decentraland (a virtual reality platform powered by Ethereum) for $80,000 o Digitizing real assets In the future, NFT can be widely applied to all areas of life, encrypting all assets and potentially digitizing all intellectual property rights We can put assets like land on Blockchain, encode ownership in NFT, solve the problem of fake red numbers in real estate In addition, items can be tokenized to exchange and trade such as domain names, e-tickets, , Example: Nike uses NFT to technicalize its limited shoes 3.3 How does NFT work? Many NFTs are created and stored on the Ethereum network, although other blockchains (such as Flow and Tezos) also support NFTs Because anyone can look at the blockchain, ownership of the NFT can be easily verified and traced, while the individual or organization that owns the token can remain a pseudonym Various types of digital goods can be “encrypted,” such as artwork, in-game items, and stills or video from a live broadcast – NBA Top Shots Are one of the largest NFT markets While NFT transfers ownership added to the blockchain, the file size of the digital item does not matter as it remains separate from the blockchain Depending on the NFT, the copyright or licensing rights may not be included with the purchase, but not necessarily In the same way that buying a limited-edition print doesn't necessarily grant you exclusive rights to the image As the technology and underlying concept advance, NFT could have many potential applications beyond the world art world For example, a school might issue NFTs to students who have already earned a degree and make it easier for employers to verify a candidate's education Or, a venue could use NFT to sell and track event tickets, potentially cutting down on fraud on resale 3.4 Pros and Cons of NFT Pros o Immutable: NFTs cannot be altered or replaced in any way if their authenticity is verified on the blockchain The intrinsic value of authenticity also becomes the actual, extrinsic value 10 Group Bears – DAO, DEFI, NFT o NFT Royalties: NFT royalties give you 5-10% of the standard sale price every time someone buys or sells your NFT work on the marketplace Each secondary sale occurs, the smart contract ensures that the terms of the NFT are fulfilled If a royalty is specified, a portion of the profits will go to the artist who created them o Play for Money: NFT games are starting to gain popularity and people are paying attention to how they can play and earn at the same time The tokens that players collect can be listed for sale on online marketplaces and converted into Bitcoin or other cryptocurrencies o More Fun: Do you get bored looking at crypto charts every day? So an NFT could be the next investment you should be thinking about Making art, buying and selling art is actually more fun than trading cryptocurrencies or stocks It's like you buy a piece of art on eBay for $100 and flip it over for $200 Cons o Too many projects on the market: According to a recent study, there are many NFT collections released in the last months The majority of projects not bring value to the owner o High Transaction Fees: Etherium transaction fees are skyrocketing and most NFTs are built on ERC-20 o Scams and Scams: The burgeoning NFT market is home to all sorts of challenges, from NFT scammers to people looking to make a quick buck to scam others o Speculative market: Currently, NFT value is completely tied to aesthetic and emotional value Its value cannot be assessed as a long-term investment, so right now, it's nothing but speculation 3.3 The potential of NFT Such practical applications of NFT have opened the door for further development for the future of cryptography.Blockchain and NFT will create a democratized digital ecosystem free of party interference third If everything is certified as NFT later on then the future of that asset will depend a lot on how it works in the NFT space and the potential of NFTs depends entirely on intellectual development intellectual property in this space Representing a single, non-substitutable asset will make NFT more attractive and sought-after by those who like the “exclusiveness” of what they have In the future, we may see a wave of encryption in all fields, and then owning NFT is indispensable 11 Group Bears – DAO, DEFI, NFT DEFI AND NFT DeFi and NFT are not new, both have been around since 2017 It is only until now that DeFi and NFT have had a chance to really develop Surely everyone knows more or less about DeFi and NFT The following are studies on the difference between NFT and DeFi: NFT DEFI NFTs are digital assets that represent a DeFi decentralized finance can be called fraction of real-world assets Such as art, simply, it is an ecosystem of financial music in-game items, videos applications And built on top of Blockchain networks DeFi puts technology at the front and center of transactions in the financial services industry NFTs are usually a type and have a DeFi uses technology to separate unique identifier This is arguably the centralized models and enable the provision exact opposite of most digital creations of financial services to all It almost always has an infinite supply DeFi gives users full control over their Hypothetically, a supply cut would assets increase the value of a given asset NFT exists on a blockchain and is a through peer-to-peer (P2P) or possibly decentralized applications DeFi is a structure with a multi-layer distributed public ledger that records architecture Each class will have a distinct transactions purpose Users have exclusive ownership because The layers that make up the Defi system are NFTs can only have one owner at a time distinguished among five layers including: NFT's unique data makes it easy for transaction processing layer, asset layer, users to verify their ownership protocol layer, application layer, aggregation, and orchestration layer COMBINATION 5.1 Combination of DAO and DEFI DAOs mainly appear in two forms in the DeFi market The first is Venture DAO, which focuses on investing in DeFi projects Through the DAO organization, individual forces are brought together and collective intelligence is used to reduce investment risk This type of DAO can search and discover investment opportunities in the DeFi sector, 12 Group Bears – DAO, DEFI, NFT aggregate funds and screen projects within the organization through voting and smart contracts, and then provide liquidity Accounts for target projects and earn income Representative organizations include ForceDAO, AladdinDAO, and more Figure DeFi DAO Venture DAOs are not only active in the DeFi sector, but they can be seen in all popular investment sectors Compared with traditional investment tools, Venture DAO's design is fair, transparent, and has a fairer regime In these DAOs, each member can make investment proposals for the DAO and select high-quality projects for the community through a competitive mechanism, which means decision-makers have changed changed from being a single leader to relying on community votes and consensus This allows Venture DAO to integrate the wisdom of different fields while enjoying the social capital and network of its members The other is that the DAO becomes a collaborative entity that helps build agreements In other words, DeFi projects directly adopt the DAO governance model to allow token holders to participate in the ecosystem and share the benefits of financial derivatives In such a project, token holders, as community members with decisionmaking power, can design and optimize protocols and applications through proposals; and the use of DeFi products within the organization as a method of payment and distribution also makes the DAO decentralized and digitalized Organizations in this field include MakerDAO (MKR), SynthetixDAO (SNX), etc With the development and evolution of DeFi, this model is being adopted by more and more projects 13 Group Bears – DAO, DEFI, NFT DeFi is currently undergoing an iterative process and the concept of DeFi 2.0 has begun to be discussed and practiced continuously DeFi2.0 is committed to making liquidity the infrastructure layer of DeFi and achieving sustainability Will the adoption of the DAO governance model become one of the defining standards of DeFi1.0 and DeFi2.0? DeFi2.0 needs a more organizational form and structure of Crypto governance, that is, truly decentralized governance: ecological governance and decision-making power are delegated to community members, all members have connected entities and the participants are motivated so as possible To avoid the project being dominated by giant whales it also minimizes the risk of people Governance token holding changes agreement Currently, the most popular DAO in the DeFi2.0 field is OlympusDAO, and there is a view that most of the future DeFi2.0 Tokemak project participants will be some kind of DAO organization 5.2 Combination of DAO and NFT The combination of DAO and NFT has brought about the evolution of the governance model Currently, most DAOs vote and govern by holding ERC-20 tokens, but under this mechanism, participants in governance must become investors and even governance can be subject to change controlled by speculators As a result, some DAOs choose to use the NFT for voting, so that each member can enjoy fairer governance rights On an application-specific level, many DAO freshmen have focused on collecting and investing in NFTs over the past two years, while nurturing and expanding NFT's value territory through the power of community In addition, because some high-priced NFTs are not friendly to individual investors, many distributed bidding DAOs have emerged In this type of DAO, members have the right to jointly define the NFT artwork to be invested in, and they can split the purchased NFT, borrow, manage, or use it as collateral on other DeFi platforms Representative organizations include PleasrDAO, PartyDAO, and more NFT project participants are also interested in activities other than finance As a result, there is a rich DAO ecosystem in the field, creating communities with warmth and resonance For example, in some NFT-based social DAOs, buyers of identical NFT 14 Group Bears – DAO, DEFI, NFT collections form communities with specific identities to maximize social capital This summer, BAYC, CryptoPunk, and other NFT avatars are constantly selling for sky-high prices, which is enough to see the strong pull of the community There are also a number of content publishing and production platforms that are establishing the creative economy through the DAO The basic model is: using NFT to encode ownership of digital content, forming a closed-loop of content-based production, investment, transfer, and consumption; and around content The assembled people have formed a temporary DAO to collaborate on decentralized content production This loose connection and heterogeneity make creativity more dynamic 15 Group Bears – DAO, DEFI, NFT CONCLUSION In conclusion, DAOs are marking a new chapter in the history of crypto Although we not know to what extent it will disrupt all forms of human organizations, the DAO governance model has proven particularly successful for crypto-native communities It should surpass traditional organizations in that it enables internet users to create and exchange value collectively in a trusted environment, and rewards them for the value they create While this new governance model inherently faces challenges such as vulnerability to attacks, it will continue to flourish Today, there are only 169 DAOs One day, there will be tens of thousands of them Now is a better time than ever to join the revolutionary wave and get involved in one or several of these DAOs These are only early experimentations but are already marking the history of crypto and perhaps the history of humankind too REFERENCES [1] [21:30 26/1/2022] DAO Introduction [online] nansen.ai/research/first-defi-then-nfts-now-daos-the-next-big-chapter-ofcrypto-is-already-here [2] [18:00 26/1/2022] NFT overview [online] https://vi.money/nft-la-gi-uu-nhuoc-diem-nft-nghe-thuat-ky-thuat-so60324/amp/ [online] https://blogtienao.com/tiem-nang-to-lon-cua-nft-trong-tuong-lai/ [online] https://phongvu.vn/cong-nghe/nft-la-gi/ [2] [21:00 26/1/2022] Combination of DAO and DEFI [online] https://coinyuppie.com/dao-can-be-said-the-magic-door-of-defi-nft-andgamefi/ 16