As an important infrastructure of Defi, the upgrade of Ethereum 2.0 has further improved its performance and scalability. This underlying change is expected to stimulate a new round of financial scenario development.
Especially at present, Layer2 is in vogue, which provides a good booster for this potential financial narrative. Therefore, the core of this article will be developed along two logics:
ETH2.0 further promotes the competition and development of Layer2, which will provide Defi with more solid underlying infrastructure;
The explosion of DeFi is most likely not due to traditional concepts and projects, but new ecological Fi such as SocialFi.
1. Layer 2’s rigid demand scenarios
We need to understand one thing: even if ETH expands and reduces Gas, it still cannot provide a good experience for native on-chain applications, so future on-chain applications and protocols will still be based on the second layer.
From a development perspective, Layer2 can almost be said to be the most competitive track in the industry, and the upgrade of ETH will further intensify this competition. In the end, the one or several chains that will win and be recognized by the market must be the one or more chains that are most suitable for the long-term survival of the ecosystem.
As Defi is a concept with the most trading scenarios, whether it is Dex or other derivative concepts, the performance requirements are extremely high. Among the current decentralized infrastructure, Layer2 can basically be said to be the most powerful!
PS: Of course, most of the second layers currently have suspicions of centralization, but don’t worry about it...
The second layer in the context of ETH2.0 brings huge benefits to Defi applications. Under the premise of perfect infrastructure, it provides a good starting soil for at least one application (why do I say this again? Because as the project matures, many popular applications want to build their own chains, such as the recently well-known MKR)
2. The impact of new concepts and the redundancy of old concepts
The market tends to speculate on new stocks rather than old ones, which has a lot to do with the development of the cycle narrative and the degree of redundancy of funds. Just imagine, a track that has exploded in the past few cycles, how many people have been trapped in the alternation of bull and bear markets? In the future, the market will have to pay for these people to get off the train first, and the pressure to pull the market is very high, which can be said to be a step by step!
But it is different when it comes to new concepts. The amount of funds accumulated in past cycles is not large, and a small plate is easy to pull up. With the current industry size, if some money flows into a certain sector from the outside market, it can form a market with enough fomo. I think this is the core logic of the market's speculation on new things rather than old things.
Therefore, when we bet on some old narratives, if we want to pursue sufficiently stimulating excess returns, then we have to bet on some new projects with old concepts. For these projects, there is no cyclical baptism, and it is easy to pull up the market even if the "car" is light.
III. Diversity of the Concept of Fi
Defi is a large sector, and many of its derived sub-concepts can all fall into the category of Defi in a broad sense. I don’t think we must bet on concepts such as DEX that have direct trading scenarios, and we can also do the "Fi" attributes of other ecosystems. #DeFiChallenge
To extend the sentence at the beginning, "The explosion of Defi is most likely not due to traditional concepts and projects, but the new ecosystem Fi." There are many Fi concept sectors in the industry recently, but the newest and most noteworthy one is the SocialFi sector, which has more room for pulling up compared to the other two concepts RWA and Gamefi.
Reason: Take the recent Friend.Tech as an example. The industry has mixed reviews about it, but it must be said that FT has created a new funding relationship, reconstructing the traditional game field of individuals vs. project parties in the industry, and forming a new funding game of individuals vs. individuals.
This kind of ecological approach is itself a highly liquid funding model (even if it is labeled as social). The amount of funds it can carry is very imaginative, which is why I have been constantly looking for and actively participating in new social projects recently.
4. The support provided by L2
Finally, I would like to summarize what I said above:
1. ETH2.0 will further promote the development of L2 and bring more efficient underlying facilities to the industry;
2. Based on the principle that the market only speculates on new things and not old ones, there is nothing wrong with betting on SocialFi for the next round of "Fi" attribute concepts~
3. The new SocialFi application must also be built on the second layer, otherwise the failure of the infrastructure to keep up will lead to restrictions on future development, just like FriendTech on the Base chain.
