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Friday, 24 June 2022
By Rohas Nagpal
Good morning

What's the future of DeFi Blockchains?

DeFi (Decentralized Finance) is the most important function of public blockchains. The ongoing crypto crash has hit the DeFi sector very badly. Most of the DeFi protocols have taken a massive beating - Total Value Locked (TVL) has plummeted from $237 billion to $73 billion in 2022.

Terra was one of the top DeFi blockchains, up until its spectacular crash. So, what's the future of DeFi blockchains?

     

1. DeFi Blockchains

There are over 100 DeFi Blockchains, and the top 5 by TVL are:

1. Ethereum:

The Ethereum Mainnet is the world’s first DeFi blockchain and remains the largest by TVL since its birth.

The major protocols on the Ethereum Mainnet are MakerDAO, Uniswap, Lido, AAVE, and Curve.

Slow speeds and very expensive gas fees are the biggest problems facing Ethereum Mainnet. Scaling solutions like Polygon, Arbitrum, Loopring, Immutable X, and xDai Chain are solving these problems to some extent.

ETH is the native token of Ethereum Mainnet and its high price makes transactions expensive.

It is expected that over the next few months, the Ethereum Mainnet will "merge" with the Beacon Chain, which is the base on which the Ethereum ecosystem hopes to become secure, sustainable, and scalable. As of now, the Beacon Chain runs in parallel to the Mainnet and uses proof-of-stake.

2. BNB Smart Chain

BNB Smart Chain comprises the earlier Binance Chain (which was optimized for fast decentralized trading) and Binance Smart Chain.

The major protocols on BNB Smart Chain are PancakeSwap, Venus, Alpaca Finance, BiSwap and Coinwind.

On the plus side, transactions on BNB Smart Chain are fast and cheap.

On the negative side, it is not very decentralized. It has 21 validators who are selected every 24 hours and must stake a minimum of 10,000 BNB.

Another negative issue is that over 50% of BNB Smart Chain’s TVL comes from the PancakeSwap decentralized exchange. Negative developments in PancakeSwap can have serious repercussions on BNB Smart Chain.

BNB Smart Chain’s native token is BNB. Validators stake BNB and can receive transaction fees. Unlike Bitcoin, there is no block reward by way of newly minted BNB because BNB is not inflationary. Instead, the supply of BNB decreases over time, because the Binance team regularly "burns" coins.

3. Tron:

Tron was created to enable digital content creators to better monetize their content without intermediaries like Google, Meta, and Apple.

The major protocols on Tron are JustLend, SUN.io, JustStables, SocialSwap, and UniFi.

On the plus side, transactions on Tron are fast (2000 tps) and cheap.

On the negative side, almost 40% of Tron’s TVL comes from the JustLend lending protocol. Negative developments in JustLend can have serious repercussions on Tron.

4. Avalanche:

What I like the most about Avalanche is that it lets anyone launch customized private and public blockchains. With a transactional throughput of more than 4500 tps, Avalanche performs phenomenally faster than Bitcoin (7 tps), Ethereum (14 tps), and Polkadot (1500 tps).

In terms of transactional finality, Avalanche (less than 2 seconds) leads as compared to Bitcoin (60 mins), Ethereum (6 min), and Polkadot (60 seconds).

The major protocols on Avalanche are AAVE, Wonderland, Trader Joe, Benqi, and Curve.

On the negative side, almost 42% of Avalanche's TVL comes from the AAVE lending protocol. Negative developments in AAVE can have serious repercussions on Avalanche.

AVAX is Avalanche's native token and it can be used for staking, paying fees, and providing a unit of account between the multiple sub-networks created on Avalanche.

5. Solana:

On the plus side, Solana is one of the world's cheapest and fastest public blockchains. It has a block time of 400 milliseconds and transaction fees of less than $0.01. SOL is the native token of Solana.

On the negative side, Solana is plagued by congestions, outages, exploits, and serious allegations of being highly centralized.

The major protocols on Solana are Serum, Marinade Finance, Solend, Raydium, and Atrix.

2. How the top DeFi cryptos are faring

Blockchain Native Token ATH (US$) Current Price (US$) TVL ($ billion) Mcap / TVL
Ethereum ETH 4,892 1,097 46 2.8
BNB Smart Chain BNB 691 222 5.9 6.1
Tron TRX 0.3 0.06 4 1.5
Avalanche AVAX 146 17 2.6 1.8
Solana SOL 260 36 2.6 4.7

Note:

ATH = All Time High price

TVL = Total Value Locked

Market cap = Current Price x Circulating Supply

Figures may have been rounded off for convenience

Note: The data is from DefiLlama, CoinMarketCap, Messari, and Future Money Wallet and may be rounded off.

     

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Written by Rohas Nagpal. Edited by James Mathew. Produced by Samiksha Khanna. Send in your feedback to newsletters@livemint.com.

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