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Author: Jesus Rodriguez, Coindesk; Compilation: Songxue, Bit Chain Vision Realm
The cryptocurrency market will enter a new stage in 2024, full of optimism.It overcomes the turbulence of the past 18 months and with the support approved by the recent regulatory authorities, the transformation of monetary policy and the new Web3 innovation are paving the way for the new wave of encryption innovation.
The development of decentralized finance (DEFI) is particularly promising.As the central bank issued a signal of interest rate cuts, the Defi yield has become more and more attractive as an alternative investment form.In addition, the new ecosystem and a new generation of agreements are introducing new financial primitives into the field.
However, in order to cross the extensive gap, the DEFI at this stage needs to be different from the previous stage.What are the key pillars required for Defi development?How do they reflect in this market?Let’s explore it.
DEFI V1: Inspiration, benefits, overall and hackers
The first stage of the Defi market is to launch a highly motivated ecosystem to create artificial and unsustainable returns in various ecosystems, but it also lays the foundation for agreement innovation.The feasibility of incentive plans is often challenged, but they solve the problem of cold start in many ecosystems.Unfortunately, with the changes in market conditions, a large part of the DEFI activities in these ecosystems decreased, and the yield decreased to a level from the perspective of risk returns.
Another noteworthy aspect of Defi V1 is the dominant position of complex protocols containing extensive functions, which has caused people to question whether they should be called financial primitives.After all, primitives are a function. AAVE protocols include hundreds of risk parameters and support very complicated overall functions.These large protocols usually lead to a fork, which enables similar functions in the new ecosystem, which leads to the surge in AAVE, Compound or UNISWAP and various EVM ecosystems.
at the same time,Security attacks have become the main obstacles adopted by DEFI.Most DEFI hackers are asymmetric events, and a large part of the protocols are lost.The combination of these hacking attacks with the decline in native DEFI yields has greatly hindered investors.
Despite these challenges, DEFI V1 has achieved great success.The ecosystem successfully affected extremely harsh market conditions and maintained a strong level and vibrant community.
But can the next stage of Defi adapt to the new market conditions and achieve the technical innovation required for mainstream adoption?
In order to enable the second iteration of the technical trend to obtain a higher level than its predecessor, either the market conditions need to be changed, or technology must be developed to attract new generations of customers.As far as DEFI V2 is concerned, we can divide them into three parts:
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Developers build a new DEFI protocol and application;
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Visit investors access DEFI through wallets and exchanges;
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Institutional investors use DEFI to achieve more complex use cases and scale.
DEFI V2 for developers: finer granularity and new primitive
For developers, the new stage of Defi is controlled by influential trends.The agreement is transitioning from the overall structure to a smaller and finer granularity.In a recent article, I call this movement “DEFI Microe said”.A protocol like MORPHO BLUE enables loan atomic primitives to combine into complex functions.
In addition, Defi V2 developers will benefit from the emergence of new unique ecosystems such as EigenLayer or Celestia/Manta, and provide new canvas for new financial originals in DEFI.Early innovators of these new ecosystems include Renzo or Etherfi and other protocols.
DEFI V2: risk management, structural products
Defi V1’s institution is mainly driven by cryptocurrency companies.In order to achieve this goal, the Defi V2 must supplement its key original words through strong financial services to reduce the entry threshold of the institution.It can be said,Risk management should become the original primitive of Defi V2, so that the institution can accurately model the risk returns in Defi.This may bring more complex risk management services.
The continuous increase of the particle size of the DEFI V2 architecture also means that the adoption of the organization is facing greater challenges.In order to solve this problem, Micro -based elements need to be merged into high -level structural agreements to provide the complexity and stability required by the institution.Security loans, insurance or credit services are necessary for the institution to unlock the next stage of DEFI.Providing DEFI vaults that provide income from different protocols and combine risk management and borrowing or insurance mechanisms are an example of structured products suitable for mechanism framework.
Supervision is still the X -factor of the institution using DEFI.However, without risk management and insurance systems such as systems such as risk management and insurance, the comprehensive regulatory framework is almost impossible.Without them, powerful supervision may be the only choice.From this perspective, the construction of institutional -level capabilities in DEFI V2 is not only to improve the adoption rate, but also to reduce the survival risk of the field.
DEFI V2 for retail investors: user experience and simpler services
Retail investors are the most affected by the DEFI market turbulence.However, the emergence of the new ecosystem has been steadily attracting retail investors to return.Despite this trend, DEFI is still a cryptocurrency market.For most retail investors, using the DEFI protocol is still a strange concept, and the granularity of Defi primitive makes it more challenging.
The well -known secret in Defi is that improving user experience is essential for users.However, when considering the user experience, we can be more ambitious than simplifying the interaction with the DEFI protocol.Over the past five or six years, the wallet experience has basically remained unchanged.The wallet experience using DEFI as the core component is necessary to improve the adoption rate of retail investors.
In addition, the interaction between retail investors and DEFI agreements should be abstracted through simpler primary words, and they do not need to become DEFI experts.Imagine that you don’t need to interact with AAVE or Compound and other agreements. Just click on a loan with appropriate levels of mortgage and protection mechanism.The user experience in DEFI is an obvious problem, but it needs to attract attention immediately.
The current status of macroeconomic conditions and cryptocurrency markets is integrating, and DEFI has entered a new stage.DEFI V2 should combine more fine and combined financial primitives in order to create new agreements, provide strong financial services for institutions, and provide a better user experience to eliminate obstacles to adopting retail investors.Although the first stage of DEFI is mainly driven by artificial financial incentives, the DEFI V2 should be more practical, organic, and simpler to verify its feasibility as a traditional financial parallel financial system.
