Ethereum and DeFi 3.0: a new generation of financial applications
How is DeFi 3.0 different from previous generations of financial apps?
The division of decentralized applications into generations is highly conventional. First, different criteria are used to define them: some experts focus on user experience, others on how applications work with liquidity, and others on how their architecture is built. Second, DeFi platforms are being updated, and some industry pioneers are now unequivocally using DeFi 3.0.
With DeFi 1.0, everything is quite transparent: the first significant projects in the field belong to this generation:
- Aave,
- Compound,
- Yearn.Finance, and so on.
When creating these applications, developers focused on providing liquidity flow, and usability and redesigned user interfaces were purely secondary.
In developing DeFi 2.0 applications, the focus was on liquidity efficiency, protecting against losses and hacks, and addressing the scalability of DeFi protocols. However, the developers didn't forget about progress in user experience either — significant attention was paid to developing interfaces and improving accessibility. Typical representatives of DeFi 2.0:
- OlympusDAO,
- Abracadabra.
DeFi 3.0 is, in many ways, an evolutionary development of DeFi 2.0 concepts, but the focus has shifted to making decentralized products more accessible and easier to use.
Characteristic features of DeFi 3.0 projects:
- With the increasing complexity of smart contracts and a high degree of automation,
- Active use of Layer 2 solutions for scaling,
- Cross-chain interoperability,
- Real Asset Integration,
- Frequent use of artificial intelligence,
- High energy efficiency,
- The high degree of decentralized governance,
- Use of decentralized insurance,
- Use of minimalistic interfaces.
In addition, the idea of "cryptocurrency Lego" has become one of the pillars of DeFi 3.0 — multiple products, from decentralized exchanges to oracles, are synergistically combined on one platform so that the whole ecosystem has more value than the sum of its parts.
One aspect, however, has remained unchanged in the third generation of decentralized applications — Ethereum is still the primary blockchain for DeFi.
Interesting DeFi 3.0 projects on Ethereum
Since there are already dozens of DeFi 3.0 protocols running on the Ethereum blockchain, let's examine the most interesting representatives of different platforms.
Uniswap V3
Uniswap V3 is a DEX that runs on multiple blockchains: Ethereum, BNB, Polygon, Celo, Optimism, and Arbitrum. This gives liquidity providers an unprecedented level of control over their capital allocation.
Synthetix V3
Synthetix V3 is a decentralized ecosystem for trading cryptocurrency derivatives on all EVM-compliant blockchains. However, Synthetix can also act as a backend protocol for DeFi projects on Ethereum and Optimism networks, providing liquidity and avoiding slippage. Synthetix has been one of the pioneers of the "crypto Lego" idea.
SingularityDAO
- DynaSets — automatically customized token baskets co-managed by AI and a team of experienced traders.
- Epoch Vaults allow users to utilize their DynaSets to supply liquidity and capitalize on profitable farming. The returns are optimized with the help of AI.
The SingularityDAO project actively uses artificial intelligence to strategize and improve the performance of its products, including:
Ethena Labs
Ethena Labs issues a fully decentralized synthetic stablecoin pegged to the US — USDe. Decentralized stablecoins are not common, but USDe also allows users to earn money by providing liquidity and staking. The declared yield is 8%. In addition, the token has already become an essential part of the decentralized finance ecosystem and is actively used on various DEX.
Abracadabra.money
Abracadabra is another excellent example of "crypto Lego". The platform is based on a decentralized credit protocol that works across multiple blockchains, including Ethereum, BNB, and Fantom.
The ecosystem also includes the dollar-based MIM (Magic Internet Money) stablecoin, which is 100% backed by user-locked assets. At the same time, the stablecoin's management is fully decentralized. All decisions on the platform's development and management are made by voting with SPELL tokens.
Conclusion
From a technical point of view, DeFi 3.0 projects do not differ so radically from the DeFi 2.0 generation. The differences in the approach to creating financial applications are much more important. Since the third generation, DeFi products have evolved into genuinely convenient, accessible, yet highly efficient and profitable tools, often organized into extensive ecosystems. So, it is DeFi 3.0 that is laying the groundwork for decentralized finance to transform from a niche industry to the mainstream.