What Is DeFi 2.0, How It Improves on DeFi 1.0 — and How to Invest in It
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The first wave of decentralized finance, collectively known as DeFi 1.0, gave people a way to invest and exchange cryptocurrency outside of traditional, centralized markets. Now, a new generation of decentralized initiatives is taking shape, and it’s already been dubbed DeFi 2.0. This in-depth guide will answer the question, “What is DeFi 2.0?” It will also explain DeFi 2.0 vs. DeFi 1.0 and describe how to invest in DeFi 2.0, giving you the knowledge you need to capitalize on the latest innovations in decentralized finance (DeFi).
What Is DeFi 2.0?
DeFi 2.0 is a collection of decentralized finance projects that aim to improve on the previous efforts of DeFi 1.0. The movement focuses on making improvements in the areas of liquidity, scalability, governance and security.
Once we’ve answered our initial question and discovered what DeFi 2.0 is, we need to understand why the movement exists. DeFi 2.0 traces its origins to OlympusDAO, a decentralized autonomous organization (DAO) based on the OHM token. This organization manages the control of its signature token through a system of policies, and the protocol is backed by assets held by the associated Olympus Treasury. Launched in May 2021, Olympus demonstrated a new range of possibilities for DeFi. In the months since its release, a slate of similar DAOs and projects have developed, marking the beginning of DeFi 2.0.