How to bind the value of governance token with the protocol and platform in DeFi 2.0

Before understanding “DeFi 2.0”, you may need to clarify what “DeFi 1.0” is. We know that those early decentralized financial infrastructures constitute the current DeFi scenario, such as decentralized trading applications DEX (Uniswap, Curve, etc.), lending applications (Compound, Aave, etc.), stable currency (USDX, DAI, etc.), etc.

These applications have now formed basic product functions and their respective economic systems. They have passed at least two rounds of market tests and have attracted a large number of users to use them. They constitute the mainstream application direction of the current DeFi market.

With the efforts of global technical engineers, the results of the DeFi 1.0 stage are obvious to all, up to 240 BU for just one year, but there are also many unsustainable shortcomings in the DeFi 1.0 stage.

TVL in DeFi

First of all, most of the DeFi projects at the current stage are the issuance of tokens for “printing money”, and this kind of DeFi project has not proposed new solutions in the distribution of governance tokens and community governance. Its launch of “Mining Architecture” is often unsustainable as the tokens’ selling pressure comes huger and huger.

Compared with participating in community governance, there is no connection between all participants and a lack of motivation to participate in the governance of the platform. The original intention of most miners to participate in the early stage is more inclined to obtain high token incentives. However, the governance token is not strongly bound to the platform. Exactly speaking, the value and price of the governance token get little relationship with the protocol revenue, sometimes just because the governance token is issued by the platform. Look at Uniswap and you will surely get it.

At present, many technical teams including ACY Finance are not satisfied with the short-sighted architecture at the current stage. Currency transactions need to build a sustainable and automatically spread decentralized financial system, called DeFi 2.0. In ACY Finance, 20% of the Flash Arbitrage Revenue will be used to buy back the ACY token, and 10% therein will be used to buy the ACY token and reserve as the ACYDAO’s rewards. The community members who own ACY tokens will happy to deeply join the governance, because of the ACYDAO’s incentive mechanism. What is more, unlike Uniswap which takes the 0.5% transaction fee into Foundation the project team control, the 0.5% transaction fee goes into ACYDAO for everybody who holds and stakes ACY tokens.

We need to build a sustainable and automatically propagated decentralized financial system- DeFi 2.0. In the DeFi 2.0 stage, decentralized finance is more inclined to link all community members who may provide liquidity and exchange in the platform. The liquidity incentives are more encouraged to connect relationships in all future transactions and strive to create a warm, sustainable, and interconnected decentralized financial architecture. It is also the ice-breaking journey of DeFi 2.0, an unprecedented financial governance innovation.

Compared with DeFi 1.0, the DeFi 2.0 community members do not simply rely on short-term interest to participate in community activities. All members are stakeholders and able to benefit from the development of the platform so that all members have a source of participation and truly realize decentralized governance.

Numerous decentralized financial innovations will be born here, which will attract global geeks to complete technological innovation ideas here, and burst out more high-quality financial projects. Innovations in any narrow field will have unlimited imagination. Through the strong links between the members, it will gradually eliminate the cold, single mining incentives and continue to provide a more forward-looking driving force, and it will be a new world of financial ecology in the future.

The DeFi 2.0 ecosystem represented by OlympusDAO and ACY Finance is doing this kind of exploration and experimentation right now. This will be a change in the blockchain field for a long time, and it also allows everyone to see the new world of decentralized finance.

So, DeFi 2.0 is a real upgrade, not just a play concept.

If innovations are made on these early and now relatively mature DeFi applications, and other new products or new mechanisms are derived, then these agreements can be classified as “DeFi 2.0”.

Then, innovative product functions and new economic models are probably important features of DeFi 2.0.

In the current market, some protocols are being classified into DeFi 2.0. ACY Finance provides a thoroughly innovative function built-in protocol level called Flash Arbitrage, which can significantly increase the protocol revenue and cut down the trading slippage sharply. Another original basic DeFi protocol is OlympusDAO, a floating algorithm protocol adopting an innovative incentive mechanism.

From the perspective of users, the upgradeability embodied in DeFi 2.0 also needs to have the characteristics of improving the DeFi player experience, such as improving the Token economic model, reforming the DeFi liquidity farming method, improving the utilization rate of funds, and smoothly transferring risks.

Before DeFi has become a supplement or substitute for mainstream financial products, it is still in early development, even though the well-known DEX, lending applications, stablecoins, and asset management applications have attracted a large number of users and funds to interact with DeFi applications. However, these applications are still in a very early stage. The blockchain’s revolution is the biggest one in human history, and DeFi is the biggest revolution since 1609 Amsterdam stock exchange was established.

For users, the most important thing is first to see whether these features can enhance the long-term value of the encrypted assets or not. Second, the users should be aware of the potential security risks of the DeFi “Lego Combination”. Under the premise of prompting risks, we will get a glimpse of how the DeFi 2.0 coins the world.