During a September 2nd livestream titled “The Opportunities and Challenges of DeFi,” Huobi Global CEO Qi Ye stated that DeFi is not a new concept, but rather a product that has been evolving for years. Its recent explosive growth represents a qualitative leap driven by accumulated quantitative progress. Compared to CeFi, DeFi has recently introduced several key innovations, such as liquidity pool-based matching mechanisms, the removal of institutional counterparty risk, and token-based incentive alignment for participants.
Qi Ye also pointed out that while the DeFi sector is currently booming, it contains significant bubbles. A major concern is the potential for a sharp price correction once the initial hype subsides, which could trigger mass sell-offs of DeFi tokens, cascading liquidations, and a downward spiral. Therefore, while recognizing the opportunities, participants must remain highly vigilant of the associated risks.
The following is the full transcript of Qi Ye’s speech:
Hello everyone, I’m Qi Ye.
Thank you to Mars Video for the invitation, and thank you all for joining today’s session despite your busy schedules. The market is quite volatile today—I recommend keeping an eye on your positions while you listen.
Recently, we’ve seen a significant shift in the industry: most discussions now revolve around various DeFi tokens. So what exactly is DeFi? Is it the future? Will it disrupt CeFi? Does liquidity mining hold real value? We see many seemingly explosive opportunities, but we also recognize these could be bubbles or even outright scams. Today, I’ll address these pressing questions.
First, let’s look at some recent observable changes. The industry landscape has clearly been reshuffled: the composition of the top 20 cryptocurrencies by market cap has shifted. Several previously obscure—or even hard-to-understand—assets have joined this elite group. For example, the oracle project LINK rose from relative obscurity to become a top-tier asset, now ranked within the top 5 or 6.
Let’s start with DeFi itself. In fact, DeFi isn’t a new concept—it emerged several years ago. For instance, last year Huobi Prime incubated DeFi projects like RSR and AKRO. DeFi is a product that has been in the making for a long time. Its recent concentrated explosion reflects the maturation of underlying infrastructure, marking a transition from quantitative accumulation to qualitative transformation.
Take exchanges as an example. Centralized exchanges (CEXs) use order-book models, with their core principle being “efficiency.” When 1,000 buyers and 1,000 sellers place orders, a robust centralized system is needed to match and settle trades. However, shifting to decentralized exchanges (DEXs)—i.e., on-chain trading—means every order placement or cancellation incurs gas fees, which users naturally find unacceptable.
Yet this year, Uniswap achieved astonishing trading volume, even surpassing Coinbase at times. This happened because Uniswap’s matching mechanism underwent a fundamental shift: it moved away from a performance-dependent order-book model to liquidity pools, significantly lowering the performance requirements for on-chain matching.
Simply put, a liquidity pool aggregates user funds into a shared pool, with trades matched at pre-agreed ratios. All buys and sells occur against this pool, and a portion of each trade is allocated as fees to liquidity providers—what users call “yield farming.” This model allows Uniswap to execute trades without relying on frequent order placements or cancellations.
Moreover, DeFi’s other major appeal is its genuine elimination of “institutional counterparty risk.” What does this mean? Consider current trading or lending platforms—if they’re run by a founding team or operators, institutional counterparty risk exists: you entrust funds to an institution whose integrity determines your capital’s safety. If that entity covets your assets or needs cash, it could simply seize your funds. Similarly, P2P risk fundamentally stems from institutional counterparty risk. This risk remains difficult to resolve in traditional centralized institutions, but DeFi solves it perfectly: all actions occur on-chain, assets reside on-chain, and behavior is governed by code that is collectively agreed upon and audited. On-chain transactions are fully transparent—a key structural advantage over the inconsistent quality of centralized exchanges—and represent a true leap forward.
DeFi delivers freedom, fairness, and transparency, attracting affluent individuals—i.e., crypto asset holders—who confidently deposit assets onto decentralized platforms.
Recent market movements vividly validate the adage “One day in crypto equals one year in real life.” Take Uniswap and Sushiswap: Sushi simply added a platform token incentive mechanism on top of Uniswap, achieving better alignment of ecosystem participant interests.
With no central party mediating interests, how can DeFi ensure transparent and equitable balancing of stakeholder interests? How can on-chain governance enable ecosystem self-governance and cold-start capability? These are defining features of this DeFi wave—and keys to the success of projects like YFII, YFV, and Sushi.
Governance tokens resemble FCoin’s model from years ago. Fundamentally, both leverage tokenomics to mobilize external resources—making them integral to trading/lending platforms—and distribute future revenue via tokens. Yet FCoin failed due to poor incentive alignment, which allowed arbitrageurs to flood in and enabled early participants to capture disproportionate profits at the expense of later entrants.
In contrast, YFI, YFV, and Sushi implemented extremely gradual early token releases—sufficient to incentivize early participation without over-diluting future rewards. This represents a more effective balance. Setting aside specific projects, this difference in participant incentive alignment is a major distinction between the two eras.
Another critical distinction lies in the near-impossibility of malicious behavior. This differs sharply from the 2017 ICO era, where project teams often retained over 70% of tokens and dumped them once prices surged—human nature rarely resists such temptation, which was a root cause of ICO failures.
In contrast, this wave of DeFi tokens is distributed entirely to communities. There is no pre-mine—and often no formal “project team” at all. Frequently, just a single developer launches a passion project, contributing the entire protocol to the community on day one. We are witnessing a vibrant, entirely new ecosystem.
These are the transformations and innovations brought by DeFi. Next, let’s discuss the challenges DeFi presents.
First, the DeFi sector currently exhibits massive bubbles. Many projects command sky-high valuations despite lacking sustainable business moats—new disruptors could emerge overnight. Current market sentiment strongly resembles the rampant speculation of 2017. Amid this fog, we must recognize the value of innovative models, but declaring that DeFi will “disrupt everything” remains premature, as fundamentals still fall short of breakthrough-level maturity.
Currently, on-chain yield farming is profitable primarily for large players. For users with modest capital, the cost-benefit ratio remains low, and the process is complex, presenting significant barriers to entry.
Second, there are code-level security risks. If vulnerabilities exist—and attract massive capital before adequate auditing—any failure becomes systemic. For instance, YAM’s TVL surged to astronomical levels on launch day, but a critical code flaw nearly derailed the entire DeFi market.
Third, copycat projects abound. Following Sushi’s rapid rise, countless imitators emerged—including malicious fake platforms luring users with unrealistically high yields.
Here are some recommendations for participating in DeFi:
First, yield farming thresholds remain relatively high. Participating in on-chain mining requires careful cost-benefit analysis—your capital must be substantial enough to offset friction costs like gas fees.
Second, over 40% of DeFi traffic originates from users in North America, Europe, and Singapore. Participation across East Asia remains comparatively low—many users still lack understanding. At this stage, we advise against engaging with unproven, high-risk projects; instead, consider assets already validated within the DeFi space.
Third, DeFi’s growth pace is astonishing—but beware of asset bubbles.
In fact, we at Huobi have mixed feelings about DeFi. We’ve tracked this space closely for years but exercised caution during the first half of 2020. Huobi’s operational philosophy prioritizes stability above all. Having operated for seven years, we enjoy immense trust from our vast user base. We safeguard user assets more rigorously than any other crypto exchange and prefer not to aggressively adopt immature models that could expose users to unnecessary risk.
We've recently struck a balance with our Global Observation Zone, which captures many fast-emerging projects with real potential. As the industry's largest platform, Huobi not only gives users early access to high-quality global assets but also helps them manage risk prudently. That's why we have position limits—to help users steer clear of most pitfalls.
This year marks the dawn of Blockchain Infrastructure 2.0. While many applications are still held back by Ethereum's current bottlenecks, key sectors like cross-chain interoperability, oracles, Layer 2, and DAOs will dramatically improve network usability. Once this foundational infrastructure matures, the ecosystem's potential will be unlocked. That's why Huobi has launched dedicated DeFi and Polkadot ecosystem zones, along with the most comprehensive oracle section available.
The rise of Uniswap may put pressure on second-tier exchanges, whose asset offerings and user bases tend to be highly similar—some more aggressive traders are migrating there. So far, Huobi has seen minimal impact, thanks to our large base of conservative, risk-aware users. Following the recent DeFi boom, Huobi has listed most high-value assets and attracted some higher-risk-tolerance users to move funds from their wallets onto our platform for trading. Early data suggests Huobi's revenue in August could be its highest ever—which means more HT buybacks.
The explosive growth of DeFi has actually reinforced the core value proposition of top-tier centralized exchanges. At heart, guiding and educating users on how to connect with quality assets remains crucial—and Huobi has the world's most professional asset research team, capable of effective screening. This stands in stark contrast to decentralized platforms that flood users with countless altcoins, offering clear differentiated value. As a result, DeFi and CeFi will continue to occupy distinct, complementary spaces.
We're living through a period of rapid transformation—a historic moment we're fortunate to witness and seize. Huobi will continue to drive the industry forward and stand with everyone through both bull and bear markets.