Introducing DeFi 2.0

The second generation of DeFi protocols is on the rise which are being aptly dubbed: DeFi 2.0.

The term was coined in an approachable thread by @scupytrooples.

If DeFi, in general, makes your eyes glaze over, we suggest skipping along to the next section or spending some understanding the what and why of DeFi before digging into this next generation.

What is DeFi 1.0?

Although there isn’t a clear boundary between the first and second generations of DeFi, it is widely accepted that the first generation consists of protocols such as MakerDAO, Uniswap, Compound, and Yearn. These are projects which attracted new users by rewarding them with a high yield. The only problem? Well exactly that, the investors were ONLY attracted to the yield… not the roadmap of the project. As soon as a new, higher yield paying project came along, investors left.

What’s the difference between DeFi 1.0 and DeFi 2.0?

Unlike the first generation of DeFi, DeFi 2.0 projects aim to attract new users, but also keep them around. Projects are doing this by acquiring funds to support their financial applications, rather than tapping users’ funds by enticing them with liquidity mining rewards.

What projects are under the DeFi 2.0 umbrella?

Projects like OlympusDAO, Fei Protocol, Tokemak, and Alchemix, are all experimenting with new ways of capturing users with the new challenge of getting them to stay.For more, we suggest checking out this write-up from The Defiant.