NFTs are slowing and this is the next big thing in crypto
I was right when I said Im not worried about the last months Evergrande-induced market pullback. I mentioned how this, to quote JPowell regarding inflation, is TRANSITORY. Crypto folk will find something to hype about, no bear market shall keep them bored.
The short attention span nature of crypto, combined to strive for innovation and growth both in terms of net worth and tech has made new things keep popping up in the crypto space.
See it as good or bad, but hopping into the newest shinier train is the norm currently. And every time, it is always interesting.
The NFT hype is slowing down. NFTs are DAOnizing themselves now, launching tokens like Bored Aped Yacht Club NFTs and jumping around regulations to not be called securities (Gotta keep making money somehow but its proven to be difficult.)
In short, crypto needs something new to be excited about. And DeFi 2.0 is perfect. It comes at the right time.
Missing the first DeFi summer in 2020? This might be your chance to spot the next AAVE, Sushi, and MakerDAO.
DeFi 2.0 has many faces.
One of those faces is: It is similar to the initial DeFi craze. Only this time, it doesnt happen on Ethereum. But rather on a small up-and-coming chain like Avalanche, Solana, and my new blockchain crush, Fantom.
People are rushing into these platforms not without reason. The high Ethereum gas fee has made adventuring between protocols and dApp no longer viable nor it is fun. It will be hard for you to explore various DeFi apps features just because, unless paying $40 per smart contract execution is a no-brainer (i.e. you are a whale.)
You go to Ethereum when you want to park funds and wait until your kids are ready for college, not because you want to ape or degen-farm into some new and hyped protocols, get airdrops, or just to fulfill your curiosity. Those are the good old days.
Then people are going into lesser, cheaper chain offers that offer all these opportunities. In many areas, the experience is better too. Faster transaction speed, innovative UI, or simply fun theme and UX.
The Uniswap of Avalanche Chain is one of the fastest-growing protocols in 2021.
On August 12th, the total value locked of this protocol is a mere $22 million. As of October 12th, the total value locked according to Defillama is $1.2 Billion.
The price of Trader Joes native token, $JOE has raised from around $0.03 to $1.6, while reaching $4 during its peak.
On October 12th, Trader Joe also launched the Banker Joe, basically extending the protocol services into borrowing and lending, not just swapping tokens and AMM.
Geist Finance is another DeFi 2.0 star. This one is a Fantom lending protocol and is a fork of AAVE. Coming up seemingly so suddenly, no VC, from anonymous developers, and has multisig consists of some respectable people on crypto, the protocol gained traction very quickly. It locked volume from several hundred million to 2 billion in just one day, subsequently also raised Fantom price 30% in the same period.
I wrote about this phenomenon here.
These two, Trader Joe and Geist, are just a few among many examples. SpiritSwap on Fantom looking like it will follow Trader Joes path. Then theres Tarot, Wonderland ($TIME), and the cross-chain Abracadabra ($SPELL).
Whats interesting about DeFi 2.0 is that now, the stars of DeFi 1.0 are called the boomers DeFi. Crypto folks do not forget how these protocols are the ones who forged the initial path of DeFi. AAVE, Yearn, and Uniswap were the pioneer. But as it turns out, people want more. And they have some legit grievance as well.
Not much yield, not much opportunities
The most common complaint about DeFi blue-chips is that they have become boring. Yields arent as attractive as it was before, while DeFi 2.0 offers lots of creative ways for money lego-ing. Even if you are trading their tokens, price action on coins like AAVE isnt that exciting especially in crypto taste, where huge volatility is expected.
They have become like Amazon. Stable, but again, boring.
Different, if not lesser, features on non-Ethereum chain
Plenty of protocols are deploying on other blockchain and layer twos. But theyre just not the same as the Ethereum ones. In most cases, it offers limited features and opportunities.
There isnt enough liquidity. Some features like Sushi staking arent available, only on Ethereum one (please correct me because I tried this so far on Polygon and Arbitrum) A guy lost money because he transferred funds to MakerDAO vault address, but as it turns out theres no Arbitrum version of that vault. Hence he sent to a non-existent smart contract address. (Ill link if I found the guys post on Twitter.)
Or simply, they are getting outshined by native protocols like TraderJoe or Geist.
Being the TradFi they were trying to avoid becoming previously
One of the biggest grievances about bluechip protocols are they become too big and too TradFi. Bluechip Defi is now a playground for TradFi who are starting to dab into crypto. Hedge funds starting to look into DeFi would aim for AAVE or Yearn as a start. A French bank is proposing to MakerDAO for a $20 million loan and using the banks bond as collateral (Deposit ETH or BTC as collateral like everyone else please, not your junk bonds.)
Its no wonder that crypto natives feel like they are getting set aside. A feeling that these bluechip have become too close and too accommodating to TradFi, a group theyre trying to revolutionize from. And worst of all, they too also become too compliant with the government. Losing all that cryptophunk rebel vibe.
Im talking about KYC, UniSwap delisting 100 tokens, protocol creating a separate platform thats compliant with regulators, and sometimes a doxxed team which means now they cans protect themselves with anonymity. Its just they become, so normies.
I told you about how DeFi 2.0 has many faces. Apart from bluechip forks but on new layer ones, there are some fresh innovations,mind-bendingones.
One of them that is stealing peoples attention is OlympusDAO.
What Olympus offer is something DeFi never offers previously.
It aims to be the stablecoin of crypto that is not pegged by fiat. It introduces the concept of bonds. Put your crypto collateral, get OHM at a discount, olympus will use the collaterals as reserve assets. The value of OHM relative to that assets will determine whether the protocol will increase the supply (minting) OHMs or burning them. Just like a reserve bank.
Its interesting that Olympus has no VC, no pre-sale, or airdrops (they raise initial funding on their existing discord members to prevent gaming and unfair distribution). They plan to never list on Centralized Exchange because theres simply no point in that.
Olympus hopes for everyone to wins. Its something they call the 3,3 scenario of the game theory. For example is when the price is up, the yield is down. But when the price of OHM is down, you get more yield on your staked tokens.
The most impressive thing about Olympus DAO to me is their strive for the true crypto spirit from the get-go. Fair distribution, no VC-accomodating, sustainable and long-lasting growth, besides solving the main problem of crypto (high dependence on fiat stablecoin.)
Abracadabra Money is another DeFi 2.0 phenomenon. You might hear about $SPELL a lot lately if you hang out on crypto Twitter. Visit their website and youll be welcomed with some nonsense. But like with everything in crypto, dont be deceived by the outer appearance.
Quoting them, the formula is simple, yet brilliant. Interest-bearing tokens like xSushi in, then the magic internet money, called $MIM, will be out. Deposit your tokens and youll get a stablecoin which later you can exchange with good old USDC or DAI, and use them as you like.
People stake their crypto to get interests with interest bearing tokens (xSushi, yvUSDC). These tokens, on abracadabra, can be used as collateral, thus earning you money, while allowing you to borrow up to 90% of the value of it. Thus, it increases your capital efficiency. Since the collateral is productive assets, it safe to say that your collateral actually help you pay your debts.
In DeFi 2.0, youll hear more and more about self repaying loans.
Their native token is called SPELL, which is used as an incentive for users. Stake it and youll get sSPELL for revenue sharing and vote right.
Follow me for updates on more innovative protocols like Alchemix, BadgerDAO, the concept of tricrypto, etc. Lots of new things I cant cover in just one article.