I was right to say that I am not worried about the stock market correction triggered by Evergrande Real Estate last month. I mentioned that, to paraphrase Powell, inflation is temporary. People in the crypto space will find something to hype and bear markets won't bore them.
The attractiveness of the crypto space, coupled with its efforts to innovate and grow in terms of net worth and technology, has resulted in a constant flow of new things in the crypto space.
The hype for NFTs is slowing down. NFTs are now skirting regulations to avoid being called "securities" (must somehow continue to make money, but that's proving hard).
In short, the crypto space needs something new to spark interest. And DeFi 2.0 is perfect. It came just in time.
Missed the first DeFi summer of 2020? This could be your chance to discover the next AAVE, Sushi and MakerDAO.
There are many aspects to DeFi 2.0.
One of them is: it's similar to the original DeFi craze. Only this time, it didn't happen on Ethereum. Instead, on smaller emerging chains like Avalanche, Solana, and Fantom.
People are rushing to these platforms for a reason. High Ethereum gas fees make venturing between protocols and DApps neither feasible nor fun. You'll have a hard time exploring the capabilities of various DeFi apps, simply because, unless paying $40 per smart contract execution is a no-brainer (that is, you're a whale).
When you want to park your funds and wait until your kids are ready for college, you go to Ethereum, not because you want to emulate some new and hyped protocol, get an airdrop, or just satisfy your curiosity. Those are the good old days.
And then people go to those cheaper blockchains that provide all these opportunities. In many ways, the experience is better too. Faster transaction speeds, an innovative user interface, or just fun themes and user experience.
Avalanche's Uniswap is one of the fastest growing protocols in 2021.
On August 12, the total value locked in the Avalanche protocol was just $22 million. As of Oct. 12, the total value locked was $1.2 billion, according to Defillama.
The price of Trader Joe’s native token, JOE, rose from around $0.03 to as high as $1.6, reaching $4 at its peak.
On October 12, Trader Joe also launched Banker Joe, extending the protocol’s services to lending and lending, not just swapping tokens and AMMs.
Geist Finance is another DeFi 2.0 star. This is a Fantom lending protocol, which is a fork of AAVE. Appearing seemingly out of the blue, with no venture capital, from anonymous developers, and with a community of respectable individuals, the protocol quickly gained traction. It locked up transaction volume from a few hundred million to two billion in just one day, and subsequently increased the price of Fantom by 30% during the same period.
These two, Trader Joe's and Geist, are just a few of the many examples. SpiritSwap on Fantom looks set to follow Trader Joe's path. Then there are Tarot, Wonderland (TIME), and the cross-chain Abracadabra (SPELL).
The interesting thing about DeFi 2.0 is that now, the stars of DeFi 1.0 are called the DeFi Baby Boomers. Crypto folks don’t forget how these protocols forged the original path of DeFi. AAVE, Yearn, and Uniswap are pioneers. But it turns out, people want more. And they also have some dissatisfaction.
The most common complaint about DeFi blue chips is that they have become boring. Yields are not as attractive as they used to be, and DeFi 2.0 offers a lot of creative ways to make money. Even if you are trading their tokens, the price action of tokens like AAVE is not that exciting, especially in the cryptocurrency market where huge volatility is expected.
They become like Amazon. Solid, but still boring.
A large number of protocols are being deployed on other blockchains and second layers. But they’re just not the same as Ethereum’s. For the most part, it offers limited functionality and opportunities.
Not enough liquidity. Some features - like Sushi staking - are not available and are only available on Ethereum (please correct me as I have tried on Polygon and Arbitrum so far) A person loses money because he transfers funds to MakerDAO vault address, but it turns out there is no Arbitrum version of that vault. So he sends money to a smart contract address that doesn't exist.
Or simply, they are being replaced by native protocols like TraderJoe or Geist.
One of the biggest grievances with blue chip agreements is that they have become too big and too "TradFi". Blue-chip DeFi is now the playground for TradFi, which is starting to dabble in cryptocurrencies. Hedge funds starting to research DeFi use AAVE or Yearn as a starting point. A French bank is proposing a $20M loan to MakerDAO, using the bank’s bonds as collateral (please deposit ETH or BTC as collateral like everyone else, not your junk bonds).
It’s no wonder that natives of the crypto space feel left out. One sense is that these blue chip protocols have become too close to TradFi and they are trying to revolutionize this group. And worst of all, they lost all cypherpunk rebel makings.
I'm talking about KYC, UniSwap delisted 100 tokens, the protocol created an independent platform, compliant with regulators, which means now they can't use anonymity to protect themselves.
I told you, DeFi 2.0 has many faces. In addition to blue-chip agreements, there are some fresh innovations.
One of them that is gaining attention is OlympusDAO.
What OlympusDAO offers is something DeFi has never offered before.
Its goal is to be a stablecoin that is not pegged to a fiat currency. It introduces the concept of bonds. Take your crypto collateral, get OHM at a discount, and Olympus will use the collateral as a reserve asset. The value of OHM relative to that asset will determine whether the protocol increases the supply (mints) OHM or burns them. Like a Reserve Bank.
Interestingly, OlympusDAO has no VCs, no presales, and no airdrops (they raise initial funds among existing discord members to prevent gaming and unfair distribution). They plan to never list on a centralized exchange because it just doesn't make sense.
OlympusDAO wants everyone to win. For example, when prices rise, yields fall. However, when the price of OHM drops, your staked tokens earn more.
High APY when staking OHM
What impresses me most about OlympusDAO is that they strive for true crypto spirit from the very beginning. Fair distribution, no involvement of venture capital firms, sustainable and long-lasting growth, and moreover solves the main problems of cryptocurrencies (high reliance on fiat stablecoins).
Abracadabra Money is another DeFi 2.0 phenomenon. If you hang out on Crypto Twitter, you've probably been hearing SPELL a lot lately. Visit their website and you'll be greeted with some "bullshit". But like everything in cryptocurrency, don't be fooled by appearances.
What is this magical Abracadabra Money?
To quote them, the formula is simple, but brilliant. Interest-bearing tokens like xSushi go in, and out comes the magic internet currency known as the MIM dollar. Deposit your tokens and you get a stablecoin that you can later exchange for USDC or DAI and spend them however you want.
People stake their cryptocurrencies to earn interest on interest-bearing tokens (xSushi, yvUSDC). These tokens, on Abracadabra Money, can be used as collateral, earning you money while allowing you to borrow 90% of its value. So it improves your capital efficiency. Since collateral is a productive asset, it can be said that your collateral is actually helping you pay off your debt.
In DeFi 2.0, you will hear more and more "self-paying loans".
Their native token is called SPELL and is used to incentivize users. Invest it and you get sSPELL revenue share and voting rights.
DeFi 2.0 is currently happening on the first layer blockchain. But I can expect that it will also pass to the second layer, such as Arbitrum. A new craze has arrived, and every day one wonders which projects are attracting hordes of users. (Use DefiLlama to track the new protocol).
In particular, the innovation part needs attention. Builders are creatively creating protocols that maximize profit, maximize capital efficiency, and maximize decentralization (the concept of currency Lego). While some things do exist, the trade-offs remain to be seen. Right now, it seems like everyone is just excited.
Source: https://medium.datadriveninvestor.com/defi-2-0-a-new-hype-in-crypto-you-should-know-about-6e7b414a38db (Author: Ann Inw)
Disclaimer: Cointelegraph Chinese is a blockchain news information platform, and the information provided only represents the author's personal opinion, which has nothing to do with the position of the Cointelegraph Chinese platform, and does not constitute any investment and financial advice. Readers are requested to establish correct currency concepts and investment concepts, and earnestly raise risk awareness.
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