DeFi 2.0 is coming, KeplerSwap is mounted on the flagship
Financial transactions in the traditional world are run such that there is always a central authority that watches over the movement of money. More so, there are commercial middlemen in the form of fintech firms that execute these transactions.
Their presence in the day-to-day running of business delays throughput and imposes a lag in the way business is done.
Blockchain technology came with a solution that will lead to a paradigm shift in both the way money is moved and how people control their money. Among others, DeFi is one of the invaluable promises of blockchain technology.
DeFi is a compressed form of decentralized finance. It aims to solve the problems affiliated with traditional finance. For the first time, transactions can be carried out without a middleman or central authority keeping an eye.
With DeFi, users can access financial services as obtained in the traditional world but now in a decentralized manner, from lending to borrowing, and everything in between.
However, as with every other innovation, there is always a flaw that hinders mass adoption and DeFi is not an exception. The inefficiencies associated with DeFi gave rise to DeFi 2.0. In the remaining part of this article, I will explore the benefits of decentralized finance, the flaws encountered in the early days and how DeFi 2.0 is coming to the rescue including the big players in the niche.
Benefits of DeFi
DeFi boasts of a lot of benefits even of ousting the existing traditional financial system and installing an immutable, permissionless, transparent business model.
Lending and Borrowing
DeFi has made lending and borrowing as difficult as making a cup of coffee. With the elimination of intermediaries and central authority, the processes involved are quickened and executed in a seamless manner.
Alongside the improved efficiency, it is also cost-friendly and easily affordable to anybody on the internet.
Here users lock their crypto assets for a stipulated amount of time in a liquidity pool while they earn rewards for providing the liquidity. There are different yield farming pools available and easily accessible.
This feature of DeFi is effected using smart contracts usually deployed on the Ethereum network. A token can represent a part ownership of a company as likened to shares in the traditional world. It can also be a utility token which has a use case and appreciates in value as more people use the product behind the token.
In DeFi, there are decentralized marketplaces like KeplerSwap where users can buy and sell digital assets.
Limitations of DeFi
One of the most common features of DeFi 1.0 is liquidity mining. Protocols attract users with a percentage reward when they lock up their assets in the liquidity pool. This enables the protocol owners to utilize users’ funds to run their dapp.
This strategy has worked for a while now but it has a major flaw. Whales can manipulate the market. When a whale decides to take profit the protocol experiences a sell pressure and forces smaller investors to follow suit leaving the protocol milked and dry.
DeFi 1.0 is quite fun and worth the hype but another loop hole in the system is the Ethereum gas fees which remain a terror to small investors. And if you want to escape the exorbitant gas, you wait till when only God knows to claim your airdrop or swap a token.
DeFi 2.0 to the rescue
DeFi 2.0 is coming and it promises to be a gateway to escape the dreadful claws of the Ethereum chain. A lot of players are coming with this upgrade and it will soon get caught in a fresh new wave in the industry.
DeFi uses the Decentralized Autonomous Organization to source for liquidity. DAO comprises independent investors that lock up their funds in a kind of a massive liquidity pool. They provide venture funds to projects and get the project’s token in return. Using the DAO, DeFi 2.0 will offer an improved mining pool to users and will not face a severe sell pressure.
With low gas fees and efficient throughput, DeFi 2.0 Dapps will oust DeFi 1.0 and take the lead in the march towards a fully decentralized economy.
Big Players in the field
What stands to be the most interesting DeFi project is KeplerSwap. It comes with amazing features that will raise many eyebrows in the industry. From the improved staking to lucky pool, KeplerSwap looks like what decentralized finance is waiting for.
Other DeFi 2.0 protocols worthy of note include Trader Joe, Geist Finance, Alchemix and Abracadabra.