DeFi 2.0 is a movement of projects improving on the problems of DeFi 1.0. DeFi aims to bring finance to the masses but has struggled with scalability, security, centralization, liquidity, and accessibility to information. DeFi 2.0 wants to combat these and make the experience more user-friendly. If successful, DeFi 2.0 can help reduce the risk and complications that discourage crypto users from using it.

We already have a variety of DeFi 2.0 use cases working today. Some platforms allow you to use your LP tokens and yield farm LP tokens as collateral for a loan. This mechanism lets you unlock extra value from them while still earning pool rewards.

You can also take out self-repaying loans where your collateral generates interest for the lender. This interest pays off the loan without the borrower making interest payments. Other use cases include insurance against compromised smart contracts and impermanent loss (IL).

A growing trend in DeFi 2.0 is DAO governance and decentralization. However, governments and regulators may eventually affect how many projects are run. Keep this in mind when investing, as offered services might have to change.

Source - https://academy.binance.com/en/articles/what-is-defi-2-0-and-why-does-it-matter?utm_source=BinanceAcademy&utm_medium=Social&utm_campaign=Article

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