WHAT IS DEFI 2.0? WHY IS THERE A DEFI 2.0 CONCEPT?
Although being revolutionary in providing decentralized financial services, DeFi still has some restrictions. Thus, the concept of DeFi 2.0 was introduced to solve those issues and prompt the first-gen decentralized finance wave.
KEY DOWNSIDES OF DEFI 1.0
- Massive traffic of DeFi protocol on Blockchain leads to network congestion and protracted delay in transactions. Moreover, during peak hours, the gas fee is elevated which is a big barrier to young investors approaching DeFi.
- DeFi 1.0 launches projects to take liquidity by paying their origin token in return, however, these projects are not long-term and sustainable solutions.
- Although the objective is a decentralized finance model, eliminating 3rd party, some projects in DeFi are still under strict control of some dev crew or major sharks.
- There is a high value of Total Value Locked (TVL) in DeFi projects but those are still not utilized in an optimal way.
- When staking token into Liquidity Pool, investors will receive the reward so-called liquidity provider token. But if the token rate volatiles, the investors will be at risk of impermanent loss.
WHY DEFI 2.0 IS IN NEED?
- High scalability and capital efficiency DeFi 2.0 offers more Blockchains and more alternative solutions for Ethereum. This broadens the customer base and provides more sources for Liquidity Providers to allocate capital easily.
- Decentralization enhancement More DeFi projects utilize DAO to launch an effective administration mechanism, enhancing decentralization which is the essence of DeFi.
- Liquidity increasing DeFi 2.0 focuses on solving the problems relating to Liquidity Mining, and eliminates short-term staking which makes an impact on sustainability.
- Impermanent loss protection DeFi 2.0 protocol developers are examining the method that helps minimize the risk of impermanent loss.
