DeFi 2.0 is an evolution of DeFi 1.0.
Be aware, DeFi (DeFi 1.0) or decentralized finance saw its importance in introducing financial services on blockchains, much like the existence of conventional banks.
For example users of the DeFi 1.0 platform; Uniswap, SushiSwap, and WagyuSwap may conduct any financial activity including interest offers, loans, insurance purchases, derivatives trading, asset trading, and more.
The only difference with traditional banks, the DeFi platform is faster and there is no intermediary control.
However, DeFi 1.0 has its problems and risks.
One of them, the volatility of the cryptocurrency market has an impact of impermanent loss on liquidity providers.
Second, high accessibility, not all users understand. For example, the risk of yield and not fixed such as high APY (annual percentage yieald) makes consumers uncomfortable and confident with the investment.
Not enough with that, apparently many more are unaware of the use of the DeFi platform as its marketing fails to appeal to amateurs.
That is why the presence of DeFi 2.0 is to resolve the issue.
How?
According to the world's largest cryptocurrency exchange platform, Binance - "DeFi 2.0 is very important because it is able to democratize finance without compromising risk."
Some large networks like Solana and Ethereum actually already have the foundation of DeFi 2.0 with the presence of smart contracts.
And if you want to know, the presence of DeFi 2.0 is more focused on the growth of the business-to-business (B2B) sector.
The solution to DeFi 2.0 can be detailed as follows:
Token Liquidity Protocol (LP)
The use of LP tokens is for staking as loan collateral against crypto lenders or the issuance of new tokens.
See an example of MakerDAO (MKR):
Founded on Ethereum from DeFi 1.0.
This protocol uses LP tokens to generate stablecoin,
Smart contract insurance
If you have invested in a smart contract -based project and it offers potential as well as a good future, you are eligible to redeem your insurance for a fee.
The fees vary.
Permanent loss insurance
The partial loss of an investment due to price fluctuations is a ‘non -permanent loss’. This is normal.
But DeFi 2.0 simplifies the situation in a way:
Example: Ali makes an investment into a one-sided liquidity protocol, where he does not have to add other currency pairs.
The protocol will add its administrative token as a pair to the currency that Ali enters.
For each exchange made against each currency pair, both parties: the investor and the protocol will receive a payment.
These payments will be used protocol to introduce insurance funds that can support temporary funds.
If the funds are not enough to cover the loss, the protocol will generate a new token and burn/store the balance.
Self-repayable loan
We continue with Ali's example:
Ali needed money and asked for RM100 from Abu. Abu agreed but wanted RM50 as collateral.
As soon as Ali deposited RM50, then Abu lent RM100.
Ash needs to use a RM50 deposit to get a return. If the value depreciates, the profit process will continue until RM100 is returned.
Once completed, Ali accepted his deposit.
The whole process is controlled by smart contracts and run automatically.
Anyway, the presence of DeFi 2.0 is to educate consumers to use a more appropriate approach for those who have just become accustomed to the sector.
In fact, DeFi 2.0 opens up vast spaces and opportunities to integrate with traditional financial services, thus creating convenience for users to use these protocols from a centralized platform.
