As an important infrastructure for DeFi, Ethereum's upgrade to 2.0 will further enhance its performance and scalability. This fundamental change is expected to stimulate a new round of development in the financial sector, driven by $ETH
Especially with Layer 2 currently in the spotlight, it provides a good booster for the potential financial narrative. Therefore, this article will focus on two logical aspects:
ETH 2.0 will further boost the competition and development of Layer 2, providing a more solid underlying infrastructure for DeFi.
The explosion of DeFi is likely to be driven not by traditional concepts and projects, but by new ecological Fis such as SocialFi.
1.The essential scenarios for Layer 2
We need to understand one thing: even with the expansion and gas reduction of ETH, it still cannot provide a good experience for native on-chain applications. Therefore, future on-chain applications and protocols will still be built on Layer 2.
From a development perspective, Layer 2 is currently one of the most popular tracks in the industry.
The upgrade of ETH will further intensify this trend. In the end, the winner recognized by the market will be the chain or chains that are most suitable for the long-term survival of the ecology.
As the most transactional concept, DeFi has high performance requirements for both DEX and other derivative concepts. Among the current decentralized infrastructure, Layer 2 is basically the most capable!
PS: Of course, most Layer 2s currently have the suspicion of centralization, but don't get too caught up in this...
Under the background of ETH 2.0, Layer 2 provides huge benefits for DeFi applications. With the improvement of infrastructure, it provides a good starting point for at least one application (why am I saying this again? Because as projects mature, many popular applications want to build their own chains, such as MKR, which is well-known recently).
2.The Impact of New Concepts and the Redundancy of Old Concepts
The market often focuses on new concepts rather than old ones, which is closely related to the development of cyclical narratives and the degree of redundancy of funds.
Imagine a track that has exploded in the past few cycles, how many people have been trapped in the bull-bear transition? In the future, the market needs to let these people sell before it can rise again, which creates a lot of upward pressure, making it a step-by-step process.
However, it's different for new concepts. The amount of funds accumulated in the past cycles is not significant, and the market can easily pour money into a certain sector off-exchange, forming a strong FOMO trend. This is the core logic behind why the market focuses on new concepts rather than old ones.
Therefore, when we bet on some old narratives, if we want to pursue sufficient and exciting excess returns, we must inevitably bet on new projects of old concepts. For these projects, without the baptism of cycles, they are easier to push up.
3.The Diversity of the Fi Concept
As a broad category, many sub-concepts derived from DeFi can be considered within the scope of DeFi. I believe that we don't necessarily have to bet on concepts such as DEX that have direct trading scenarios, but we can also explore the "Fi" attributes of other ecosystems.
Expanding on the opening statement "The explosion of DeFi is most likely not traditional concepts and projects, but new ecological Fi", there are many Fi concept sectors in the industry recently, but the most recent and worth paying attention to is the SocialFi sector, which has more upward potential compared to the other two concepts, RWA and GameFi.
The reason is that, taking Friend.Tech as an example, the industry's evaluation of it varies, but it has to be said that FT has created a new funding relationship and reconstructed the traditional game between individuals and project parties in the industry, forming a new game between individuals and individuals in terms of funding.
This ecological approach is itself a highly liquid capital model (even if it is labeled as social), and the amount of funds it can carry is very imaginative. This is also why I have been actively seeking and participating in new social projects recently.
4.L2's Boost #DeFiEthereum2.0
Finally, I would like to summarize what I said earlier:
ETH2.0 will further promote the development of L2, bringing more efficient underlying infrastructure to the industry;
Based on the principle of not betting on old concepts but new ones, the next cycle of "Fi" attribute concepts is likely to bet on SocialFi without any problems~
New SocialFi applications are also bound to be built on top of Layer 2. Otherwise, if the infrastructure does not keep up, it will limit the later development, just like FriendTech on the Base chain.
