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As DeFi matures, it will gain greater traction in 2021. However, the slow progress of Ethereum 2.0 has seriously affected current DeFi developers. DeFi experienced explosive growth at the beginning of this year, but because DeFi projects are almost entirely dependent on Ethereum, this has led to more network congestion and soaring transaction fees on Ethereum. Most DeFi projects are based on the Ethereum blockchain; Image source: Bitpush
The slowing block speed, generally poor user experience, and rising fees have led to a sharp increase in demand for expansion, but the Ethereum 2.0 expansion sharding upgrade has been delayed. In this situation, DeFi developers have had to turn their attention elsewhere and find other solutions - they gradually began to think about building services on other blockchain platforms.
And because of the establishment of interoperable bridges, building services on other blockchain platforms does not mean that they will be completely isolated from the Ethereum ecosystem. 2020 is the year of advancement of blockchain interoperability technology, and many platforms like RSK, Solana and NEAR Protocol have built interoperable bridges between their own networks and Ethereum.
Therefore, there is great potential for realizing an Ethereum-style thriving DeFi ecosystem on other blockchain platforms.
RSK
At the beginning of 2020, RSK announced the launch of an interoperable bridge between its own network (a sidechain of Bitcoin) and Ethereum. The establishment of the bridge allows assets to interact directly between Bitcoin and Ethereum.
Money on Chain is the first DeFi application developed on the RSK platform. Since the bridge was established, Money on Chain has expanded its token range to include Bitcoin leveraged tokens (BTCx) and stablecoins backed by RSK’s RIF token.
RSK's decentralized exchange RSK Swap is also due to the establishment of the above-mentioned bridge, allowing users to exchange Ethereum-based DAI in RSK Swap.
Recently, Sovryn, a decentralized platform that provides trading and lending services for Bitcoin, was also launched on RSK. Users can borrow assets and trade on margin with 5x leverage. Sovryn integrates the Money on Chain product suite to take advantage of Bitcoin's unparalleled liquidity. Sovryn currently has a total of $2.1 million in venture funds, including investments from Greenfield One and Collider Ventures.
Solana, Near Protocol, and Matic Network <br />Solana, a more scalable blockchain platform that competes with Ethereum, was launched in a beta version on the mainnet in March 2020. In early 2021, FTX Exchange founder Sam Samman-Fried chose to launch the decentralized derivatives exchange Serum on Solana. Solana is known as "faster, cheaper, and more powerful DeFi," and its own token can provide users with fee discounts as low as 60%, while their transaction fees are as low as $0.00001.
Another scalable Ethereum alternative is the NEAR protocol, which launched on mainnet in October 2020. Almost at the same time, the established Ethereum-based DeFi protocol Balancer announced that it would bring its programmable liquidity to the NEAR platform. Balancer is one of the most popular applications in Ethereum DeFi, currently ranked in the top ten with more than $775 million locked. A few weeks later, the decentralized aggregation platform 1inch announced that it would migrate to NEAR. 1inch confirmed that it will develop another NEAR-based version of its Mooniswap DEX protocol, allowing it to run in parallel with the Ethereum-based version. 1inch just received a $12 million Series A funding led by Pantera Capital in early December.
As a high-performance second-layer solution based on Ethereum, the Matic network was also launched on the mainnet in 2020. It uses an improved version of Plasma to achieve a transaction speed of 65,000 per second. In early January this year, Aave ecosystem NFT game Aavegotchi confirmed in its Twitter and blog that it had decided to move from Ethereum to the Matic network, and Ethereum's high transaction fees were the main reason for Aavegotchi's transfer.
Polkadot <br />The launch of Polkadot in May last year gave DeFi developers more options. Currently, the Polkadot website lists 25 DeFi applications developed on its network, and many projects are worthy of attention.
One of them is Mantra Dao, a community-managed platform that provides users with staking, lending services, and opportunities to participate in key decision-making. The project has already started on-chain voting and proposals.
Another project worth mentioning is Equilibrium, which was originally an iterative version of the MakerDAO stablecoin system on EOS. Equilibrium has decided to migrate to Polkadot and will expand its platform to provide versatile DeFi products including lending, trading, and staking, allowing users to interact with Ethereum-based DeFi applications.
All in all, the demand for DeFi shows no signs of slowing down in 2021, with total locked value climbing by $9 billion in January alone and reaching $24 billion. Developers are also happy to continue to deliver goods. But based on the above, it seems that we can already expect that the DeFi ecosystem will begin to flourish beyond the boundaries of Ethereum. (Bitpush)
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