In recent months, DeFi 2.0 protocols such as Alchemix, Abracadabra, and OlympusDAO have been experimenting with novel ways of operating without sacrificing token incentives.

Despite all of the developments in decentralized cryptosystems, they have failed to generate new pathways for economic gain for the most disadvantaged. DeFi is only available to customers who already have access to the financial system and live in countries with robust financial markets.


This is demonstrated by the fact that crypto “degens” (degenrates) have been a primary driver of DeFi’s growth. As it grows, DeFi 2.0 must break free from the historical underpinnings of a financial system founded on exploitation and injustice.

One immediate step would be to review lending regulations requiring excessive collateralization and investigate new community-based finance models that empower regular people. Over 2 billion people are unbanked or underbanked, with women, the poor, and the youth bearing a disproportionate share of the burden.

In their current form, DeFi lending techniques rely on over-collateralization. This means that in order to obtain a loan, you must put up collateral that is greater in value than the loan itself. As a result, a number of DeFi protocols have investigated on-chain and off-chain collateralized loan strategies.


On-chain approaches include flash loans, non-fungible token (NFT) collateral, leveraged trading, and crypto social scores. Off-chain techniques include third-party risk assessments/approvals, connecting to off-chain credit ratings, utilizing personal networks, and tokenization of real-world assets.

However, none of these methods aid the financially disadvantaged in acquiring access to DeFi financing choices. Flash loans are used for crypto trading, and NFT collateral requires ownership of a highly speculative (at the time) asset or tokenization of an object that may not be valuable to someone who is unbanked.

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