Defi 2.0
Decentralized finance (DeFi)
Decentralized finance (DeFi) is a blockchain-based form of finance that does not rely on central financial intermediaries such as brokerages, exchanges, or banks to offer traditional financial instruments. It utilizes smart contracts on blockchains instead. DeFi platforms allow people to lend or borrow funds from others, speculate on price movements on a range of assets using derivatives, trade cryptocurrencies, insure against risks, and earn interest in savings-like accounts. DeFi uses a layered architecture and highly composable building blocks.
As of October 2021, the value of assets used in decentralized finance amounted to $100 billion.
DeFi 2.0
Many see DeFi 2.0 as a โmovementโ aiming to address limitations of the original DeFi. Namely: Security - mass crypto users are not fully aware about DeFi risks, while staking large sums of money in smart contracts; Splitted liquidity - liquidity pools are spread across different platforms and blockchains; Locked funds - tokens staked in the given liquidity pool(s) canโt be used anywhere else; Lack of DAO principles - or, in other words, centralization; Scalability - high traffic and high fees of protocols; Third-party players dependance.
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