What's the difference between DeFi 2.0 vs 1.0?

DeFi 2.0 and DeFi 1.0 differ in terms of liquidity ownership. Protocols that adopt DeFi 2.0 own the liquidity of the protocol, but in DeFi 1.0 the liquidity is owned by the participants. A good example to observe this contrast is looking at DEXs and DAOs. Decentralized exchanges (DEXs) grow liquidity by depending on the contribution from its participants (liquidity providers), who get rewarded for providing liquidity to the DEX via a process called yield farming - this is DeFi 1.0. DAOs, on the other hand, utilize DeFi 2.0. They own their liquidity and incentivize members to stake in the protocol by providing them with juicy APYs. DeFi 2.0 helps curb the problem of impermanent loss and whale manipulation associated with DeFi 1.0, however, since it is still in its nascent phase, it is difficult to predict if this DeFi model is sustainable long term.