As DeFi boasts, Ethereum’s blockchain competitors are catching up

Ethereum is not the only blockchain platform that is seeing a significant increase in value as the decentralized finance space continues to move alongside the thriving cryptocurrency ecosystem. The new year has continued well for the DeFi space, which is evident in the pure value injected into different platforms.

The value set in DeFi’s protocols surpassed $ 27 billion briefly on Jan. 20, according to DappRadar, driven in part by the rise in the value of the vast majority of cryptocurrency tokens. Nevertheless, the space has seen increasing adoption and development in recent months.

Ethereum currently holds the mantle as the most popular smart contract blockchain application for developers and projects to build and launch apps and platforms on. The DeFi space is intrinsically linked to Ethereum in its current state, with the vast majority of most DeFi projects and protocols running on its blockchain. Uniswap, DeFi Pulse’s largest automated market maker, runs on Ethereum, while the rest of the top 10 DeFi projects listed also operate on the blockchain network.

While the growth and success of DeFi platforms has strained the Ethereum network’s ability to process transactions and increased fees, these platforms have resulted in a huge amount of value being locked into the Ethereum ecosystem. With that said, a couple of Ethereum’s market competitors are enjoying huge success in early 2021, suggesting that more participants are pushing the pace in the DeFi space.

Polkadot, Chainlink and Near Protocol are seeing big gains

Polkadot is considered one of the most prominent competitors for Ethereum. It is a new generation blockchain that connects private and public blockchain and networks. The project was started by the Web3 Foundation and hopes to drive interoperability between blockchains to power the decentralized internet of the future.

Essentially, Polkadot implements a multichain protocol using what it calls “barachains,” which allows other blockchains to connect to its network as sidechains. The protocol also has the ability to handle thousands of transactions per second, which has been set against Ethereum in the eyes of some commentators. Polkadot has seen tremendous growth in 2021, with the price of its DOT ticket almost doubling since the start of the new year.

Near Protocol is another smart contract blockchain platform that has been growing in popularity since its launch in April 2020. Its native ticket, NEAR, recently saw a value increase of more than 100%. The project operates on its own proof-of-proportion protocol using sharpening, which Ethereum is still working towards implementing this year.

Cardano, which runs on its own proof-of-stake blockchain, has also seen some growth. Its native ticket, Ada, moved past Bitcoin Cash (BCH) to become the six largest cryptocurrencies by market capitalization. The platform has not yet introduced functional smart contract capability but is expected to do so this year, which will allow DeFi platforms to be built on the protocol.

Chainlink is also featured on this list for its role in the smart contract space and DeFi space. Chainlink is a decentralized oracle network that serves as an intermediary providing data to smart contracts on various blockchairs. According to the project, Chainlink has become an important tool for the DeFi space, as it provides high quality pricing data that prevents interference with various DeFi protocols.

The network’s native token, LINK, moved into the 10 largest cryptocurrencies by market capitalization in January as Chainlink continued to enjoy the indirect effects of DeFi’s success.

The phrase “The Great Repricing” was thrown around in the DeFi space as the native tokens for popular Synthetix and Aave platforms also moved into the top 20 cryptocurrencies by market cap early in the new year. Synthetix Network Token (SNX) and AAVE have both seen significant growth in value and have a combined market cap of over $ 3.5 billion. SNX is the native sign of Synthetix, a derivatives liquidity protocol, while Aave is a liquidity protocol that allows users to deposit and borrow various cryptocurrency assets. Both run on the Ethereum blockchain.

Plenty of room for competitive chains

The DeFi space is clearly a growing sector with enough space for more than one blockchain to power the plethora of applications and offerings developed over the past year. Dan Reecer, Polkadot’s head of growth at Web3 Foundation, acknowledged that Ethereum is the incumbent leader in the DeFi space by total locked value.

However, that does not mean that consumers are not ready to try alternatives, according to Reecer: “The surge in DeFi platforms built on blockchains other than Ethereum is a clear indication that DeFi, crypto, and blockchain are generally become multi-chain. . ”He also stressed that moving to a multi-header DeFi ecosystem will become a necessity in the future, considering how mainstream, mainstream applications and networks currently operate:

“Compared to traditional technology, all of our most used apps, Instagrams and LinkedIns in the world, use a wide variety of main database systems. These databases, along with the rest of the internet pipelines and protocols, all function together seamlessly. In order for DeFi and crypto to thrive in all age groups at scale, we need to reach a multi-chain infrastructure all operating in parallel. Most importantly, the user should not know what basic protocol or blockchain they are even using. “

Bette Chen, co-founder and chief operating officer of the “hub” of Acala’s decentralized finance, told Cointelegraph that the DeFi space is still in its infancy, with an average of just 4,000 to 5,000 addresses active every day.

Nevertheless, Chen believes the emergence of new smart contract blockchains is a positive development for the DeFi space: “We don’t think in the competition frames, we’re in the very early stages of new disruptive technology, we think the a multi-chain future we are evolving into growing the DeFi space together and helping to adopt the mass market. “He went on to add that it will likely be” a hybrid of CeFi and DeFi offerings that help deliver the true end-user values ​​and experiences for end-users. “

Pavel Bains, co-founder and CEO of the decentralized data hosting project Bluzelle, told Cointelegraph that Ethereum’s dominance may not necessarily be threatened, but its switch to Ethereum 2.0 is becoming more and more important, as other protocols are already offers the capabilities it is working to embed:

“The best thing Ethereum can do right now is make progress for Ethereum 2.0 every few months. Even if it’s just baby steps, developers will be less likely to switch platforms knowing that 2.0 is almost here. At the moment I do not think it is under threat. But I hope it is and it is better for the whole ecosystem. ”

As Reecer said, competition is always healthy for industry, and noted that the cryptocurrency space is no exception. He stressed that Ethereum’s percentage share of TVL, users and developers in the broader ecosystem will depend on the project’s ability to scale and keep up with its peers, especially sharded multichain ecosystems: “It probably won’t be reasonable to expect that there will be 10-20 + protocols that win out in the end. This decade should see chain mergers and acquisitions, some teams crashing, and a handful of FAANG-esque winners emerging for the long haul. “