Decentralized finance (DeFi) has transformed the financial landscape by providing users access to financial instruments. This article examines the changes from DeFi 1.0 to DeFi 2.0 and new yield farming strategies.
Issues and Achievements of DeFi 1.0
The first iteration of DeFi, known as DeFi 1.0, provided access to financial tools without intermediaries. However, the DeFi 1.0 period faced issues such as impermanent loss, reliance on mercenary capital, and high vulnerability to hacks. These limited the sustainability and widespread adoption of the technologies.
Transition to DeFi 2.0
DeFi 2.0 represents an evolution that addresses the shortcomings of DeFi 1.0. Key changes include improved liquidity management, enhanced security, and the introduction of new models such as Protocol-Owned Liquidity and bonding mechanisms. These enhancements aim to create a more stable and accessible ecosystem.
Modern Yield Farming Strategies
New yield farming strategies arising from DeFi 2.0 include Protocol-Owned Liquidity farming, bonding mechanisms for long-term value, auto-compounding vaults for optimized returns, and delta-neutral strategies to mitigate risks. These approaches allow efficient capital utilization and risk minimization in generating yields.
The shift from DeFi 1.0 to DeFi 2.0 signals a mature development of decentralized finance. Advanced yield farming strategies, grounded in sustainability and efficiency, are cornerstones for the future of DeFi.
