As with most technical fields, the crypto industry develops in waves. The first wave was the creation of multi-tiered solutions and infrastructure such as Bitcoin (BTC) and Ether (ETH). The second wave is the ICO boom. With this nearing an end, there has been more speculation about what the next wave of cryptocurrencies will look like.
Some predicted that security token offers and initial exchanges would be the next big thing, but that didn’t happen. Others believe in level-to-scale scaling solutions like Plasma and the Lightning Network, which have recently proven to be crucial decisions due to the high network load and Ethereum gas fees that are breaking new records every day. Unfortunately, these decisions are still several years away.
On the other hand, we also have zero team solutions like Cosmos and Polkadot, which fall roughly into the same category: they are forward-looking in the sense that they provide a free flow of liquidity between networks, and they also solve congestion problems.
We also have a decentralized economy. It came just in time to bridge the gap between (let’s be honest) public disillusionment with early coin offerings – with over 80% of fraudulent projects and most of the projects remaining yielding no alternative value – and a purely technical L0 and L2 solution that ends in a few. Years.
DeFi offers a unique solution: synthetic products that allow conservative investors to earn interest on stacked coins and allow traders and crypto optimists to profit from their existing positions. However, the true beauty of DeFi lies in the comparison. These codes really hit the nail in the head, providing a truly exponential return on investment, drastically democratizing protocol governance and promoting true decentralization. This has allowed DeFi to become our purest form of decentralized self-regulation.
DeFi originally came in two versions: companion / synthetic products (such as composite) and infrastructure to support the former (such as oracles, decentralized exchanges, bond contracts, and automated market makers like Balancer).
Compound is one of the most famous names in DeFi. Its loan solution was one of the first solutions (along with MakerDAO, though with notable differences) to introduce management codes to users. Since the company began distributing COMP tokens to lenders and borrowers in June, the platform has exploded, quadrupling liquidity, and becoming the biggest DeFi app – not recently surpassed by Aave and Maker.
Meanwhile, the COMP token’s value increased from $ 66 in early June to nearly $ 220 in mid-August. Compound distributes 2890 COMP tokens on a daily basis to all users providing liquidity or borrowing from the protocol. The exact terms of distribution are determined by the interests of the individual currency pairs. The governance token model has already proven favorable to decentralization, as COMP holders have already influenced protocol policy.
Related: COMP Token Storms DeFi vehicles, should now take first place
Then there is the balancer (BAL) where although the BAL tokens have not been minted and distributed yet, and after some fluctuations due to early pricing, the BAL tokens have grown from around $ 8 in mid-July to more than $ 34 at the end of August.
The interesting thing here is that the control code was not part of the original Balancer design, but was introduced later, following this trend in digital assets. Either way, it definitely paid off. It is worth noting that this is despite the fact that the Balancer team kept most of the icons with them.
These projects have two things in common: they provide strong returns through interest or taxes, and they have the potential to generate exponential returns through the symbols of governance.
For the second phase of Defi evolution, we have a different approach – what I would call meta-DeFi solutions. These are projects and protocols that provide game-changing capabilities such as enhanced automatic returns (like Yearn.finance) or via blockchain (like Equilibrium) that allow both to use a larger pool of liquidity than just Ethereum, while also solving time and congestion problems.