Goodday guys, in this bull market of encrypted digital currencies, Polkadot and Cardano have emerged, and their market value has entered the top 5 of the market value of encrypted digital currencies. Obviously, the market is re-optimistic about public chain projects. But I think that the current valuation of these two public chain projects does not have a solid business foundation. According to the current progress of these public chain projects, the market's valuation of them is obviously extremely high. Such a high valuation price is difficult to sustain.
Whether it is Polkadot or Cardano, these two projects are still in a very early stage. The Goguen phase of Cardano's support for smart contracts is not yet online. In Polkadot's ecosystem, there has not been a parallel chain online. So in the two ecosystems, none of the applications started. Not to mention how popular these applications will be in the market, not to mention what kind of benefits these applications will generate. Therefore, in the future development of these two projects, it is difficult to guarantee the current market valuation of these projects due to any internal factors of the projects and changes in the general environment.
The most basic factor that determines whether a public chain project is valuable is the popularity of the various applications running on it. At this stage, Ethereum is the basic public chain adopted by various applications. Various blockchain applications are developed on Ethereum. Among these applications, there are some applications that are popular in the market, such as the former Kitty cat and the current DeFi application. If we look at the development of the market value of Ethereum, we can see that although Ethereum is a commonly used public chain so far, the ups and downs of its ecological development directly affect the market value of Ethereum. The market value of Ethereum has risen from a peak at the end of 2017. After a long period of lows, it has risen to a peak due to the popularity of DeFi applications in the market. The market value of Ethereum is directly related to the popularity of its applications. But whether it is Polkadot or Cardano, there is still no popular application running on it. Even if a certain type of application (such as DeFi) is popular, such applications will develop on different public chains. At present, it is impossible for any public chain to enjoy the basically monopolistic position before Ethereum, so the funds in the market must be scattered on several public chains.
In terms of expectations for the ecological development of Polkadot and Cardano, one of the main expectations is to migrate the popular applications on Ethereum to these two ecosystems. The most important type is DeFi. Cardano has provided tools for the migration of Ethereum assets to the Cardano ecosystem. In the Polkadot ecology, there are already parachain plans to provide DeFi applications. If DeFi applications that are popular in the market can be established in the short term in these two ecosystems, then this will indeed help maintain the market value of these two public chain projects. But this migration is a process. But most importantly, how long DeFi itself can sustain the market enthusiasm is a big question.
DeFi's popularity in the market has emerged with the recent boom in the stock and currency markets. Speculators need capital and better trading methods, which has promoted the rise of various DeFi applications. Correspondingly, if encrypted digital currency transactions enter the bear market stage, the transaction volume of various DeFi applications will definitely decrease significantly. Therefore, the application of DeFi cannot attract market support for the public chain it uses. Judging from the current overall economic development status and the situation of the stock market, the substantial adjustment of the stock and currency markets is a high probability event this year. This will definitely affect the market's interest in DeFi, and further affect the market's valuation of corresponding public chain projects.
I think that for public chain projects, the real application that can promote the prosperity of the public chain ecosystem is the introduction of stable coins. Stable currency is the simplest and easiest financial product to introduce, but the market demand for it is very strong. The use of stablecoins in the public chain ecology will be used in two specific application areas: payment and transfer. Such applications can quickly form a network effect. On the one hand, it is continuously expanding the number of users of the public chain, and on the other hand, due to frequent such transactions between existing users, it can further enhance the cohesion of the public chain. Moreover, such demands are activities that people must engage in in their daily economic life, so these activities can promote the long-term development of the public chain ecology.
In terms of applying stable coins to promote ecological development, I think the Diem ecosystem will be the best application case. After the launch of the Diem stablecoin, the members of the Diem Association will provide stablecoin-based payment applications in their respective fields. Therefore, stablecoin applications will be promoted in many segments (such as ride-hailing applications such as Uber and Lyft). It is the promotion of ecological development. Therefore, the ecology established on the Diem blockchain will develop very rapidly. This will generate very big competition for existing public chain projects. If the relevant demand based on stablecoins in the market can already be met by the Diem ecosystem, then in this regard, the market's demand for Polkadot or Cardano will naturally decrease. Therefore, the development of Polkadot and Cardano ecology lacks an important support.
In terms of support for stablecoins, neither Polkadot nor Cardano are prepared. In the two ecosystems, stable coins will be produced and circulated, but such stable coins are generated based on encrypted digital currency mortgages. If the total amount of encrypted digital currency assets declines, this will definitely affect the total number of stablecoins in the ecosystem. And more importantly, the number of stablecoins generated in this way is far less than the number of digital stablecoins directly generated based on legal currency. So in general, whether it is Polkadot ecology or Cardano ecology, the number of stablecoins will be much less. This will directly limit the development of ecology. Of course, in the early days of the ecology, it is unlikely to directly provide stablecoins based on legal currencies. Even influential organizations such as Facebook and the Diem Association have encountered many obstacles in launching fiat-based stablecoins, not to mention blockchain technology development companies such as Polkadot and Cardano. Therefore, in the early stages of the ecology, it is also a feasible strategy to have stablecoins based on encrypted digital currency mortgages. But I still hope that these two projects will start stablecoins based on legal currency as soon as possible to provide a solid foundation for ecological development.