The Scaling Report: Does the Future of Decentralized Finance Still Belong to Ethereum?

March 2022 - Cointelegraph Research, Crypto Research Report

Public Access
Keywords :
Ethereum, Bitcoin, Algorand, Polkadot, Solana, Radix, DeFi

Bitcoin is the reason all other modern cryptocurrencies exist. Bitcoin utilizes decades of research in cryptography, computer technology, and information sciences. Bitcoin’s evolutionary step was in 2009, and since then new generations of cryptocurrencies have spawned, looking to improve upon Bitcoin. Out of many that came after Bitcoin in the early days of crypto, one has stood the test of time and has risen to the number two cryptocurrency by market capitalization. That would be none other than Ethereum.

Ethereum went farther with its capabilities than Bitcoin, and the code was written in such a way that it made it easier to upgrade and change over time. Ethereum (ETH) allowed for the utilization of “smart contracts” or self-executing instructions based on computer code. This allowed Ethereum to create agreements between parties that did not have to form a bond of trust before interacting, because the code is impartial to either party. This allowed decentralized finance (DeFi) to explode.

DeFi allows individuals to trade digital assets quickly, efficiently, and in a way that is settled because of the actions of programmed code, not because of a centralized entity. This allows for borrowing, lending, trading, collateralization, and payments, none of which requires permission from an outside authority. This eventually culminated in the summer of 2020 and was called “DeFi Summer.” There was a host of decentralized finance (DeFi) cryptocurrency projects which grew during that period, but none compared to the likes of Ethereum. Ethereum spawned into a vast ecosystem of asset management tools, decentralized exchanges (DEXs), asset tokenization, decentralized autonomous organizations (DAOs), stablecoins, insurance, and the list goes on.

Just like the evolution of Ethereum from Bitcoin, other chains have evolved as well. Ethereum, in its current state, has its drawbacks and opportunities for improvement. This is where other blockchains have stepped onto the stage. The likes of Solana, Polkadot, Algorand, and many others have begun to eat at the space Ethereum continues to carve out. Can Ethereum remain the “King of DeFi” in the coming years?

That is exactly the question this report seeks to answer. This report will explain why Bitcoin, while the mother of all cryptocurrencies, is not capable of DeFi at the levels of Ethereum. In addition, we will dive into some of the largest competitors in this space, such as Solana, Polkadot, and Algorand. By exploring each of these alternative Defi ecosystems in-depth, we can analyze each one’s strengths,weaknesses, and how each one poses a potential threat to the throne of DeFi in the short, medium, and long term.

We hope you will enjoy the reading Cointelegraph and Crypto Research Report’s analysis of how the blockchain technology is improving scalability and building the infrastructure required for the largest capital market in the world.