DeFi 1.0 is Officially Dead - Welcome to DeFi 2.0

By xuanling11 | Crypto Learning | 14 Nov 2021

Defi 1.0 is officially dead. The idea of Defi 1.0 is simple, to provide financial products without a third party. Those finances then will back by assets from a traditional financial system like cash, gold, or any other form. The problem is that it triggers regulations and many projects now have been reviewed or investigated by the SEC or U.S. Securities and Exchange Commission.


The double-edged sword of regulations

Regulations suppose to make financial products safe for all users. It usually seems that way until it is a game to push innovation ideas away from the dominated financial system. Regulations hinder the growth of the innovation of Defi and put a hold on Defi to freely evolve. Rather, it is an artificial way to bend existing rules into Defi and makes innovation fit into the traditional way of thinking. In some ways, it helps to prevent exploitation from the project to investors. But the most cases, oppression projects away from their freely experimental test and force them to comply with existing regulations that fit into the old system.



The old way to provide financial products is to create a way of growth based on existing valuable assets and hope such products can continue growing. The problem is valuation is volatile. It heavily depends on the subjective judgment of investors rather than an objective natural growth. Without a third party, such collateralization is worse because it is sensitive to market reaction. 


Invest in human capital rather than objects

If Defi 1.0 is to invest valuation objects, Defi 2.0 is to invest in human capital. After all, the most valuable thing is the input of human capital as a continuous creation power. Building a community to grow wealth together is a long-term goal of investment to consistently generate profits rather than betting on objects and hope such will increase value eventually.


Micro-investment is a future

Instead, to create a one-person with all money to invest, Defi 2.0 is to collect every small investor together to achieve the same goal. It is to avoid the single point of failure while making investment fair and transparent. 


Stablecoin-based system

Collateral assets need to change from traditional assets into cryptocurrency because cryptocurrency is more valuable than the traditional ones. Also, even cryptocurrency is fluctuated and is volatile, it will eventually stabilize and increase value to satisfy each investor.


A better financial future

Apart from the traditional financial system, Defi 2.0 focus on individual investors and empower each individual. No one will dominate the market and manipulate it.


In conclusion

Defi 1.0 is outdated and Defi 2.0 is just started. We need a fair and democratized financial system and empower every investor to join the community.

Photo by Daniel Hatcher on Unsplash

Note: the post was shared on multiple platforms.

You can refer my previous article lists here
Digital Commodities- the Unlimited Resources of Commodities Has Born
Universal Income in Crypto Way
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