DeFi 3.0

A financial product can attract investors without attracting customers. DeFi’s speculative cycles make that distinction painfully clear. A token price tells us what people are willing to pay, but it does not tell us whether anyone needs the product.

DeFi 2.0. created hype by a lot of crazy gimmicks like the insanely high APY on OHM forks, and by trying to merge DeFi with the buzzwords of the day. We got a lot of NFT, Metaverse and Gaming related products, and while these Dapps did gain traction from investors, they lacked consumers, therefore their growth was not sustainable at all. It was an absolute misreading of what DeFi should be, and what it needs to focus on. While trends and gimmicks did bring billions of dollars into a number of products, this only sounds good until we realise what DeFi really should be. It’s not just another category of crypto products. It is an ecosystem that should take on traditional finance and grab a huge chunk of its consumers and capital. It shouldn’t capitalize on speculative money, but profiting on solving real world issues. It should be an alternative to the old fragmented, permissioned, corrupted system. Therefore the potential of DeFi should not be measured in billions, but trillions.

Calling the next iteration “DeFi 3.0” will not make it useful. Its builders have to solve financial problems that people actually face. I want to see products that create value through reliable, effective services, even when those services are too ordinary to become a fashionable slogan.

The potential I see in DeFi is a permissionless, interoperable network that makes useful financial services accessible to more people. That ambition has to be tested in practice: do people use the product, does it solve their problem, and will they keep using it without speculative rewards? Those answers matter more than the label attached to the next wave.