The DeFi ecosystem is booming – and not just on Ethereum
Until a few months ago, Decentralised Finance (DeFi) existed almost exclusively on Ethereum (ETH). However, the ETH network is now so congested that other blockchains are becoming more attractive for DeFi applications. One project in particular can benefit from this.
Decentralised Finance has gone through the roof in the last 12 months. The breakthrough success of decentralised exchanges (DEX), lending protocols, liquditiy mining and other innovations has of Bitcoin Lifestyle led to DeFi protocols on Ethereum currently managing more than $40 billion.
Just a year ago, there was „only“ just under one billion US dollars deposited in DeFi logs. The enormous price increases of many DeFi tokens and the extreme growth of the entire sector in the past year have shown that DeFi can be an extremely lucrative sector of the blockchain economy.
For this reason, almost all major blockchain projects are currently betting on decentralised finance, and since Ethereum is currently unable to meet the enormous demand, other crypto projects in particular have benefited this week.
Avalanche (AVAX) soars 200 per cent
Avalanche is a network for decentralised applications (dApps) and is similar to Polkadot in the way it works. Developers can build blockchains on Avalanche that can be customised. In addition, these blockchains can interact with each other.
Earlier this week, Avalanche announced that it has built an Ethereum bridge that allows DeFi users to transfer assets between Avalanche and Ethereum at low cost.
1/ Avalanche 🤝 Ethereum. The Avalanche-Ethereum Bridge (AEB) is now live, enabling DeFi users to seamlessly move assets like $WBTC, $AAVE, $UNI, and $LINK between the two ecosystems, manage exposure to high fees, and build without limits. https://t.co/nujRzDFfZG
– Avalanche (@avalancheavax) February 8, 2021
Transferable assets include the cryptocurrencies Aave (AAVE), UniSwap (UNI), Chainlink (LINK) and tokenised Bitcoin (WBTC). The project has also announced plans to focus more on decentralised finance in the future. These developments at AVAX have led to the cryptocurrency being one of the top performers on CoinGecko this week. At the time of writing, AVAX’s share price was up 236.1 percent on a weekly basis.
Ethereum competitors benefit from DeFi hype
But AVAX was not the only one to benefit from the Ethereum network’s congestion. Polkadot, Cardano and IOTA, among others, also seem to be benefiting this week as investors look for alternatives to the congested Ethereum network.
But while these Ethereum competitors still have few DeFi applications that can boast high user numbers and trading volumes, the growth of one other platform in particular has been impressive this week.
DeFi on the Binance Smart Chain (BSC) is growing extremely fast.
The Binance Smart Chain is a blockchain protocol from Binance (BNB) that runs in parallel with Binance Chain. The BSC offers smart contract functionality and is compatible with the Ethereum Virtual Machine (EVM). This makes it extremely attractive for DeFi applications that cannot scale on Ethereum and are looking for alternatives.
Although transactions can be carried out cheaply and quickly, the BSC is much more centralised Ethereum. Nevertheless, the DeFi sector on the Binance Smart Chain is the second largest in the entire crypto space.
Within the last 30 days, the capital managed by BSC DeFi protocols increased from under US$0.5 billion to US$4.53 billion at press time. In addition, two BSC projects are already in the top 100 on CoinGecko: the decentralised exchange PancakeSwap (CAKE) and the DeFi project Alpha Finance (ALPHA).