What are the core characteristics of DeFi 2.0 from the perspective of evolution and initial characteristics?
DeFi, which was suppressed by NFT and GameFi, seems to have returned to the center of public opinion recently, represented by multiple innovative DeFi projects, unknowingly bringing out the shadow of DeFi 2.0. Although the current stage of DeFi 2.0 is still relatively vague and its durability still needs market tests, its arrival makes it clear that the DeFi market is actively engaged in a series of new explorations, new elements and innovations will continue to flow in, and have a real flagship The DeFi2.0 project party exists.
(Chart source: DEFI PULSE)
Wake from DeFi to the breakthrough of DeFi2.0
The reform of the financial market has never ceased, and after the crypto world entered, this change is even more refreshing. The outbreak of DeFi in 2020 will not only excite the crypto market, but also attract the intervention of traditional finance. They hope to reshape a value revolution through such a brand-new financial circulation model. Then, last year’s liquidity mining was mainly a wake-up call to awaken users, communities, and the industry’s participation in the concept or gameplay of decentralized finance, and repeat the logic of new projects step by step. The scale of this market lays the foundation for hundreds of billions of dollars.
After waking up, we also found that DeFi has been in a stable growth stage for almost half a year this year. Even if mainstream protocols such as Uniswap undergo rounds of upgrades, the effect is still in the small repairs and supplements of their own agreements. It once again triggered the frenzied participation of the market. The breakthrough Defi2.0 seems to bring heat to the market again. It has revolutionized the industry’s accustomed way of providing liquidity. Through Protocol Owned Liquidity (POL for short), the protocol that controls the liquidity, it changes the agreement and The relationship between the two liquidity providers. Under such an agreement relationship, the consistency of the asset provider’s assets is stored in the agreement, which can not only obtain incentives, but also obtain further value appreciation through the value of the agreement itself. Simply put, DeFi 2.0 uses another profit-making method to make users move from active liquidity to a stable liquidity stage, which promotes the continuous expansion of the value of the agreement itself.
A general understanding of the specific gameplay and projects of DeFi2.0
Speaking of DeFi 2.0, it is still necessary to mention its original source. According to Internet news, the concept was first exposed in a live broadcast. It was proposed by Alchemix developer Scoopy Trooples. He believes that DeFi applications built on the first-generation protocol, Because of the innovation from 0 to 1, it can be regarded as the second generation protocol, called DeFi2.0. Since this definition is not complete, we try to understand how DeFi 2.0 achieves 0 to 1 innovation from existing projects.
The first project to talk about is Olympus DAO, which is an algorithm pass project promoted by the community. This project is also a typical representative of the value of protocol control. Simply put, the team issued OHM tokens to protocol users. This token is a free-floating reserve currency created by a specific algorithm and supported by a package of encrypted assets. Its price is determined by the relationship between supply and demand, and it can basically maintain stable purchasing power. Then users who get OHM tokens will obtain the corresponding token positions when the protocol is synchronized. The more liquidity of the tokens controlled by the protocol, the larger the issuance scale of OHM will be, and the scale of liquidity controlled by the synchronized protocol With increasing demand, the price of OHM tokens will also rise. At present, the price of OHM tokens is around $1,145, and the lock-up amount of a basket of supported currencies including USDT or DAI is constantly increasing. On the popular kanban page of Dune Analytics website, the Olympus project is at the top, which also shows that it has attracted the attention of the market. In short, at this stage, the practical results of Olympus are positive, but it is difficult to determine the potential of Olympus DAO. If its potential disappears, the holders cannot obtain the potential premium and cannot obtain profit, so just throw it away. The scattered group escape also has a great probability of occurrence.
(Chart source: defipulse)
Another is the cross-chain interest-bearing lending agreement Abracadabra. By name and we know it can support a lot of turnover among chain assets, now has support for Ethernet Square , the BSC, the Fantom, Avalanche, Arbitrum other public and chain agreements. The agreement still uses over-collateralization or casting stable coins that anchor a stable value. On this basis, the mortgaged assets can also obtain continuous income. For example, if a user deposits USDC in the Vaults of Year’s aggregation agreement, he can obtain the interest-bearing asset yvUSDC. Year will allocate the transaction fees earned by USDC through the lending agreement or transaction agreement to the holders of yvUSD, which means that as long as Year The agreement is less risky, and the amount of USDC corresponding to yvUSD in the Abracadabra agreement will continue to grow. The project adopts a dual token model. The governance token SPELL is mainly used to adjust the overall parameters of the agreement, while MIM is mainly a stable currency anchored to the US dollar, which is convenient for combination with other stable currency transaction protocols. At present, functions such as farming, lending, pledge, exchange and cross-chain bridge have been launched, and the team’s execution ability can be said to be rapid and decisive.
In addition to the above mentioned, there is Fodl Finance, which uses users to deposit funds and act as a margin to evolve simple borrowing into a free currency market. That is to say, in leveraged trading, leveraged service funds are no longer dependent on the advance behavior of margin and fee rates, but are derived from your assets in lending applications such as Compound and Aave. The amount of funds you leverage depends on The amount of funds you deposited into the lending application. Specifically, users need to store funds on the lending application, and then set the amount and multiple of leveraged assets by themselves. Fodl will automatically calculate the leverage that can be matched by the loaned assets. When a user opens a position, Fodl will take out a lightning loan, allowing the user to open a full leveraged position in a single transaction without requiring the user to recycle operations.
Although DeFi2.0 has representative projects in several business scenarios, its development logic will still follow the “hot” manufacturing. With the popularity of Olympus DAO, there have been “replicas” of similar projects. This kind of same project The emergence of the Olympus DAO will also divert the share of Olympus DAO, and the risks inside will also increase. The good thing is that when more elements or developers come in, it will directly lead to the emergence of new application scenarios, including some more novel concept products.
After the hype period, DeFi2.0 still needs time to pave the way
In short, a simple interpretation of the Defi2.0 project already exists, which also makes a good start for DeFi2.0 from aerial buildings to reality, but we believe that the current DeFi2.0 project is in the embryonic stage, and the success of this stage cannot be achieved. Explaining its longevity, it is still full of Fomo pursuits of conceptual consumption. Therefore, the development of Defi2.0 still needs a long time to observe and layout. On the one hand, the foundational status of DeFi1.0 has been established. DeFi2.0 reform should not only be about gameplay, but also on the basis of 1.0, such as continued integration of combination, trying to find grafts and breakthroughs in 1.0 projects. . Moreover, Defi2.0 should focus on the development needs of the new public chain to make connections, not blindly immersed in the world of Ethereum, and need to make a breakthrough in compatibility and ecology. Furthermore, any new things have two sides, and better value judgments need to be judged from multiple perspectives such as capital, users, and activity. As for when the “Compound” project in DeFi2.0 will appear, we will wait and see its changes
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