Ethereum has surged to a new all-time high, and many seem to attribute its success to the ever-growing DeFi ecosystem. But there are experts who disagree.
Without Eth 2.0. there will be a decrease in all chances of Ethereum’s dominance in 2021
On January 19, the ETH cryptocurrency finally reached a new price milestone of $ 1,432. Currently, according to CoinMarketRate, the asset has returned to a price of around $ 1,254, but many industry experts believe that ETH will grow, helped by the interest and innovation associated with the decentralized finance (DeFi) sector.
Thanks to DeFi, financial transactions can be performed automatically and securely using smart contracts implemented in the blockchain. Since most DeFi protocols currently use the Ethereum network and experienced a significant surge in 2020, reaching $ 24.31 billion in total blocked value (TVL), experts have made predictions to determine if DeFi will remain at its peak, or if it’s just a bubble.
Ripple DeFi CEO Michael Zohowski said that DeFi will undoubtedly gain momentum and rise to new heights of innovation as the industry evolves. However, he believes that not all protocols will remain unchanged. Zochowski said:
“I expect many of the early DeFi projects to fail, merge, or be acquired in the coming months. But the really useful ones, simpler applications that replicate financial services like packaged assets or decentralized exchanges, should continue to gain traction among users”.
Currently, most DeFi projects run on the Ethereum blockchain, but this may change over time. According to Zohowski, if Ethereum continues to slow down or delay the timing of its updates, which are designed to increase scalability, interoperability in the chain and provide lower transaction fees (gas), this could send DeFi developers to other platforms. He said:
“I believe that at least 25% of the value deployed in DeFi by the end of 2021 will come from networks other than Ethereum.”
Ethereum is currently working on deploying ETH 2.0, a core network that will make the transition from Proof-of-Work to Proof-of-Stake a reality for the community. It is in the first stage and is working on improving the signal circuit. When Ethereum 2.0 is fully completed, it is expected that a decentralized, secure and scalable blockchain solution will be released, with network capture by stacking, instead of mining, to verify transactions.
However, developers were already looking for other platforms to host their projects. If the second phase of Eth 2.0. is delayed, it could potentially lead to many DeFi projects exiting the platform, as the growth of gwei Ethereum continues to be a problem that needs to be addressed.
Can Ethereum withstand the DeFi craze?
In addition, with the rising value pouring into DeFi, industry experts have repeatedly questioned whether the Ethereum blockchain can sustain the volume of transactions in the long run. Bitfinex CTO Paolo Ardoino, however, is confident that the update will be scalable enough for DeFi to continue to exist in the ecosystem. He said:
“Ethereum has reached a new historical high today. Its price is rising in the resurgent space of decentralized finance. While the rapid growth of projects in Defi has caused growing problems for the Ether, multi-level solutions are currently being developed to help the network scale.”
Earlier, Ethereum co-founder Vitalik Buterin also assured that scalability and gas charges will be improved on ETH 2.0 with accumulation. However, growing DeFi projects are already threatening to shut down, or creating alternatives to host protocols.