How Solana, Fantom, and Polygon are Powering DeFi Growth
Decentralized finance began growing rapidly in the summer of 2020. Two years after the 2018 introduction of DEXs, or decentralized exchanges, made it possible for onchain token swaps, plethora of other decentralized applications, or dApps, and platforms began running on Ethereum.
A healthy DeFi ecosystem reached a maturation point that began hoovering value last summer, and DeFi saw its total value locked, or TVL, explode. More dApps appeared on Ethereum and more users began using them for DeFi. Unfortunately, this congestion led to side-effects like insanely high gas fees for transactions, longer wait times for transaction confirmations, and many users seeing their transactions fail to complete when fees spiked.
In short, Ethereum became expensive and difficult to use. The exponential rise in value of ETH in anticipation of Ethereum 2.0, the long-awaited scaling solution, did not help this matter. With over $50 billion of TVL now, DeFi has reached a point where 15 transactions a second are simply not enough. Markets refuse to pause and wait for the ETH2 upgrade. A lot of DeFi’s overflow has ended up on chains like Solana, Fantom, and Polygon (formerly Matic).
Solana Sees Innovative Projects Powered by Scale and Speed
Solana is a blockchain that went live in March 2020, and it has shown a lot of promise for future DeFi growth. The network runs on proof of history instead of proof of work, which means it’s environmentally friendly as well as much more scalable than a system that depends on miners.
Solana has provided a fast and cost-effective space where developers have built a healthy ecosystem of new products. By allowing developers to explore more possibilities without paying exorbitant gas fees for transactions, some of these applications are starting to show developments that were once thought to be pipe dreams due to the nature of DeFi and dApps.
DEXs are at the heart of DeFi, but they lack a lot of tools that CEXs, or centralized exchanges, can offer. In the past, the hurdles to providing more complex features in a decentralized space revolved around having to execute many transactions at a high cost in order to develop, test, and run an idea, so very few projects began toying around with ways to make DEXs more trader-friendly.
One project on Solana that has tackled this issue is Cryptocurrencies.ai. This robust orderbook DEX will allow users to set entry points, stop losses, and exits for profit as well as track performance, just like a CEX and much unlike every other DEX out there. These are all features that the DeFi community have sought after for a long time, and Cryptocurrencies.ai promises more in store for users as their IDO for $CCAI will launch on MANTRA DAO’s Zendit launchpad platform in early June.
Fantom Quickly Becoming a New Home for DeFi
Fantom is another blockchain working on a consensus model other than proof of work, called proof of stake, and the low transaction fees and high speeds means that the network has attracted a lot of new users since its debut.
Fantom reported that they are seeing a 70% increase in new users month over month, and a lot of money in DeFi is trending toward this network. Over 2,200 smart contracts have been deployed on Fantom, and dApp developers used to building on Ethereum can find most of the same tools available on this chain as well.
In April, Fantom acquired $15M in funding, which is a great sign for the future of the blockchain. Looking towards the future, more and more use cases for blockchains are being thought up every day, and Fantom might be one home for a plethora of services relying on decentralized ledger technology.
Fantom has attracted more use cases than DeFi already. It’s reported that the government of Tajikistan has adopted Fantom’s technology to power their e-government’s infrastructure.
Polygon Is the Cheapest Way to Ethereum
Polygon is an Ethereum layer 2 scaling solution that allows a lot of what happens in DeFi to occur off of Ethereum’s main network. Polygon also works on proof of stake, which Ethereum is working towards, but users can benefit from low transaction fees and fast speeds by moving to Polygon while Ethereum updates.
Polygon essentially bundles transactions on its own network and then records that data on Ethereum’s network. This is a great solution for Ethereum diehards who want to stick with their chain of choice.
Some big names in DeFi dApps have already moved over a lot of liquidity onto Polygon. Aave, Curve, and now 1inch have all moved onto Polygon and attracted billions in TVL over a short period of time.
It will be interesting to see how the future of DeFi on Polygon plays out when Ethereum 2.0 is finally released, and many wonder how much of DeFi will stay on a layer 2 solution if the layer 1 becomes affordable again.