While the actual meaning of DeFi 2.0 is currently evolving, its key component is the inclusion of alternatives to the pillar of DeFi 1.0, i.e liquidity mining. Read more!
While the actual meaning of DeFi 2.0 is currently evolving, a key component of this future generation of DeFi is the inclusion of alternatives to what previously defined itself to be a pillar of DeFi 1.0: liquidity mining.
What Is Olympus DAO?
The holders of OHM have the authority to vote on the future destiny of the Olympus DAO system, thereby building a financial platform that is community-led and community-based to ensure transparency and stability.
Olympus hopes for itself to be a worldwide unit of trade and a means of exchanging currency within the real world at some point in the future.
How Do Users Earn Through Olympus DAO?
Users on Olympus DAO can choose between two basic techniques in order to earn profits: staking and bonding. Both of these methods are linked to the OHM token, further expanding its usage.
Furthermore, users are rewarded sOHM, which can be leveraged on various DeFi protocols. In order to get OHM from sOHM, all that the users have to do is burn their sOHM tokens.
The only other way to acquire OHM, besides earning it directly through staking and/or bonding, is buying it. Users can buy OHM on DeFi exchanges, such as Gate.io, Uniswap, and SushiSwap, to name a few.
The Shortcomings of DeFi 1.0
DeFi 1.0 was based on liquidity mining. Simply put, liquidity mining is a mechanism where platforms reward users with their own native token in return for depositing resources that some other user may trade or borrow.
The issue is that these protocols are diluting their token supply in return for capital contributions, which are usually impermanent. So what happens is that individuals come in, commit their resources to the protocol, reap its benefits, and then withdraw both their resources and their rewards, dumping the native token in the market.
However, liquidity mining operations aren't always so brief and short-lived. COMP coin by Compound Finance has sustained a long-term and continuous liquidity mining operation.
Regardless, despite the length, liquidity mining is a risky strategy to employ in DeFi. It waters down the supply of a project and draws money from mercenary users, as evidenced by Big Data Protocol's initiative.
Why Is Olympus DAO Introducing DeFi 2.0?
A number of new projects are abandoning liquidity mining (which was employed largely in DeFi 1.0) in favor of exploring new substitutes. Olympus DAO is introducing DeFi 2.0 to overcome the shortcomings of DeFi 1.0.
The mechanisms of staking and bonding have enabled Olympus to be the owner of its own liquidity, which is a significant distinction from many (but not all) DeFi 1.0 projects that see liquidity dwindle when rewards are distributed to farmers.
According to Olympus DAO's statistics on their website, the protocol possesses more than 99% liquidity of the OHM-DAI bond. The platform is quite confident that the liquidity is not going to go away since it is owned by none other than Olympus itself. On top of that, they're even getting LP fees!
Olympus DAO Forks
Forks refer to tweaked versions of the codebase of a certain project. Owing to the success of the protocol-owned model of liquidity of Olympus DAO and its subsequent catalyzation of the DeFi 2.0 movement, it is no surprise that forks of Olympus DAO came about.
The most popular Olympus DAO forks are currently Wonderland, Hunny DAO, and Klima DAO.
There are multiple other up-and-coming forks of OHM as well, including but not limited to Venom DAO, TaiChi DAO, Snowbank, Spartacus, Temple DAO, OtterClam, Exodia, and others.
DeFi 2.0 claims to be a solution to DeFi 1.0's shortcomings. While both have the same goal, their protocols matter a lot in terms of their longevity. Regardless, decentralized finance is arguably a good concept, especially for the consumers, but whether DeFi 2.0 will continue to soar is something only time can tell for sure.