Written by: Jack Niewold
Compilation: Deep Tide TechFlow
What will DeFi 3.0 look like? Which cryptocurrency projects will lead the way?
DeFi 1.0 laid the foundation of DeFi: AAVE, COMP, UNI.
And DeFi 2.0 is plagued by scams, scams, and pyramids of returns.
The author of this article offers some theories about what DeFi 3.0 will involve and why. These aspects include Multichain, capital efficiency, incentive redesign and product Liquidity flywheel.
This article also lists some projects that are pioneers of DeFi 3.0, including Multichain lending markets, fast-iterating perpetual contract decentralized exchanges, passive Liquidity projects, and reliable fork projects. Let us understand the characteristics of these projects one by one.
Multichain
Representative of DeFi 3.0: Radiant ($RDNT)
Protocols face difficulties in unifying Liquidity and vision:
• Team overstretched across multiple chains
• Fragmentation of product use
• Liquidity is dispersed.
how to solve this problem?
In Radiant's upcoming V2, you can:
• Deposit native collateral (eg USDC on Arbitrum)
• Lend ETH to mortgage USDC on the new chain
• Sell it to another asset.
On a product level, Radiant became the home rather than a specific chain itself .
What fundamental problem does Radiant's Omnichain model solve?
Unity of Liquidity :
Protocols that attract Liquidity emerge as winners.
Protocols that adopt the Omnichain model are more likely to attract Liquidity.
Protocols that adopt the Omnichain model are more likely to be winners.
capital efficiency
Radiant innovates here too:
If I want $1 million in ETH exposure, I should deposit my ETH into the lending protocol to earn yield. Or I can mortgage my ETH to borrow USDC, and then participate in Yield Farming.
Incentive redesign
Represents: a fork of Solidly
Although the DeFi 2.0 protocol Solidly has a bad inflationary token model, it does pioneer a new type of incentive design. Solidly forks have now been redesigned and have figured out how to align the interests of different stakers.
Take a look at forked projects like this one:
• Satin Exchange (Matic)
• Velodrome Fi (OP)
• Thena (BNB)
• Solid Lizard (Arbitrum)
These protocols steadily drive up the Total Value Locked (TVL) of the Solidly fork in 2023.
Why?
These Solidly forks have managed to align the interests of many different stakers:
• user;
• ecosystem;
• other agreements;
• Liquidity Provider;
• team member;
• fee income;
Meanwhile, Uniswap's forked project is in trouble.
Products - Liquidity- Flywheels
Pioneered by GMX , the final piece of the DeFi 3.0 puzzle has to do with the Liquidity flywheel:
DeFi 1.0 + 2.0: Issue tokens, and then gradually increase token supply to incentivize Liquidity.
DeFi 3.0: Find a model that doesn't require token rewards at all!
GMX and similar forks like Vela have demonstrated that token rewards are not required to drive Liquidity. In this model, tokens serve as equity rather than inflationary incentives. Projects like Sentiment and DefiLlama show that you don't need a token to gain adoption.
In many of the protocols mentioned above, we see users paying for Liquidity rather than the protocol. This model allows token holders to easily collect fees, allowing for a more sustainable model.
What do you think DeFi 3.0 will look like?
https://twitter.com/JackNiewold/status/1632890404898062341
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