What is Defi 2.0?

DeTech.World
2 min readApr 13, 2022

Just recently Defi began to gain popularity, so what is Defi 2.0 and do we even need it?

DeFi 2.0 is a set of projects aimed at solving the problems of DeFi 1.0.

DeFi protocols are aimed at popularizing finance, but face such problems as scalability, security, centralization, liquidity and availability of information. DeFi 2.0 is aimed at resolving them and improving the comfort of use. If successful, DeFi 2.0 will help reduce the risks and difficulties that are currently pushing potential users away from this sector.

Let’s look at the weakest and most controversial places in Defi and try to predict how the industry of decentralized finance will develop.

Verification

DeFi has revolutionized the provision of decentralized financial services. DeFi 2.0 has to respond to new requirements such as KYC and AML (KYC refers to the process of identity verification and risk assessment, and AML is a range of anti-money laundering methods used to protect against financial crimes, identify and report them).

In particular, if the DeFi ecosystem wants to attract large institutions, then verified credentials are needed.

Insurance

Failures in the growth of DeFi have become noticeable in the form of hacks and protocol exploits.

According to Elliptic, in 2021 alone, about $10 billion was lost due to hacking and fraud.

Safe to say that along with regulation and training, the risk of capital loss is one of the main bottlenecks for the widespread adoption of DeFi by enterprises. If only there was a way to protect yourself from this.

Since only 2% of the total cost of DeFi is insured, a huge gap needs to be filled.

Anonymity

By default, your entire transaction history and Ethereum balances are publicly available. All transactions can be seen in block browsers such as Etherscan. Thus, literally anyone who knows that you have a specific address can easily view your payments, track the source of your funds, count your holdings and analyze yours. What if you want anonymity and privacy when it comes to your transactions?

Although there are already many successful projects in the DeFi space, we do not yet see the full potential of DeFi 2.0. Work is still underway to simplify the process, especially for new users.

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