Will Ethereum Still Capturing The Future of DeFi?
By: Cointelegraph Research
Ethereum faces stiff competition from emerging blockchains. Cointelegraph Research couldn’t help thinking — — Which new public chain can compete for the top position of the blockchain?
Ethereum is a decentralized finance giant that has seen significant growth over the past few years, driven by events such as “DeFi Summer” and the rise of non-fungible tokens (NFTs).
However, the popularity of Ethereum may lead to its decline, as other protocols may cannibalize or even completely consume Ethereum’s market position.
Birth of Bitcoin and Ethereum
Bitcoin (BTC) is the mother of the blockchain and, until now, was widely known as the first modern iteration of cryptocurrency. Also starting with Bitcoin, attempts to provide users with more powerful functions began to emerge in an endless stream, but most of them did not have lasting vitality. The real challenger to Bitcoin is Ethereum, whose native ether (ETH) is currently the secondly-largest cryptocurrency by market capitalization.
Cointelegraph Research released a 74-page report that delves into the rise of Ethereum. Start by contrasting the history of Bitcoin with Ethereum and where it stands today. Discovering that Ethereum gave users a way to create smart contracts that Bitcoin couldn’t, helped establish Ethereum as the leading blockchain for DeFi. It’s clear that Bitcoin is here to stay, and Ethereum’s DeFi capabilities have made greater strides — — primarily leveraging Layer 2 solutions to help improve scalability, such as Lightning Network, Portal, and DeFi Chain. Still, Ethereum is far ahead of Bitcoin in the DeFi space, but will it stay ahead?
Ethereum’s current strengths and weaknesses
Ethereum has seen unprecedented adoption in 2021, peaking at 800,000 daily active users in November. And there are real application cases.
By 2021, the total value locked in DeFi applications running on the blockchain exceeds $150 billion. Decentralized applications on Ethereum provide services including lending, derivatives, asset management, stablecoins, trading, and insurance. However, as the Ethereum blockchain has been adopted by more and more people over the past few years, this is both Ethereum’s popularity and nightmare.
The more the network is used, the more congested it becomes, and the higher the transaction costs (also known as gas fees) become. These fees help incentivize the network’s miners to participate in the proof-of-work consensus mechanism it uses. One solution to the congestion and scaling problem is Ethereum’s move to proof-of-stake and other upgrades in its full transition to what’s called Ethereum 2.0. However, with the delayed launch of various stages of the Eth2 upgrade, coupled with the growing popularity of other smart contract blockchains, Ethereum may fall from the altar.
Rookies in the blockchain
There are many blockchain protocols trying to climb to the top of the cryptocurrency charts. In recent years, only a few have shown strong adoption, popularity, and real-world use cases, and they are starting to gain the attention of some non-Ethereum circles in the blockchain space. The report from Cointelegraph Research takes a deep dive into three of these blockchains — — Solana, Polkadot, and Algorand.
Each protocol’s history, unique characteristics, ecosystem, and scaling potential are explained in detail to help determine whether any of these chains have what it takes to be an “Ethereum killer”.
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(The above information is not intended as investment advice, this article only represents personal opinion)
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