The DeFi boom of 2020, which really took off in the third quarter, has driven demand for Ethereum, cementing it as the foundation for crypto finance, according to recent research.
This has come despite a new raft of ‘Ethereum killers’ which don’t appear to have lived up to the task. DeFi is back in the spotlight again as total value locked hits another all-time high of $12.3 billion. In part, this has been driven by an uptick in Ethereum prices which topped $415 over the past day or so.
Researchers and analysts have concluded that despite the emergence of these self-proclaimed killers, Ethereum itself has been solidified as the epicenter of cryptocurrency-based finance.
According to Messari researcher, Wilson Withiam, the total market capitalization of smart contract markets increased by 57% in the third quarter.
Q3 solidified Ethereum as the epicenter of crypto finance.
Its potential to become the dominant settlement layer for crypto is clear, if not a foregone conclusion.
But this activity came at a cost (high fees) that might give other blockchains a glimmer of hope.
— Wilson Withiam (@WilsonWithiam) October 22, 2020
Is Ethereum the Beating Heart of DeFi?
The Messari research also noted that the launch of multi-billion dollar valued Ethereum rival Polkadot barely had an impact on Ethereum’s performance.
The demand for Ethereum resulted in a surge in gas prices which itself spawned a slew of rival platforms and upgrades including Binance’s Smart Chain, the Tron Network, NEO’s Flamingo Finance, Cardano’s Shelly, Solana’s Institutional Blockchain, EOS, and of course the over-hyped Polkadot project.
None of have so far managed to usurp Ethereum as the standard smart contract platform for decentralized finance. Noting this, Withiam added:
“This would be the time for alternative platforms to flex their low-fees and ‘superior’ scaling tech. However, low-fees aren’t defensible. L1s must have a vibrant community and original apps to keep their market share.”
The research revealed that token sales by Layer 1 projects also surged in Q3 with five platforms raising a combined $138 million over the period. He added that Ethereum has been successful because it made early investors wealthy and thrived due to the large pool of early contributors.
He noted that newer networks have been more favorable to insiders compared to older networks and early network capital distribution enhances long-term community engagement. This is mostly due to Ethereum’s large and active developer community.
The researcher concluded that the next year could come to define the smart contract market as almost every high-profile Ethereum rival will be live by then.
“And these networks are barreling towards a head-to-head battle with Ethereum’s bevy Layer-2 scaling solutions.”
The launch of Phase 0 of ETH 2.0 is expected in the coming weeks, but it will not include scaling just yet. There are, as observed above, already a wide array of Layer 2 solutions already running on Ethereum that are going to make ‘killing it’ a gargantuan task for any rival platform.
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