Best article on Defi 2.0:
DeFi 2.0 and Liquidity Incentivization
Gives a good overview of the history of Defi, and the problems that have led up to this so-called 2.0. Does it warrant a "2.0" moniker? I think not, but, hey, sounds like progress, right!
The problem with liquidity pools:
[...] there were few incentives for end-users to bootstrap liquidity for a new token, as this would mean exposing themselves to the risk of impermanent loss in exchange for minimal fee revenue from swaps. They needed a sufficient economic reason to take on that risk.
This led to a chicken and egg problem. Without a sufficient level of liquidity, the slippage induced by swaps discourages users from participating in a DeFi protocol’s ecosystem. Without users participating through token transactions, there isn’t enough fee volume generated to incentivize third-party actors to pool their tokens and provide liquidity.
Yield pools put a bandage over the whole issue but it just means that token prices bleed more slowly.
DeFi 2.0 is a batch of different solutions, including Protocol-Owned Liquidity (POL) and Tokemak Reactors. You can read about them in the Chainlink article.
This multi-faceted model helps to realign incentives between third-party liquidity providers and on-chain protocols. Protocols are better positioned to be exposed to impermanent loss than an independent third-party liquidity provider. While third-party liquidity providers are faced with opportunity costs representing every other liquidity pool and yield farming protocol on the market, protocols have an additional incentive to keep the liquidity as it helps secure low-slippage swaps for users transacting with their native token, lowering the cost of entering their respective ecosystem.
None of which solves the real issue that a new token will become worthless unless it is able to earn income from outside the system that is funding the token; without that, these protocols will remain short-term liquidity boosts and should be honest about this. Just more mathematical games - learn to play.
Far more interesting constructs can already be made using Balancer, or even Osmosis on Cosmos. Indeed, the Tokemak system can easily be constructed with existing structures, hence, there really isn't a Defi 2.0 - more like a version 1.2.
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Now, this is making sense to me. So pools are like high and low tides, the value we put can go high giving returns or we can have losses.
I will now read more on this.
mmm, maybe defi 101 is in order.
might make more sense if u code a little simulation ;-)
eg https://docs.uniswap.org/protocol/V2/concepts/protocol-overview/how-uniswap-works
the basics are XY=k and swap price = dY/dX (depending on swap direction)
simulator here = https://hash.ai/blog/uniswap
That's cool, i will give it a try
I personally wish I could put 100% of my tokens into a Liquidity pool that would provide liquidity for all the known pairs between all coins i have. It would obviously opt in for the most profitable pair if both currencies are called for in 2 different transactions. Solve the liquidity crisis but with all currencies, not just a pair.
But that's what the pools in pancake swap already do!
eg https://pancakeswap.finance/pools
the CAKE pool at the top is such an aggregator.
But you have no choice - if you wish to manage such a bespoke pool then you need to look at those (few) sites that allow multi-token pools.
The technology is developing, I am ironically on a side note waiting for Aladdin by BlackRock to get hacked, proving the biggest player on earth isnt too big to fail. Killing that too big to fail idea that props up the false financial orgs. Once Aladdin is busted wide open, people will adopt the principals of the derivatives into the Crypto economy.
I am imagining a world with self prescribed quantitative easing, and once BlackRock and the FED are unsettled from their control over peoples finance, there will be a huge opportunity for this technology at that point.
Quality discussion right here Folks!
lol sorry but your ass is getting beat by the elite!
I have lost 2 Ether in fees trying my way into "pools" and water was icy i wont go no more ☹️
I knew about Defi.
And from my knowledge I want to say that Defi will do best in future. And it is soon.
I have voted for you as a witness
