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In the cryptocurrency community, sub-industries often play off against each other. In 2020, we experienced what most remember as the summer of DeFi, a period of a few months when everything related to decentralized finance erupted and grew to insane valuations.
This trend has been going on for some time and has been spread within bloggers who buy instagram followers, but how did the tokens that shaped the development of the DeFi industry last year collide with Ethereum, the network where it all began?
Ethereum will reach 100,000 transactions per second in 5 steps
Let’s break down how:
1 The Merge – transitioning ethereum to Proof-of-Stake (PoS) protocol.
– Energy consumption will decrease by 99%
– ETH will become deflationary.
The Merge is scheduled for September 19.
2 The Surge – implementation of sharding technology on Ethereum.
Sharding breaks down the entire block chain network into smaller partitions known as “shards.” This will greatly increase the scalability of the network.
Near Protocol works on this principle with a maximum throughput of up to 100k transactions per second.
3 The Verge is the introduction of “Verkle trees”, a powerful update to the existing hash function.
These technical updates will allow users to become network validators without having to store large amounts of data on their computers. Ultimately, this helps ETH become more scalable.
4 The Purge – reducing the amount of space validators need to have on their hard drives.
Trying to simplify the Ethereum protocol over time and not require nodes to store history Optimizes storage, which in turn reduces network congestion.
5 The Splurge is a series of small improvements to the network after the previous 4 updates.
“The difference between Bitcoin and Ethereum is that bitcoiners think bitcoin is 80% complete, while ethereums think Ethereum is 40% complete.
ETH has twice as much technical potential as BTC.
Trends for DeFi tokens
DeFi’s main tokens lost to ether and lost 69% against ETH. The main reasons:
– High asset inflation.
– Lack of protocols that distribute profits to token holders
– 4-6% APR on ETH
- Launching your own Stablecoin.
Near, Tron, and Waves already have their own algo stables. AAVE recently announced the launch of an ultra-secured GHO steblycoin, along the lines of DAI. There are also rumors of a stabilecoin from Curve Finance.
Let’s break down the benefits using GHO (AAVE) as an example:
– A new source of revenue
– Additional value for the AAVE token.
– Competition for DAI-type ultra-secured stabbling market
- Distribution of the veNomics model
The veNomics model locks in user tokens (usually a project token such as CRV) and provides voting rights and revenue from commissions.
– Synthetix will use veSNX to control inflation.
– Pancakeswap will add vCAKE to vote on the distribution of rewards.
This model allows a large number of tokens to be blocked and relieves holders of the desire to sell on panic.
- Progressive decentralization.
As projects build financial sustainability, community and compliance, they seek to reduce their only bottleneck: centralization.
– DYDX is moving to Cosmos to have its own block chain.
– GRT plans to get rid of all centralized services by early 2023.
- Protocol Updates.
Major protocol updates coming up, maybe something will shoot up:
– Synthetix V3.
– Compound III
– dYdX V4
– Yearn V3
– GMX X4
- New value for tokens
– Chainlink has announced the LINK stacking.
– Pancakeswap has limited CAKE offerings and added various perks for long-term holders.
– Maker will launch liquidity mining for MKR and even for DAI holders.
Conclusions
- The year 2021 saw the largest price increase in the cryptocurrency sector. Bitcoin peaked at about $69,000, maintaining the simulation thesis while Ethereum peaked at $4,878. Since then, the market has recovered, but apparently there is more to some than others.
- At the time of this writing, ETH is just over $3,200, while DeFi 1.0 coins have lost much of their established value.
- The above largely reflects what is known as The DeFi 1.0 era, when protocols such as the Joint Exchange and Sushi shaped the face Of the DeFi area as we know it today, despite significant obstacles.
- This shows that the cryptocurrency industry is developing at an extremely rapid pace, and it is often critical to constantly provide new products (sometimes even resorting to buy real Instagram followers by some firms to promote them) as demand is constantly evolving.
- Of course, another possible explanation could be completely detached from fundamentals but related to the narrative of the day, which may or may not necessarily be what the industry is best off with.
