Over the past few months, rising interests for Decentralized Finance (DeFi) offerings have pushed the Ethereum network to the limits of its capacity – a replay of the CryptoKitties incident of 2017. With its current capacity and architecture, the Ethereum network can only handle a maximum of 15 transactions per second (tps). This inherent limitation has forced users to choose between high transaction fees or long delays.
The much-hyped Ethereum 2.0 has been touted as just the solution that the network needs to scale. Ethereum 2.0, otherwise known as Eth2 or Serenity is a rather ambitious series of network upgrades that improve the scalability of the Ethereum blockchain, its robustness, and versatility, and address the persistent gas fee issue, amongst other concerns. A lot of DeFi projects are built on the Ethereum blockchain and upgrading the network to new heights will ultimately allow DeFi protocols to grow too.
In a discussion with Cointelegraph, Steven Becker, the president and chief operating officer of MakerDAO can be quoted saying:
“Eth2 is designed to optimize the network architecture without causing decentralization, security and scalability to suffer. Upgrades should enable Ethereum to scale to thousands of times its current capacity while remaining both secure and decentralized… which will be a boon for DeFi.”
Meanwhile, in a November 17 Reddit AMA session, Ethereum co-founder Vitalik Buterin noted that the benefits of Ethereum 2.0 will come faster than people expect.
On this note, the smart contract needed to activate the first phase of Ethereum 2.0 has reached its funding benchmark. The deposit contract is the first step towards the launch of Eth2 and since the funding milestone has been reached, development can begin.
A Rising DeFi Space
A number of interesting DeFi projects have hit the market since the recent boom. Major players believe that the launch and transition to Eth2 will have a large impact on the DeFi community.
Speaking of interesting DeFi projects, OnigiriSwap is undoubtedly one of the promising projects in the DeFi space. Surprisingly, OnigiriSwap is not trying to introduce a new tech or innovation (at least, not presently). Their core focus is on providing sound tokenomics in a tried and tested AMM, based on Uniswap.
But despite this claim of not wanting to do anything spectacular, OnigiriSwap has received significant attention from yield farmers and traders. This goes to prove that in addition to making profits, investors are also interested in the foundation of a project. After all, why fix it when it is not broken.
Finally, on OnigiriSwap, the project has a deflationary token (ONIGIRI) which doubles as a governance token. Users who stake Uniswap/Susuhiswap liquidity pool tokens will be rewarded with ONIGIRI.
Another DeFi project worth mentioning is DeFi Million. The project which says it is “a new way of decentralized finance interactions between users” appears to have some prospect. DeFi Million shares its decentralized ERC-20 tokens – DEMI to its global Telegram community. The token allows users to earn by staking and trading assets.
In conclusion, DeFi is still a relatively nascent niche. Ethereum’s move to solve its scalability problem will definitely solve a lot of problems and give room for future developments.
It’s worth stating though that the upcoming upgrade is not an actual launch. Ethereum will not transition to a new chain overnight. Instead, this is part of a parallel PoS activation that would allow the Beacon Chain to operate alongside the current network. Consequently, beta testing phases will not have any impact on the current Ethereum network users or its decentralized applications.
On how the fund was raised, several whales and retail investors deposited funds in the smart contract. The total number of ETH tokens deposited in the contract amounted to over 540,000 – equivalent to $300 million. With funding in place, the beacon genesis event is set to take place on Dec 1.
Eth2 marks the beginning of a radical shift in the network’s economic model, regulation, and resources. For one, if the launch goes down as successful, Ethereum will be transitioning to the Beacon Chain and will introduce Proof-of-Stake consensus to its ecosystem down the line. Furthermore, shard chains will be the next upgrade to follow after the Beacon Chain.