One of the hottest crypto trends over recent months has been Ethereum DeFi. Also known as decentralized finance, DeFi is the industry of building decentralized applications for financial services.
As can be seen below, coins related to this sector have gone parabolic, outpacing Ethereum. Take the example of Aave’s LEND token, which is up by over 700% since the middle of April.
Chart of Ethereum vs. top DeFi altcoins (Compound, Chainlink, Ren, Synthetix Network Token, and Aave's LEND) over the past three-four months. Chart from TradingView.com
According to a prominent executive in the space, DeFi is likely to be boosted even further once Ethereum 2.0 goes live.
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How Ethereum 2.0 Could Boost DeFi
Ethereum 2.0 is slated to implement what is known as “staking.” In layman’s terms, staking allows one to allocate their holdings of a cryptocurrency to the governance of a network, then earn rewards as a result.
Some in the DeFi space have postulated that the upgrade will decimate DeFi. After all, the primary use case of many DeFi applications at the moment is to provide yield on top of one’s cryptocurrency.
According to Marc Zeller, CEO of a top DeFi protocol Aave, this may not be the case.
Writing to Aave’s community on Telegram, Zeller wrote on July 11th that “if anything, ETH2 phase 0 will multiply the supply rate of ETH.” The term “supply rate” is used to describe how much of a cryptocurrency is deposited into a DeFi protocol.
My hot take on ETH2 and the #Defi ecosystem.
Not a threat, an opportunity. pic.twitter.com/5WkAbWh918
— Marc ‘aUSDC is Money’ Zeller (@lemiscate) July 11, 2020
As to why he thinks this is the case, Zeller said that many will be hesitant to deposit their money into Ethereum 2.0 staking. But, there will still be some looking to stake their cryptocurrency, pushing rates higher on DeFi platforms as borrowing activity increases:
“Markets love equilibrium so you will end up with a small discount between ETH supply rate on Aave and the staking yield on ETH2. So my take is that ETH2 will grow DeFi instead of being a threat.”
May Be Delayed?
Unfortunately for DeFi and Ethereum bulls, there’s been some recent talk of the upgrade being pushed back.
Justin Drake, a researcher at the Ethereum Foundation, said that he personally doesn’t think it’s viable for the upgrade to go live this year. This comes in spite of the initial goals of many developers to roll out the upgrade in Q3 2020.
“All the above cannot happen in Q3 2020. With Thanksgiving on November 26 and the December holidays I’d say the latest practical opportunity for genesis in 2020 is mid-November, 4 months from now. As such, I’m now inclined to say that the earliest practical date for genesis is something like January 3, 2021 (Bitcoin’s 12th anniversary).”
Yet, Ethereum founder Vitalik Buterin has politely disagreed with the sentiment, as have others.
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Featured Image from Shutterstock Price tags: ethusd Charts from TradingView.com ETH 2.0 Is Likely to Boost DeFi Further, Even After Parabolic Rally