Top DeFi 2.0 projects to take off next year

By: Daniela Kirova
Daniela Kirova
Daniela was born in Bulgaria, grew up in Chicago, and then moved to Michigan to attend the University of… read more.
on Nov 25, 2021
  • In November 2021, DeFi’s total value locked reached $269 billion
  • Abracadabra generates stablecoins by over-collateralizing assets
  • Olympus DAO uses a bond mechanism to create an alternative to the liquidity mining model

In November 2021, DeFi’s total value locked (TVL) grew 990x to an impressive $269 billion. Among the most significant DeFi projects that emerged were Curve (CRV/USD), Compound (COMP/USD), Aave (AAVE/USD), MakerDAO (MKR/USD), Yearn Finance (YFI/USD), and Sushiswap.

Many investors adopted the term ‘Defi 2.0’ as these early players developed. 2.0 promises to improve capital utilization, launch new finance tech, and improve the user experience. The three most important projects to take off in 2022 are Abracadabra, Olympus, and Convex Finance, according to Yahoo Finance.

Problems solved by DeFi 2.0

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DeFi 1.0 was innovative in that it created pools, whose liquidity was provided by users. More and more people started taking resources from the pool to finance their own crypto projects and problems began to emerge with that. Among those are:

  • Selling LP tokens without an attractive staking mechanism
  • Releasing more tokens as LP rewards, increasing pressure to sell
  • Capital inefficiency
  • Lending requires over-collateralized assets

Abracadabra: adding value and improving use of capital

Abracadabra generates stablecoins by over-collateralizing assets, like MakerDAO. Unlike it, the lending platform pledges assets with proceeds. You can use an interest-bearing token to mint or borrow MIM, a dollar-pegged stablecoin, thus freeing up liquidity and increase revenue of holders.

With Abracadabra, you can liquidate interest-bearing asset certificates to make more money, benefit from stable interest rates and low borrowing costs, and enjoy MIM’s good liquidity on the multi-chain Curve. Abracadabra also reduces the likelihood of liquidation because the value of collateral assets increases.

Olympus DAO: A stable crypto and liquidity mining alternative

Olympus DAO takes the innovative approach of using a bond mechanism to create an alternative to the liquidity mining model. It can buy LP positions to create protocol-owned liquidity by issuing OHM, its native token, at a discount. The higher its price, the higher returns are obtained from taking part in the pledge because each OHM is backed by 1 DAI.

Convex: A new and improved user experience

On June 3, Convex ousted Yearn as the platform with the highest percentage of CRV locked. It aims to improve intuitiveness by launching a one-stop platform to pledge CRV and mine liquidity. Convex develops the CRV ecosystem by increasing the compensation for CRV holders and liquidity providers and simplifying the process of Curve and CRV pledging and locking.  

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