DeFi 2.0: What's in Store for the Future of Decentralized Finance

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By Connor
Estimated reading: 3mins
future of decentralized finance

Decentralized finance (DeFi) has seen explosive growth over the past few years. 

But we're still in the early innings of this technology's potential. 

DeFi 2.0 represents the next evolution of the space - with scalability, interoperability and real-world connectivity at the core.

What is DeFi?

Decentralized finance (DeFi) refers to financial applications built on blockchain networks with no centralized intermediaries. Inspired by Bitcoin, DeFi aims to transform traditional financial products into trustless and transparent protocols.

DeFi platforms allow users to lend, borrow, trade, save, stake and more - while retaining control of their funds. Smart contracts automate processes that are manual and opaque in legacy finance.

Key attributes of DeFi include:

  • Open Source - DeFi protocols are transparent with code that is auditable by anyone.
  • Permissionless - No approval is required to use DeFi platforms. Anyone can access financial services.
  • Interoperable - DeFi apps are Lego-like components that can be mixed and matched.
  • Algorithmic - Smart contracts automate processes and remove middlemen.
  • Non-custodial - Users maintain ownership of their funds and private keys.

By eliminating rent-seeking intermediaries, DeFi aims to increase accessibility, efficiency and transparency in finance.

What is DeFi 2.0?

DeFi 1.0 refers to the initial wave of decentralized finance applications built primarily on Ethereum, such as lending protocols like Liquity and decentralized exchanges like Uniswap.

DeFi 2.0 aims to solve some of the limitations of early DeFi, like high gas fees, poor scalability and limited interoperability between siloed applications.

Key goals of DeFi 2.0 include:

  • Scalability via layer 2 solutions and alternative blockchains like PulseChain, Solana, Avalanche, Polkadot and more.
  • Interoperability between blockchains via blockchain bridges
  • Fiat on-ramps and integration with real-world assets
  • User experience and accessibility improvements

How to Invest in DeFi 2.0

As a nascent space, investing in DeFi 2.0 involves risks and rewards. 

And of course, nothing in this blog post, or anywhere on this website, is to be taken as financial advice.

There are many options on how to invest in DeFi 2.0, here are some:

  • Research and invest in new, DeFi-friendly blockchains such as PulseChain
  • Research and invest in layer 2 projects
  • Buy tokens of multichain DeFi platforms
  • Provide liquidity on DEXs offering cross-chain swaps
  • Use emerging fiat on-ramps to move capital into DeFi
  • Look for projects aiming to connect real-world assets to DeFi

DeFi 1.0 vs 2.0

While DeFi 1.0 sparked the revolution, DeFi 2.0 promises to take decentralized finance into the mainstream. Here are some key differences:

DeFi 1.0
  • Built mostly on Ethereum
  • Limited scalability due to blockchain constraints
  • Isolated applications with minimal interoperability
  • Poor UX and inaccessible to average users
  • Narrow focus on speculative finance
DeFi 2.0
  • Multichain ecosystems
  • Scalability via layer 2 solutions
  • Interoperability between blockchains
  • On-ramps for traditional finance
  • Real-world integrations beyond just finance
  • Focus on usability and real-world adoption

What Will DeFi 3.0 Look Like?

DeFi 3.0 may realize the full disruptive potential of decentralized finance. Possible developments include:

  • Seamless fiat on- and off-ramps
  • Hybrid architectures blurring lines between CeFi and DeFi
  • DeFi applications with easy mainstream onboarding
  • Tokenization of real-world assets like real estate and commodities
  • Greater interconnection between chains and layer 2 solutions
  • Evolution of decentralized governance and regulation

The future looks bright for the users, builders and investors driving decentralized finance forward. DeFi 2.0 sets the stage for this financial revolution to achieve global adoption.

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Disclaimer:Please note that nothing on this website constitutes financial advice. Whilst every effort has been made to ensure that the information provided on this website is accurate, individuals must not rely on this information to make a financial or investment decision. Before making any decision, we strongly recommend you consult a qualified professional who should take into account your specific investment objectives, financial situation and individual needs.

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Connor is a US-based digital marketer and writer. He has a diverse military and academic background, but developed a passion over the years for blockchain and DeFi because of their potential to provide censorship resistance and financial freedom. Connor is dedicated to educating and inspiring others in the space, and is an active member and investor in the Ethereum, Hex, and PulseChain communities.

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