DeFi 2.0 is a new trend in the cryptocurrency industry which in 2021 showed a rapid growth in consumer interest. It is adapted to a mass market and provides simplicity and user-friendliness.

 

DeFi 2.0 or decentralized finance is a set of financial services and applications developed using blockchain, cryptocurrencies, tokens and smart contracts. These services are integrated into a single network, offering users better solutions that are usually provided by banks and other financial institutions. Basically, it’s a kind of alternative banking sector whose services can be used by people who do not want to deal with traditional financial institutions.

 

By using it, people can create a truly decentralized marketplace where the cost of services will not be determined by the will of the government or company leaders. Customers can receive passive income from cryptocurrency assets and pay small commission fees for transfers, loans, deposits. Also, it provides transparency of work for all participants while maintaining individual confidentiality.

 

DeFi 2.0 is one of those solutions that grab our attention from the get-go. Let’s learn a little more about it.

 

Contents:

 

How DeFi 2.0 Can Change Everything

Scalability

Liquidity

Security

Oracle attack

Capital Efficiency

Scalability (Layer 1, Layer 2)

Liquidity

DAO

Better Use of the Tools

Olympus DAO

Abracadabra

The DeFi 2.0 Craze

Trader Joe

Geist Finance

Final Thoughts

 

How DeFi 2.0 Can Change Everything

DeFi 2.0 is essentially a better version of the original DeFi, the developers tried to fix the previous problems. A new trend now includes the updating of the liquidity mining model and the popularization of second order protocols.

 

The original DeFi made use of blockchain technology that gave people access to secure and decentralized applications. However, it had multiple problems that DeFi 2.0 fixed, for example:

 

Scalability

The experience for users was seen to be problematic. This is because of the high gas fees incurred mainly through Ethereum. Another reason for this was the long waiting time.

 

Liquidity

This aspect of the market remains bizarre to this day. The liquidity of the original DeFi is low and has stagnated.

 

Security

This is somewhat ironic considering what blockchain technology offers. However, some subtle issues that carry consequences remain.

 

Oracle attack

The original DeFi is highly dependent on oracles. Unfortunately, some projects would rather not use a trustworthy oracle. This can lead to huge losses brought about by protocols being attacked.

 

Capital Efficiency

A lack of efficiency can still be noticed when looking at the original DeFi. Important assets are still not used despite the state-of-the-art technology available.

 

DeFi 2.0 is considered to be a major upgrade because of how it addresses these faults. DeFi 2.0 improves on the original DeFi through the following:

 

Scalability (Layer 1, Layer 2)

As previously mentioned, the Ethereum network is problematic due to high gas fees. DeFi 2.0 solves this, however, by creating another layer. This is why blockchains such as Polygon and Solana are part of the cash flow. They give users what they want without high gas fees.

 

Liquidity

This problem is solved by attracting more users and capital to the market. This is done by giving users the ability to earn yields. When users enter the fray in droves, the liquidity is enriched.

 

DAO

The case of Uniswap must be familiar by this point, but it must be known that the whole thing led to the creation of DeFi 2.0. The original DeFi was highly centralized and featured many third parties. This means that many DeFi protocols were controlled by third parties. Well, it does not work like that now. The Decentralized Autonomous Organization (DAO) was put in place to curb the very issue. It gives individuals the right to vote on any project and has attracted many to it.

 

Better Use of the Tools

The number of unused assets in the original DeFi is quite amazing, some of these assets include:

• Lending
• AMM (Automated Market Maker)
• Aggregator

 

This problem has been curbed in the DeFi 2.0 era through the development of recent projects. These projects include Olympus DAO or OHM and Abracadabra or SPELL. 

 

Olympus DAO

This crypto is different from its predecessors in that it is a stable coin that is not under fiat. The existence of a 3,3 scenario is enticing. This is because a low OHM price will not affect your staked tokens.

 

Abracadabra

Also known as SPELL, this is a well-liked version of DeFI 2.0. This is because tokens can be used as collateral that can pay off debts. With a stake in it, you can borrow 90% of its value and get voting rights.

 

The DeFi 2.0 Craze

Many people are beginning to delve into DeFi 2.0. There are a few chains that are testing the solution. The two best examples are Geist Finance and Trader Joe.

 

Trader Joe

This chain has, in many ways, surprised people. The fact that it had a possible TVL of $1.2 billion by mid-October is astonishing. This becomes even more so when you consider that two months earlier, its TVL was around $22 million.

 

A token was once worth $0.03 but has risen to $1.6. The addition of Banker Joe allows people access to the protocol with more services such as borrowing and lending.

 

Geist Finance

It can be argued that this Fantom protocol possibly has the larger growth between the two. In one day, it raised its TVL from a few hundred million to over 2 billion.

 

Final Thoughts

DeFi 2.0 is definitely growing faster than expected. Even with some disparities between certain coins, the direction is still the same. With DeFi 2.0, you can solve financial services issues and get the best solutions bypassing the classic banks. Payments are no longer processed for several days and commission and rates are lower. Today, the ability to get a cheap loan, quickly transfer funds to another part of the planet or create your own digital asset encourages investing in cryptocurrencies.

 

You can get your Real-Time and Historical Cryptocurrency Data with Finage free Crypto Data API key.

Build with us today!

Start Free Trial