DeFi Evolution

DeFi 1.0 to DeFi 3.0

Welcome to the new era of AI + DeFi3.0, where the convergence of artificial intelligence (AI) and decentralized finance (DeFi) takes center stage.

DeFi 1.0 was the first wave of decentralized finance, which began in 2017. It was characterized by a focus on lending and borrowing, and by the use of smart contracts to automate financial transactions. DeFi 1.0 was a major success, with total value locked (TVL) reaching over $270 billion in 2021.

DeFi 2.0 was the second wave of decentralized finance, which began in 2021. It is characterized by a focus on yield farming, and by the use of new DeFi primitives such as automated market makers (AMMs) and liquidity pools. DeFi 2.0 has also seen the rise of decentralized autonomous organizations (DAOs), which are self-governing communities that own and manage DeFi protocols.

The transition from DeFi 1.0 to DeFi 2.0 has been driven by a number of factors, including:

The rise of yield farming

Yield farming is a process of providing liquidity to DeFi protocols in exchange for rewards, such as tokens or interest payments. Yield farming has become increasingly popular due to the high yields that it can offer.

The rise of AMMs

Automated market makers (AMM )are decentralized exchanges that allow users to trade tokens without the need for a centralized counterparty. AMMs have become increasingly popular due to its ease when exchanging or swapping tokens.

The rise of DAOs

DAOs are self-governing communities that own and manage DeFi protocols. DAOs have become increasingly popular due to their potential to reduce the risk of centralized control.

DeFi 3.0 is the new generation of decentralized finance, and it is designed to address the challenges of DeFi 1.0 and DeFi 2.0. DeFi 3.0 will focus on security, privacy, composability, and ease of use. By addressing these challenges, DeFi 3.0 aims to create a more accessible, efficient, and sustainable DeFi ecosystem.

The transition from DeFi 2.0 to DeFi 3.0 is being driven by a number of factors, including:

The rise of Layer 2 solutions

Layer 2 solutions are designed to improve the scalability and efficiency of blockchains. This is important for DeFi, as it allows for more transactions to be processed at a lower cost, which in turn will help increase the adoption of DeFi.

The development of new DeFi protocols

There are a number of new DeFi protocols being developed that offer new and innovative features. For example, some protocols are using DeFi to provide insurance, while others are developing more complex yield farming strategies, including leverage farming and looping strategies. Meanwhile, it will not stop here as more new strategies and integration will be introduced from time to time.

The increasing adoption of DeFi by institutional investors:

Institutional investors are starting to take notice of DeFi. This is due to the high yields that can be earned, as well as the potential for DeFi to disrupt the traditional financial system. With the introduction of Real World Assets (RWA) such as bonds, stocks, real estates and structured financial products into DeFi 3.0, it will make DeFi even more attractive to institutional investors.

The transition from DeFi 1.0 to DeFi 3.0 is still in its early stages, but it has the potential to revolutionize the financial system. DeFi 3.0 is expected to be more scalable, efficient, secure, and offer a wider range of financial services than DeFi 1.0 or DeFi 2.0. We will also be able to see integration of Real World Assets (RWA) into DeFi 3.0, which will make DeFi a more accessible and attractive option for a wider range of users.