Like most disruptors, DeFi, which stands for Decentralized Finance, was born out of the need to solve a problem experienced at a mass level. The problem being intermediaries, like banks, controlling the financial success of the people they serve. For instance, banks control which financial investment products you can use based on how much money you have, creating barriers for their members. They also decide the rate of their products, like Money Market Accounts, based on how much you can deposit. Perhaps worst of all, is that the APY or Annual Percentage Yield of Savings Accounts or Money Market Accounts are rarely offered at 0.6% or higher.
DeFi disrupted centralized financial institutions by placing you at the center of your investing journey. Not only do banks create barriers to building wealth but they also don’t include you in the conversation concerning what happens with the money they collect from you. It may seem ironic that you aren’t consulted on what happens with your money, but this isn't a novel issue. Since the inception of banks, members were merely viewed as depositors who allowed banks to participate in the larger game of building wealth. While building wealth on the backs of their members, they offered little incentive to them other than a safe place to store money or access to loans.
Controlling how much you can withdraw, how much APY you can earn, and which investment products you can use, Decentralized Finance became more attractive than traditional banking. Not only does DeFi disrupt centralized finance, but it evens the playing field a bit.
History of DeFi 1.0
DeFi 1.0 offered users an alternative to broken, centralized financial institutions. Holders of DeFi projects were also given some level of influence over the project through a voting process corresponding to how many tokens you held. DeFi 1.0 users could also participate in Yield Farming. Yield farming is a process when you offer crypto tokens to a pool as a liquidity provider (LP), and receive tokens in return as a reward. Sometimes, you could receive different tokens at once, allowing you to place those tokens in new pools to accumulate more tokens. Essentially, you become a lender by adding liquidity.
While DeFi 1.0 took off, there were some shortcomings. With new tech, there is a huge learning curve. DeFi 1.0 was no different, leaving many people watching it grow from the sidelines. This issue, coupled with the volatility of the DeFi market during its infancy, and impermanent loss, contributed to the slow adoption of DeFi.
Impermanent Loss happens when you deposit tokens in a pool, which locks you into a certain rate, but the shift in price of the token changes drastically. Consequently, you could have made more profit by holding the token rather than placing it in the pool. In theory, you don’t lose money, but your earnings from the pool would be less than simply holding the tokens.
Additionally, DeFi 1.0 relied on smart contracts, which were novel during the emergence of DeFi. Due to projects expanding using smart contracts too rapidly, early adopters were exposed to the risk of losing money as scammers benefited from faulty coding of smart contracts. DeFi was new, bringing with it new risks.
Less Risk with DeFI 2.0
DeFi continued to grow, which led to DeFi 2.0. DeFi 2.0 reduced risk faced during the adoption of DeFi 1.0 by developing smart contract audits. Using smart contract audits, smart contracts could be examined methodically, reducing the risk of users losing money due to a vulnerability within the coding of the contract. With more precaution offered to the creation and expansion of projects in the DeFi space, more users were onboarded.
Furthermore, Impermanent Loss Insurance was created, offering users a bit more ease of mind as they entered pools. DeFi 2.0 also introduced cross-chain bridges, allowing tokens to be added to pools from different blockchains. Cross-chain bridges added a new layer of accessibility to the DeFi space, allowing more users to enter pools and more liquidity to be added to pools.
While the DeFi space grew bigger, safer, and stronger than ever, one problem remained. Navigating the DeFi space during this period hadn’t become easier. In fact, with the addition of cross-chain bridges, finding impermanent loss insurance, and ensuring that projects’ smart contracts are safe, DeFi became more complex and less user-friendly.
DeFi 3.0, established by Multi-Chain Capital
Multi-Chain Capital was created with the goal to address the faced by those struggling to understand and keep up with the everchanging DeFi 2.0 space. Instead of following the latest DeFi updates, understanding cross-chain bridges, or chasing the pool offering the highest APY, crypto users were introduced to MCC's innovative Farming-as-a-Service (FaaS) solution. This new DeFi operation model was promptly named DeFi 3.0, underscoring improvement over its predecessors.
Multi-Chain-Capital established FaaS and Defi 3.0 so that everyone can win; not just those with an abundance of time, years of experience, and disposable capital. By simply holding $MCC, users receive passive income and benefit from Yield Farming operations.
The catalysts of this strategy are the experts on our team like our founder, Mr. Capital and Justin Wu, our Farming and Investing Advisor. They spend their day finding the best pools to place funds from our treasury, leading to passive income for holders.
Now, you don’t have to be a crypto wizard to make it in the DeFi space, you just need to hold $MCC. We will do the heavy lifting in terms of strategy, assessing risk, consuming fees across platforms, and staying on the pulse of DeFi. Much like Apple, usability is at the forefront of our innovation, allowing users of all backgrounds to engage with DeFi through our user-friendly platform.
While Multi-Chain Capital recently ushered in DeFi 3.0 with FaaS, we remain committed to innovation. We recently introduced Nodes as a Service (NaaS) to offer our community more value through the first of many products.
With a mission to limit barriers of entry in DeFi, we’ve decided to innovate in the node space as well. While there are node solutions in the DeFi space, these nodes often have costly fees, and can’t be traded or transferred to new wallets. Our node solution offers frictionless movement between wallets and is purchased as a Non-fungible Tokens, or NFT. The passive income generated from nodes is supported by yield farming.
The innovation of creating nodes as NFTs will also allow them to accumulate value and be sold on a secondary market. That’s right, your node will produce passive income and could be sold on a secondary market when the time is right. We are passionate about removing barriers of entry in the DeFi space, so there is still work to do. Consequently, there will be more products created that remove hurdles, empowering you to accelerate your journey into DeFi. Welcome to the future of DeFi 3.0.