DeFi story in the upcoming days: Dependence on Ethereum, the role of Tether?
Ethereum is the Blockchain with the most significant number of developers and the most active, according to statistics from Electric Capital Developer. In particular, DeFi smart contracts, infrastructure, and ecosystems continue to attract full-time developers. So, the question here is, whether decentralized finance increases, will it still depend on the time Ethereum 2.0 launches?
The future of DeFi depends on Ethereum, but for how long?
The most talented developers in the Blockchain industry are turning to Ethereum to build an alternative financial world. The proof is that nearly all leading DeFi applications are made with smart contracts on the Ethereum Blockchain.
According to a data reporting website about the family of DeFi applications, DeFi Pulse, nine of the top ten DeFi products are built on Ethereum. The other is Bitcoin’s Lightning Network, a layer two solution to allow for speedy micro-payments.
At press time, a total of $ 701.7 million is currently locked up on DeFi applications. This is more than double the amount since January 2019 – the year of DeFi.
— DeFi Pulse ? (@defipulse) January 4, 2020
The term “locked up” refers to the amount of money that has left the fiat world and is earning interest, loans or transactions in crypto open finance. A specific example is MakerDAO, DeFi’s most successful credit platform, accounting for more than half of the amount locked up in the ecosystem.
Many still believe that the DeFi movement is the best chance of cryptocurrencies. Unfortunately, this opportunity may be at stake. At least for Ethereum.
Open up a scalable Ethereum
Compared to traditional financial markets, the $ 700 million locked up in cryptocurrency applications is a speck of dust. For this market to grow, people need to introduce these products to a broader audience. However, solving the marketing problem is very simple. And technical issues are painful stories.
No matter how large the number of users interested in the DeFi application is, the Blockchain that is hosting these applications will eventually stop. Currently, this Blockchain is Ethereum. And like most Blockchains, it suffers from scalability issues. Therefore, the promise of DeFi, a future that allows the open world to participate in complex financial products, is now centered around Ethereum with network expansion.
Of course, Ethereum is also very concerned about this issue. That opens up a three-stage process. In particular, phase 0 – Beacon Chain – is expected to launch in the first quarter of this year. Beacon Chain will work on the Proof-of-Stake (PoS) algorithm, in parallel with Ethereum’s current Proof-of-Work (PoW) model, until both merge into one system. This PoS model will focus heavily on security, scalability.
However, if things do not go well, there is a high possibility that developers will turn to Ethereum rivals. Because many current products can work under the assumption that Blockchain has a smart contract ability. Including projects like Tron, Waves, EOS and Stellar, etc.
While these platforms lack network activity and not as much popularity as Ethereum, they have much higher throughput.
Jim McDonald, a managing director of Weald Technology and Ethereum advocate, said:
“This is undoubtedly the most critical task for Ethereum contributors to focus on in 2020. If 2020 ends without a stable release of phase 0 of Ethereum 2, it will be hard to look at Ethereum 2 as anything other than a failure. DeFi is heavy on the network effect, and as such, if Ethereum 2 launches late, with DeFi already moving to another network, that could be problematic for Ethereum 2’s continued use. ”
In this case, it’s not that Ethereum can do anything for DeFi, but DeFi, and hopefully financially, what can be done for Ethereum.
Tether can do well as collateral for a lot of DeFi projects
You must be wondering why Tether is here. Let’s explore the relationship between Tether and DeFi with AZCoin News! It all started with Paolo Ardoino, CTO of Bitfinex, and Tether. Ardoino mentioned Tether’s expansion from Omni, built on the Bitcoin Blockchain, to other popular blockchains such as Ethereum, Tron, EOS, Liquid and will also be launched on Algorand.
Paolo Ardoino, CTO of Bitfinex
Referring to the USDT issuance standard on a Blockchain, the CTO said the research team would decide and consider the uncertainties related to Blockchain platforms such as Ethereum shifting from proof-of-work to proof-of-stake. Also, they have security and business reviews and check to see if there is any significant interest from the community to launch Tether on its platform.
Taking the example of Etheruem, Ardoino said that Tether was launched on the Ethereum Blockchain around December 2017 and received a lot of acceptance at the time. However, the decision to expand to Ethereum was made only after considering Bitcoin’s high transaction fees in 2017, and users spent a lot of money to send USDT Omni.
“We got a lot of questions and EOS, Ethereum, and Tron, they all support smart contracting. And now, since DeFi is a big topic right. I think Tether can do well as collateral for a lot of DeFi projects being on multiple Blockchains create this situation, where you are de facto the standard stablecoin across all chains.”
Expanding Tether’s presence on multiple Blockchains is a bold move, as it requires a lot of technical evaluation. The team must ensure that security holes are not present during a network upgrade. Moreover, Tether can do very well as collateral for many DeFi projects.
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