As we are at the beginning Despite being a niche market, decentralized finance has proven its ability to deliver significantly higher returns than traditional centralized finance. offer significantly higher returns than traditional centralized finance.
According to a Imperial College London studyin 2020 and 2021, DeFi offered higher annual percentage yields (APY) than centralized finance.
For example, during 2021, while the typical USD yield at a centralized bank hovered around 0.01%, DeFi offered rates consistently above 8%. However, despite these attractive yields, its use is not massive.
In order to compete with massive financial markets such as derivatives, which is 20 times the size of the world's GDP, DeFi must integrate effectively with the traditional financial world.
This is precisely what DeFi 2.0 aims to achieve. Read on!
| Features | DeFi 1.0 | DeFi 2.0 |
|---|---|---|
| Scalability | Limited due to the restrictions of the underlying or main blockchain network, where a DeFi application is built and operated. Depending on the blockchain network there are high costs and transaction times. |
Improved through the implementation of layer 2 solutions and protocol optimization to increase speed and reduce costs. |
| Security | Vulnerable to attacks and exploits; due to faulty or insecure smart contracts. | Improved smart contract security through more rigorous audits and prevention of Sybil attacks. |
| Centralization | Potential centralization; due to 'whales' or large investors that can manipulate markets. | Implementation of more equitable participation mechanisms such as equal distribution of tokens and/or governance decisions by all token holders. |
| Liquidity | It depends on users to provide liquidity, which can lead to insolvency problems. | Transition to Protocol Controlled Value (PCV), where protocols control their own liquidity, providing long-term stability. |
| Accessibility and ease of use | Interacting with smart contracts can be complicated and unintuitive for ordinary users. | Improved user interfaces and simplified interaction with smart contracts to facilitate their use by ordinary users. |
It uses a unique model called Protocol Control of Liquidity (PCV), where assets contributed as liquidity become the property of the protocol. assets contributed as liquidity become the property of the protocol, providing it with a permanent source of liquidity.
Instead of reward liquidity providers, reward tokens are sold to users at a discounted price.. In this way, investors are interested in providing liquidity, as they get it at a lower price than in the market.
It provides a Layer 2 solution for Ethereum, Sidechains PoS and Rollups, enabling faster and cheaper transactions.
It is also designed to enable the seamless transfer of assets seamless transfer of assets between different blockchain networks, which is vital to the growth and expansion of the DeFi 2.0 ecosystem.
Challenges and Opportunities Defi 2.0 |
|
| Mass Adoption: Although DeFi has grown rapidly, it is still quite difficult for beginners to navigate. | Financial inclusion: DeFi 2.0 has the potential to bring financial services to a large number of unbanked people around the world. |
| Regulation: Balancing innovation and regulation is a significant challenge. | Financial Returns Higher: Continues to offer significantly higher yields than traditional financial products. |
| Interoperability: Only some networks are able to efficiently interact with different blockchains and protocols. | Innovation in financial services: DeFi 2.0 offers the opportunity to innovate in the delivery of financial services, from loans and insurance to investment products and more. |
| Reliability: Hacking and fraud attacks have been a persistent problem. | Transparency and efficiency: The open and decentralized nature of DeFi 2.0 will lead to improved financial service delivery. |
