What are DeFi 1.0, 2.0, and 3.0?

2022-05-11
一文看懂DeFi2.0 VS DeFi1.0 - 知乎
DeFi 1.0 (2019-2020): ETH public chain is the main battlefield

In the past 2019-2020, the development of DeFi has experienced an unprecedented explosion, which has brought disruptive changes to the blockchain industry. In fact, DeFi first started in 2018, and after a year of dormancy, it emerged in 2019. At that time, the total locked value of DeFi once exceeded 150 million US dollars. As of the end of April 2021, this number has become 612 One hundred million U.S. dollars.

From the birth of DeFi in 2018 to the comprehensive development of 2019/2020, we call it the DeFi 1.0 stage. The reason why decentralized finance in the DeFi 1.0 stage can achieve such great results is closely related to many factors. At present, many DeFi applications have successfully explored some basic operation modes, and the threshold for participation in DeFi 1.0 is low. Under the loose monetary policy, it has also brought great opportunities to the development of DeFi, and investors naturally flocked to it.

But the current progress of DeFi seems to need some new blood to promote. Restricted by the performance of the underlying public chain and the decentralized user relationships in the native ecosystem of DeFi 1.0, the market growth rate of DeFi has never reached the original expectation.

There is no connection between all participants of DeFi 1.0, and there is a lack of motivation to jointly participate in platform governance, which also seriously hinders ecological development and makes the platform’s liquidity unsustainable. At present, there are many technical teams, similar to PancakeSwap on the BSC chain, KeplerSwap on the EOS chain and CherrySwap on the OkexChain that is also under internal testing, all of which are indispensable pioneers of decentralized finance in the future.

Taking keplerSwap, a decentralized asset exchange protocol first built on the EOS chain, as an example, users who join keplerSwap's liquidity mining will also have the opportunity to participate in the huge rewards of LUCKY POOL, and 11 super prizes will be given out every week, one of which will be awarded 50% of the total prize pool! These are huge innovations belonging to the world of DeFi 2.0, and will likely have a huge spreading effect.

All innovations in KeplerSwap are generated by the smart contract hash value random number algorithm, and no one can cheat, which makes super lucky winners generated every week and will regularly attract global attention. In addition, by holding TOKEN, you can participate in and initiate circles to obtain ecological governance rights. Circle members can obtain various governance rights through circles. Circle members and circle owners can jointly build this circle and obtain huge monthly bonus pool rewards.

It can be seen that the KeplerSwap ecosystem is not satisfied with the decentralized and cold architecture at the current stage. It needs to build a sustainable and automatically disseminated decentralized financial system - DeFi2.0, which may be an extremely remarkable thing.

In the stage of DeFi 1.0, ETH is the main battlefield of DeFi 1.0. Relying on the stability and flow advantages of ETH, the number of ETH pledged continues to rise. But ETH is not the only choice, and more and more ecological public chains (Polkadot chain, EOS chain) are becoming better choices. KeplerSwap seems to be the first explorer on the road of DeFi 2.0. This industry always hopes that pioneers who propose innovative ideas can gain more attention and success, and explore more great achievements on the road of decentralization.

DeFi 2.0: Building the infrastructure layer of DeFi

DeFi 2.0 is a DeFi application based on the first-generation protocol. Due to the innovation from 0 to 1, it can be regarded as a second-generation protocol, called DeFi 2.0. Its core is to turn liquidity into the infrastructure layer of DeFi, making DeFi more sustainable. From this perspective, DeFi 2.0 will be an evolutionary trend of the DeFi ecosystem.

DeFi 2.0 is a movement of projects to improve the problems of DeFi 1.0. DeFi aims to provide financial services to the masses, but has struggled with scalability, security, centralization, liquidity, and information accessibility.

In response to the industry's ongoing shortcomings, Olympus DAO is one of the first DeFi 2.0 solutions to offer different paths through its unique binding mechanism.

Launched in May 2021, Olympus is a decentralized reserve currency protocol based on the OHM token, backed by a basket of assets from the Olympus Treasury. The goal of the project is to build a policy-controlled monetary system that uses its associated OlympusDAO to help manage the performance of OHM tokens. Olympus Treasury holds a range of assets, including DAI, FRAX, LUSD, ETH, and LP tokens such as SushiSwap’s OHM/DAI.

Advantages and benefits of DeFi 2.0:

Broader flexibility for staking assets: A standard feature of many DeFi protocols is that when users stake token pairs in liquidity pools, they will receive an LP token in return. The DeFi 1.0 ecosystem allows users to further increase their returns by staking LP tokens in yield farms. However, there is not much else beyond these core value propositions, which has resulted in millions of dollars being locked up in various vaults to help provide liquidity for its protocol.

DeFi 2.0 helps add more utility and incentives by using yield farm LP tokens as collateral for loans, or minting other tokens like MakerDao (DAI). While the process varies by platform, in DeFi 2.0, LP tokens can unlock their value to find new opportunities while still generating APY.

With the rapid development of DeFi 2.0, users do not need to wait to access these solutions or find practical use cases. Projects such as Ethereum, Binance Smart Chain, Solana, and other competitive emerging blockchains have all started offering the aforementioned services in their networks.

DeFi 3.0:Liquidity mining specialization

DeFi 2.0 (protocol to control liquidity) represented by Olympus (OHM) mainly solves the capital efficiency problem of DeFi 1.0, while DeFi 3.0 professionalizes the business of Yield Farming (liquidity mining), and the protocol formulates corresponding Farming strategies to obtain benefits , and return the profits to token holders, that is, "Farming as a service", which aims to lower the participation threshold of ordinary investors and increase the income of Farming.

The threshold for DeFi is relatively high and it is not friendly to ordinary users. Farming in DeFi requires setting the slippage coefficient, forming LPs, staking, understanding free losses, etc., and in order to obtain high APY returns, it takes a lot of time to research and find new liquidity pools, and at the same time face many potential risks, such as large investors The resulting "mining accident", the project party running away and other problems, as well as the high risk factor of on-chain operations.

The DeFi 3.0 protocol uses Farming as a service to formulate specialized and cross-chain diversified Farming strategies. Compared with ordinary investors operating by themselves, the DeFi 3.0 protocol helps investors obtain higher returns. Investors do not need to spend time researching and selecting safe and high APY mining pools, nor do they need to transfer assets in different liquidity pools, and at the same time avoid the risk of on-chain operations, they only need to hold the Token of the protocol to share The profit earned by the agreement Farming. DeFi 3.0 lowers the threshold for users to enter DeFi and increases their returns, especially for ordinary users.

The DeFi 3.0 protocol sets a certain percentage of transaction fees (buy/sell), some of which flow into the protocol’s fund pool, and the protocol farms the funds according to the established strategy. The profits obtained are used to repurchase tokens, reduce the supply to maintain the token price, or reward a portion of the repurchased tokens to token holders in the form of airdrops. In addition, token holders can also get a certain percentage of fee rewards from each transaction.

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