Best DeFi 2.0 Projects You Should Know
DeFi has been revolutionary in providing decentralized financial services to anyone with a cryptocurrency wallet, but it still has its weaknesses. DeFi 2.0 was born to fix the problems of the early DeFi sector. Today, let’s join Coincu to learn about the best DeFi 2.0 projects through this article.
What is DeFi 2.0?
When DeFi first made its debut in 2020, it was hailed as a groundbreaking technology that provided access to blockchain-based financial services to individuals with cryptocurrency wallets. However, as DeFi has matured, it has become increasingly clear that certain weaknesses need to be addressed.
Just as second-generation cryptocurrencies sought to build upon the flaws of Bitcoin, DeFi 2.0 is on a mission to rectify the shortcomings of the initial DeFi wave. One of the key areas of focus for this new generation of DeFi is compliance with government regulations, which is becoming more critical in the rapidly evolving crypto space.
DeFi 2.0 is a collective effort to refine and enhance the shortcomings of DeFi 1.0, which initially aimed to democratize finance but grappled with issues related to scalability, security, centralization, liquidity, and accessibility of information. The goal of DeFi 2.0 is to create a more user-friendly experience for participants while addressing these fundamental issues. If successful, DeFi 2.0 could play a crucial role in reducing risks and barriers for users looking to engage with decentralized financial services.
DeFi 2.0 has already begun to demonstrate its potential with various use cases. Some platforms now allow users to utilize their LP (Liquidity Provider) tokens and yield mining LP tokens as collateral for loans. This mechanism empowers individuals to unlock the value of their tokens while simultaneously earning rewards from the associated pools.
What problems does DeFi 2.0 solve?
The distinguishing feature of DeFi 2.0 lies in its approach to the market. Early DeFi applications primarily catered to end-users, and while they brought revolutionary concepts to the fore, they often lacked efficiency. DeFi 2.0, however, is realigning its focus towards business-to-business transactions, leveraging the groundwork laid by DeFi’s initial user base to forge new paths in the industry.
One of the key challenges that DeFi 2.0 aims to tackle is the issue of liquidity. Through the introduction of cross-chain bridges, DeFi 2.0 is poised to provide greater liquidity than its predecessor. These bridges serve as connectors between various blockchains, allowing for the seamless sharing of liquidity. The collective result is a network of interconnected assets across different chains, significantly boosting liquidity in the crypto industry.
Smart contract security is another area where DeFi 2.0 seeks to excel. It places open-source communities in charge of auditing smart contracts, thereby enhancing their integrity and ensuring additional protection through insurance mechanisms.
Traditional DeFi lending models have often demanded substantial collateral from users to secure loans. DeFi 2.0, on the other hand, offers a groundbreaking solution by allowing loans to repay themselves through yield mining. Users can earn money through yield mining while also using these gains to service their loans. All that’s required is the initial token lockup, ensuring a continuous stream of profits.
Beyond addressing these fundamental issues, DeFi 2.0 promises a more accessible, secure, and user-friendly experience for all participants. With the collective wisdom garnered from years of navigating the cryptocurrency landscape, the industry is making strides toward a more intuitive and seamless user interface.
DeFi, even for experienced crypto users, can be bewildering. However, its fundamental purpose remains to reduce barriers to entry and create new opportunities for cryptocurrency holders. While traditional banks may be reluctant to extend loans to certain individuals, DeFi offers an alternative avenue for access to financial services.
Perhaps the most compelling aspect of DeFi 2.0 is its potential to democratize finance without introducing undue risks. By proactively addressing the issues that have hindered the initial DeFi wave, this innovative movement seeks to create an environment that benefits all participants in the crypto market.
A notable concern associated with DeFi 1.0 was the lack of individual accountability for security breaches, leaving victims with little recourse. Vulnerabilities in earlier smart contracts resulted in substantial financial losses, prompting the anticipation of DeFi 2.0 as a much-needed improvement to mitigate such risks and strengthen the industry’s security posture.
Differences of DeFi 2.0 and DeFi 1.0
DeFi 1.0 was not without its limitations, which DeFi 2.0 is actively addressing to enhance the overall user experience and security. DeFi 1.0 faced significant challenges, including:
- Scalability: DeFi 1.0 transactions incurred high costs, often leading to slow transaction speeds and long waiting times. This was particularly evident in the case of Ethereum, the blockchain platform on which a substantial portion of DeFi solutions were built. The network’s popularity resulted in delays and soaring transaction costs, affecting user satisfaction.
- Liquidity: Liquidity, vital to any trading market, remained relatively low and underutilized within the DeFi ecosystem.
- Centralization: Many influential DeFi projects were concentrated within the control of a few entities, often the development teams or major stakeholders, leading to concerns about centralization.
- Security: Users often underestimated the potential risks in DeFi, staking large sums of money in smart contracts without a comprehensive understanding of their security. As a result, DeFi witnessed a series of hacks on both large and small platforms, causing substantial financial losses and highlighting the need for improved security measures.
- Oracle Attacks: DeFi’s reliance on oracles to fetch external information made it vulnerable to attacks. Some projects failed to integrate oracles effectively, leaving them susceptible to flash loan attacks.
- Capital Efficiency: A substantial amount of assets remained locked in DeFi protocols, resulting in underutilization and unfulfilled potential for future development.
DeFi 2.0 emerges as a response to these challenges, with a particular focus on enhancing liquidity, scalability, governance, and security. By addressing these key issues, DeFi 2.0 aims to provide a more robust and user-friendly experience for participants in the decentralized financial ecosystem.
As DeFi 2.0 continues to evolve and implement innovative solutions, it is anticipated that the shortcomings of DeFi 1.0 will be progressively overcome, paving the way for a more efficient and secure decentralized finance landscape.
Top 5 best DeFi 2.0 projects
Unlike the traditional DeFi platform, Olympus is based on the OHM token, which is collateralized and backed by the Olympus DAO, also known as Protocol Controlled Value (PCV). What sets OHM apart is its unique approach to ensuring price stability and avoiding depreciation, making it a reserve currency in the world of DeFi.
Olympus operates as a decentralized financial infrastructure project, functioning as a decentralized autonomous organization (DAO) with a visionary goal: to construct a policy-controlled decentralized currency that can serve as a global unit of account, a medium of exchange, and a store of value. Olympus DAO deserves to be one of the best DeFi 2.0 projects that bring innovation to users.
The key to OHM’s stability lies in its innovative design. Each OHM token is supported by a basket of assets, including well-established cryptocurrencies such as DAI and FRAX. This diversified backing mechanism ensures that OHM remains resilient to the volatility that plagues many other tokens in the cryptocurrency space. By anchoring its value to a range of assets, Olympus provides users with a secure and reliable digital currency for a variety of financial transactions.
To achieve and maintain price stability, Olympus employs an Algorithmic Reserve Currency algorithm. This algorithm, in conjunction with its backing by a diverse range of decentralized assets, ensures that OHM’s value remains robust and resistant to extreme fluctuations. This approach has earned OHM the reputation of a reserve currency in the DeFi sector, making it a reliable choice for users seeking stability in their digital assets.
In the realm of traditional finance, banks manage currency using a diverse array of assets, including USD, foreign currencies, and bonds. In a similar vein, OlympusDAO takes a novel approach by managing assets in the form of cryptocurrencies, establishing a unique bridge between traditional and decentralized financial markets.
A distinguishing feature of OlympusDAO is its commitment to community-driven decision-making. While traditional banks often rely on the input of a select few, OlympusDAO places the power of choice in the hands of the community and OHM token holders.
One of the key advantages of the Olympus protocol is the opportunity it offers investors through token mining activities. There are two primary avenues for participants to reap the rewards of Olympus:
Staking serves as the core value accumulation mechanism within Olympus. Users stake their OHM tokens, and in return, they receive rebase rewards. These rewards represent an automatic compounding of their initial stake at fixed intervals, occurring every 8 hours.
The magnitude of these rewards is directly correlated to the revenue generated by the protocol from bond sales, varying according to the quantity of OHM staked and the reward rate established by the DAO policy team. Staking on Olympus is designed as a long-term, passive investment strategy, encouraging users to maximize the duration they maintain their stakes. The protocol’s impressive annual percentage yield (APY) motivates investors to focus on growing their OHM holdings rather than being preoccupied with the USD value of their OHM tokens.
The second value accumulation strategy, known as bonding, stands as a significant innovation in the world of DeFi 2.0. Through bonding, the protocol secures its own liquidity and reserve assets, which in turn allows it to function as a decentralized, asset-backed digital currency.
Bonding represents a more proactive, short-term strategy where users exchange various assets, such as stablecoins, ETH, or liquidity tokens, directly with the protocol in return for OHM tokens. These OHM tokens are offered at a discounted rate and come with a vesting period of 5 days. Once the vesting period elapses, users have the option to stake their acquired OHM tokens to increase market share or trade them on the secondary market, potentially collecting discounted interest (assuming price stability and favorable gas fee conditions).
Abracadabra.money combines various DeFi functionalities, including borrowing, farming, staking, swapping, and bridge support, all in one convenient package.
At the core of Abracadabra.money’s innovative approach is its ability to allow users to deposit interest-bearing assets and, in return, mint a multi-chain stablecoin called Magic Internet Money (MIM). This multi-chain capability enables users to tap into the wider DeFi ecosystem and harness the potential of their locked assets in a flexible and convenient manner.
The main objective of Abracadabra.money is clear: to unlock the capital locked within the DeFi ecosystem that users can’t readily access. This is one of the best DeFi 2.0 projects that helps users optimize profits when participating in DeFi.
By doing so, it empowers users to engage in yield farming with leverage, thereby potentially increasing their returns on investment. This approach represents a significant shift in the DeFi landscape, as it offers users a path to capitalize on their idle assets and participate more actively in the world of decentralized finance.
Borrow with Kashi Technology
Abracadabra.money leverages the innovative Kashi lending technology to introduce users to a new lending market. This technology empowers users to access leverage lending, while the level of risk varies based on the collateral used and the liquidation parameters chosen. Unlike traditional methods that require users to navigate multiple dApps to obtain leverage, Kashi simplifies the process with a single click, reducing costs for users. However, the inherent complexity of this approach necessitates careful risk management, as it involves various tokens to increase leverage.
Farm Across Chains
In the spirit of decentralized finance, Abracadabra.money offers users the opportunity to engage in farming across multiple blockchain ecosystems. This flexibility allows users to choose the chains they are most comfortable with. Additionally, the allocation of incentives for these farming pools is determined through a governance process, giving the community a say in shaping the platform’s incentives.
Staking for Returns
Abracadabra.money’s staking feature provides users with an avenue to save and earn returns within the platform. Users have two forms of staking available to them:
- sSPELL: Staking SPELL tokens offers an Annual Percentage Rate (APR) of 4.67%.
- mSPELL: Staking SPELL tokens allows users to earn MIM tokens, the project’s stablecoin, as rewards. This dual staking system provides users with options to optimize their returns on the platform.
Seamless Cross-Chain Bridge
In a bid to enhance usability and accessibility, Abracadabra.money offers a cross-chain bridge feature. This feature enables users to easily transfer their assets between various blockchains, including Fantom, Ethereum, BSC, Avalanche, Matic, and Arbitrum. It streamlines the process of moving assets, fostering interoperability across different DeFi ecosystems.
MIM’s Price Stabilization Mechanism
MIM, the stablecoin issued by Abracadabra.money, is designed to maintain its value around the $1 USD mark through an algorithmic stabilization mechanism. The platform employs basic principles of supply and demand:
- When the price of MIM falls below $1 USD on certain markets, users who have borrowed MIM from Abracadabra buy MIM at the lower price to repay part of their debt. Regular investors can also capitalize on this opportunity to purchase MIM at a discount, which effectively drives up the price of MIM.
- On the flip side, users holding collateral will note the MIM price exceeding $1 USD on specific markets. They can then mint MIM tokens and sell them at a profit, which has the effect of lowering the price of MIM. This mechanism ensures that MIM maintains its stability in the DeFi landscape.
Convex Finance focuses on two key groups of users: CRV Stakers and Curve Liquidity Providers. Convex Finance is on the list of best DeFi 2.0 projects because of its availability when interacting with Curve.
If you’re a CRV holder, Convex Finance provides an avenue to maximize your earnings by allowing you to stake your CRV tokens to earn cvxCRV. This mechanism enhances the potential returns on your CRV holdings, making it an attractive proposition for those looking to optimize their DeFi investments.
Curve Liquidity Providers, who contribute to the liquidity of Curve Finance, also have the opportunity to stake their Curve LP tokens on the Convex platform. By doing so, they can unlock additional rewards and benefits, making their participation in the Curve ecosystem even more rewarding.
Convex Finance’s focus on CRV Stakers and Curve LPs underscores its commitment to creating a comprehensive and inclusive DeFi ecosystem. Whether you hold CRV tokens or actively provide liquidity on Curve, Convex Finance offers a user-friendly platform to enhance your earnings and actively participate in the world of decentralized finance.
Benefits for CRV Stakers
Convex’s platform offers a range of benefits for CRV stakers, making it an attractive destination for those seeking to stake their CRV tokens while maintaining liquidity. Key advantages include:
- Earn CRV Rewards: CRV stakers on Convex can earn a portion of platform fees in CRV, providing a steady stream of income.
- Trading Fee Earnings: CRV stakers also have the opportunity to earn trading fees generated on the Curve platform (3CRV), adding an extra layer of income potential.
- Liquidity and Flexibility: One of the standout features of Convex is the ability for stakers to maintain liquidity. Staked CRV tokens can be exchanged for liquid cvxCRV, allowing users to exit their staked CRV positions at any time.
- CVX Rewards: Users can additionally claim CVX rewards, further enhancing their overall earnings.
- veCRV Airdrops: Convex promises veCRV airdrops, such as EPS (airdrop distribution to be done with cooperation from other platforms), providing an extra benefit for CRV stakers.
Advantages for Liquidity Providers
Convex’s platform also extends its benefits to Liquidity Providers (LPs), streamlining the process of earning enhanced CRV and liquidity mining rewards:
- Enhanced CRV Earnings: LPs can earn claimable CRV at increased rates without the need to lock up any CRV tokens, simplifying the process of earning rewards.
- CVX Rewards: Just like CRV stakers, LPs can claim CVX rewards on the platform.
- Zero Deposit and Withdrawal Fees: Convex eliminates deposit and withdrawal fees, making it cost-effective for LPs to participate in the ecosystem.
- No Fees for Additional Incentive Tokens: LPs can benefit from additional incentive tokens, such as SNX, without incurring any extra fees.
For CVX Stakers
Staking CVX on the Convex platform grants users the privilege of receiving trading fees in the form of cvxCRV, enhancing their income streams through active participation in the DeFi market.
A significant highlight of Convex’s offering is its transparent approach to farming rewards distribution, ensuring fair and equitable benefits for CVX stakers:
- 10% in cvxCRV: A substantial 10% of the farming rewards from CRV are distributed to CVX stakers in the form of cvxCRV, providing a reliable source of earnings for their commitment.
- 5% in CRV: Additionally, 5% of the farming rewards are allocated in the native CRV token, further diversifying the rewards for CVX stakers and bolstering their DeFi portfolios.
- 1% Gas Fee Refund: CVX stakers enjoy a 1% gas fee refund, easing the financial burden associated with performing reward collection and distribution functions for Reward contracts.
TempleDAO takes inspiration from the trailblazing Olympus DAO but distinguishes itself with its focus on stability in both profits and token prices.
At the core of TempleDAO’s mission is the safeguarding of user assets. The protocol provides a secure environment where users can shield their crypto assets from the wild price fluctuations that often characterize the cryptocurrency market. By participating in TempleDAO, users gain peace of mind, knowing that their assets are less exposed to the inherent volatility of the crypto world.
TempleDAO doesn’t stop at asset protection; it is designed to be a profit-generation machine. Users can leverage the platform’s unique features to harvest rewards from their holdings. By actively participating in TempleDAO, users can make the most of their crypto assets and potentially earn attractive returns.
TempleDAO unveils the TEMPLE token, a dynamic bridge between users and the DeFi ecosystem. Much like stablecoins, the TEMPLE token serves as a steadfast guardian of asset value, assuring users that their holdings remain protected while engaging with TempleDAO. This innovative addition is just one facet of TempleDAO’s mission to provide a secure and rewarding environment for DeFi participants.
The TEMPLE Token: Safeguarding Asset Value
The TEMPLE token assumes a crucial role in TempleDAO’s architecture, acting as the linchpin between the DeFi realm and users. Much like stablecoins, TEMPLE is designed to shield asset values from the often volatile cryptocurrency markets. Users can confidently participate in TempleDAO, knowing that their holdings remain relatively insulated from the price swings that frequently challenge crypto investors.
Safe Harvest and Safe Premium:
TempleDAO goes beyond asset protection by offering an array of exceptional features. Two standout features in its arsenal are:
- Safe Harvest: This feature allows users to confidently reap the rewards generated by their participation in TempleDAO. It ensures that users can enjoy the fruits of their investment while minimizing exposure to unnecessary risks.
- Safe Premium: TempleDAO brings an added layer of security with Safe Premium, offering a predictable and stable path to growth. Users can count on consistent and dependable returns within the TempleDAO ecosystem.
Regular Incentive Rewards:
TempleDAO is committed to rewarding its users for their loyalty and trust in the protocol. Users who accumulate assets within the platform can look forward to periodic incentive rewards. The conditions are straightforward – stake your assets in the TempleDAO protocol (fixed), meet any arising requirements, and unlock the door to additional benefits.
Tokemak’s primary objective is to consolidate liquidity from various sources into a single, centralized Pool. This innovative approach not only prevents liquidity from becoming fragmented across the DeFi landscape but also enhances the efficiency and effectiveness of liquidity provision. Tokemak is the last name in the list of best DeFi 2.0 projects.
Impermanent loss, a concern for many Liquidity Providers in DeFi, is skillfully addressed by Tokemak. The platform employs a robust mechanism for protecting Liquidity Providers from this risk. This protection is achieved through the management of surpluses and deficits, the maintenance of reserves, and the utilization of the native TOKE token as collateral. This comprehensive approach ensures that Liquidity Providers can participate with confidence, knowing that their assets are safeguarded against potential losses.
A Paradigm Shift: Liquidity-as-a-Service
Rather than relying on traditional incentive mechanisms and Liquidity Mining, Tokemak introduces a revolutionary approach. Projects can now access liquidity directly from Tokemak by spending an amount of money, rather than creating token-based incentives. This transformation streamlines the process and allows projects to focus on their core offerings, confident that they can obtain the liquidity they need.
Tailored for Emerging Projects
Tokemak is especially well-suited for newly launched projects seeking substantial liquidity injections. These projects may lack the clout to list on major exchanges like Binance, Coinbase, or OKX, making Tokemak a vital resource for their liquidity requirements.
In this innovative ecosystem, users play a pivotal role. They deposit their assets into the Tokemak platform and, in return, earn TOKE tokens, aligning their interests with the projects in need of liquidity. This unique source of liquidity is then funneled into various projects, spanning exchanges, automated market makers (AMMs), lending platforms, and more.
DISCLAIMER: The information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.