Array Guidebook old version
  • 1️⃣Get started
    • Background
    • About Array
    • Founding Team
  • 2️⃣Array Protocol
    • Prospect Theory
    • Array L3 Application-Specific Layer
    • ArrayVerse
    • Genesis PassCard
  • 3️⃣Token Economy
    • Deep Dive into $ARA
      • Four principles
      • ARA & USDR Relationship
    • Monetary Policy
    • Imaginary MarketCap VS Real MarketCap
  • 4️⃣Features
    • Protocol Highlights - 4S's
    • DEGA
    • Improvements to Mint & Swap
  • 5️⃣Links & Resources
    • Official Links
    • Product Demo
    • Roadmap
    • Twitter
    • Array Genesis Article
    • Press Kit
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  1. 1️⃣Get started

Background

NextAbout Array

Last updated 1 year ago

In many countries, the value of the local fiat currency is closely tied to the perceived strength of the economy and the stability of the government. When the economy is doing well and there is confidence in the government, the value of the fiat currency tends to be higher.

On the other hand, when the economy is struggling or there is political instability, the value of the fiat currency may decline. It is the responsibility of the private sector to generate cash flow in economy.

In general, DeFi applications can be thought of as having 3 layers:

  1. Base layer: This is the underlying blockchain network that DeFi applications are built on.

  2. Protocol layer: This is the layer of decentralized protocols that provide the building blocks for DeFi applications.

  3. Application layer: This is the layer of user-facing DeFi applications that are built on top of the base and protocol layers.

The order changes in the new Defi "2.0" stage, it goes:

Application Layer > Base Layer > Protocol Layer. As visualized in the figure below.

How to objectively evaluate the pros and cons and potential of a Defi protocol?

In the eyes of capital and the market, the amount of TVL (Total Value Locked) funds deposited in the protocol and its growth rate are the core elements and are linked to the overall valuation. This is due to the fact that in the past the Defi protocol mainly captured value from the underlying infrastructure of the blockchain and had poor correlation with upper-layer applications.

The market has been developing dynamically. The base layer shined in the last Defi summer cycle. It absorbed a large amount of funds and became more steady. The application layer also ushered in a golden period relying on easy customer acquisition and strong out-of-market effects. Attributes are likely to become the main theme of the next Web3 cycle. In this paradigm shift Defi must be deeply integrated with the application layer in order to get out of the trap of castles in the air. In addition, we added the following important factors when evaluating the criteria of the protocol: traffic and usage rate.

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