Hey DEFI TIMES community,
We are about to enter a scalability war! The sudden rise of the Binance Chain was a clear indicator, exposing the need for scalable DeFi services!
A growing number of alternative base chains will stress test Ethereum, and the winner is not clear yet. Both sides have a lot of things going for them!
Ethereum has the biggest developer ecosystem. The Lindy effect suggests that Ethereum has the biggest chance to survive in the long run; However, the success of Ethereum strongly depends on how fast it can finalize sharding.
No one knows how long the development will take. In the meantime, several other base chains will release their final products. Cardano launches very soon, Polkadot’s parachains are expected to go live this summer, and Cosmos has already revealed their final version to the public!
Ethereum’s only attempt to scale - in the short term - are rollups!
Today’s article is all about the scalability war: Ethereum vs. Other Base Chains.
Or: Rollups vs. Faster Chains!
Which one is the most likely to win? Let’s examine both sides!
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Rollups are the most prominent scaling solution on Ethereum right now. And they are already here.
The largest DeFi protocol using rollups is Loopring. The protocol is entirely built upon zk-rollups, a fast and secure second-layer solution closely connected to the Ethereum blockchain.
Rollups do the necessary computation outside the blockchain but store the final result on the blockchain itself. Rollups need much less storage space than regular smart contracts. So, even though the computation is off-chain, the Ethereum blockchain will always secure each new state.
Rollups need less gas to operate. They also enable a lot more transactions per second - up to thousands of tx/s.
However, you need to lock your funds to transfer them on the second-layer solution, which requires a complex (and expensive!) transaction on the base chain.
Once your funds are on the rollup, you can move, swap, or do anything you like at light speed.
You might be asking yourself why we even need other base chains when we have rollups. Well, rollups do no accelerate the scalability of the Ethereum blockchain itself. Even though I expect the usage of rollups to explode in 2021, they certainly won’t make Ethereum cheaper.
Whales will always prefer to use Uniswap instead of the Rollup version of it - Why? Because the base chain is more secure.
That’s why other blockchains will see an incredible number of new users in 2021. Let’s take a look at the most promising ones.
Other base Chains
Polkadot is the ultimate bet against chain-maximalism. Just as Ethereum, it aims to be a sharded blockchain. Launching in summer 2021, Polkadot’s final version will ship way earlier than Ethereum 2.0.
The Polkadot network connects 100 parachains that all possess different characteristics. Each parachain can be modified in a unique way.
The most important feature of the Polkadot network is its interoperability, allowing anyway to perform cross-chain action, such as token transfers between chains. From the very beginning, the network will allow thousands of transactions per second while also keeping the network decentralized and secure.
While you could conclude that Polkadot is a competitor of Ethereum, it certainly doesn’t aim to compete. Its ultimate goal is to unite the crypto and DeFi space by focusing on interoperability.
DeFi Chain is the most promising blockchain bringing DeFi to the Bitcoin ecosystem. DeFi Chain leverages the security of the Bitcoin blockchain while also allowing for fast and secure transactions.
In fact, DeFi Chain’s blockchain is intrinsically more secure than Ethereum because it only supports non-Turing-complete smart contracts. Ethereum’s Turing-completeness is the reason why we see protocol hacks on a weekly (or daily!) basis. With DeFi Chain, hacking risks are vanishing.
It seems like you don’t need Turing-complete smart contracts to provide DeFi services. How many people leave their tokens on the sidelines because they don’t want to risk losing them? Fewer people using DeFi protocols leads to less innovation.
We could see a whole new - and more secure - DeFi ecosystem evolving on DeFi Chain in 2021.
DeFinitely keep an eye on it!
Cosmos, just like Polkadot, is a network of several blockchains that are connected. They are interoperable so that their assets can be seamlessly transferred from one blockchain to another.
That means that Cosmos aims to connect the whole crypto and DeFi space. For example, you could connect Ethereum to Cosmos, Cosmos to Polkadot, and so on.
Cosmos also brings scalability to its applications. Even though Cosmos has already launched its final product, the project has been underappreciated ever since its launch.
With a market cap of close to $4 billion, Cosmos is far away from comparable projects like Polkadot ($30 billion); However, more and more teams are building on Cosmos, and they have good reason to do so.
Cosmos is one of the most promising blockchains in the short and long run! Cosmos’ vision is not to eliminate competitors but connect them. Cosmos doesn’t want to compete; it’s here to bridge the gap between blockchains.
Who will be the winner?
Let’s get back to our initial question. Rollups vs. other base chains: Who will win?
Will DeFi Chain be the only winner? What about Ethereum with rollups and sharding? Or Cosmos? These are the questions most crypto beginners ask themselves.
Rollups vs. Polkadot vs. DeFi Chain vs. Cosmos
It’s easy to think the world is black or white. Either Ethereum will win, and all other base chains will die, or the other way around. But that’s not how the world works.
Most games are not zero-sum. In fact, most games are positive-sum. If one entity wins, it doesn’t mean that the other has to lose. That’s exactly how blockchains work.
Ethereum will scale in the long run. Ethereum 2.0 will ship someday. We will rely on rollups to make the user experience smoother and more predictable in the short run.
In the meantime, other ecosystems will develop their own network effects. DeFi Chain will bring DeFi to Bitcoin, for example. Cosmos and Polkadot will connect the crypto space and bring their own value to this ecosystem.
In my opinion, we will be left with several winning chains, which are all connected. There will be no single winner. The internet of blockchains will emerge.
The best thing you can do is be open-minded and embrace changes, and good things will happen!
All information presented above is meant for informational purposes only and should not be treated as financial, legal, or tax advice. This article's content solely reflects the opinion of the writer, who is not a financial advisor.
Do your own research before you purchase cryptocurrencies. Any cryptocurrency can go down in value. Holding cryptocurrencies is risky.