along with Ethereum The 2.0 upgrade is still months or even years away from its full release. The third-generation blockchain protocol is rapidly replacing Ethereum as the “preferred” center for dapps and defi.

Blockchain transformation catalyzes future Defi growth

Although many people may have discovered it only recently, blockchain technology has existed long enough to develop from the first generation protocol to the second generation protocol, and now it has developed to the third generation protocol.

The first generation of blockchain started with Bitcoin, which is an alternative to the hegemony of centralized financial services. It laid the foundation for a decentralized financial ecosystem, but the Bitcoin network provided limited functions, required huge computing power to run, and severely lacked interoperability.

This led to the emergence of Ethereum in 2015, marking the dawn of the second-generation blockchain protocol. As Vitalik Buterin introduced smart contract functionality on the blockchain, it triggered a paradigm shift that enabled cryptocurrencies to transition from financial instruments to more practical purposes.

Ethereum’s problems continue to pile up

Ethereum opened the door to decentralized finance (defi) by realizing the “conditional transfer” of data and value on the chain. Since then, Ethereum has been developing wildly, consolidating its position as the platform of choice for launching dapps, NFT and defi protocols.

Developers and adopters accepted Ethereum and started to generate their own ERC20 tokens, so much so that social media platforms began to talk about “flipping”-where Ethereum Will overtake Bitcoin In terms of market value.

However, despite its success, the problem quickly became apparent on the Ethereum blockchain. As new projects enter the Ethereum ecosystem in large numbers, the network is beginning to face scalability issues. Gas fees have soared, and limited transaction throughput has become a daily problem.

Ethereum creator Vitalik Buterin also expressed his views Doubts about Ethereum’s ability to expand,Say,

Scalability [currently] Terrible; blockchain design fundamentally relies on the bottleneck, that is, a single node must process every transaction in the entire network.

Although the proposed Ethereum 2.0 upgrade promised to solve the current problems that cast a shadow over the Ethereum network, things did not go as planned.Initially scheduled to launch in 2019, the first phase Ethereum 2.0 starts in December 2020. There are two more stages, and the possibility of a complete release before 2022 is very small.

Therefore, it is not an exaggeration to claim that the network has a long way to go before it realizes its core vision of becoming a “decentralized computer” in the world.

The third generation agreement is coming

Although Bitcoin and Ethereum have brought innovations, these chains are plagued by their own scalability and efficiency issues. At the same time, both networks require a lot of computing resources to run. All of this has led to a painfully slow throughput rate and a permanent cycle of excessively high costs.

Many Layer 2 scaling solutions have been developed to overcome the inherent problems of Bitcoin and Ethereum, and each solution has achieved varying degrees of success. The two-tier solution solves the interoperability and scalability issues to a certain extent, but the core issues related to the consensus mechanism and mining remain to be resolved.

This is where the third-generation blockchain appears. Although some third-generation protocols can supplement existing blockchain networks, others are brand new blockchains with a wide range of features and functions. From a multi-layer architecture to an innovative consensus mechanism, the third-generation blockchain protocol is not only fully capable of solving the scalability issues that arise, but also has a high degree of interoperability, rapidity and cost-effectiveness.

It is undeniable that the defi boom occurred because of Ethereum, and Ethereum still dominates the defi market. However, with the emergence of newly defined projects based on the third-generation blockchain protocol, the authority of Ethereum will undoubtedly be challenged.

As defi continues to expand its market, the next “Defi boom” is likely to come from emerging chains that are more agile and more focused than early blockchain network innovations. In other words, as the crypto world lays the foundation for the “next big flip,” promising projects are lining up for an updated blockchain.

Battle of Defi: featuring Cardano, Solana and Polkadot

In terms of market dominance, Cardano, Solana and Polkadot are leading. Each platform provides a range of features, which is why new project alliances are lining up to start building their ideas on these chains.

E.g, Aldana, Cardano’s stablecoin and defi center, enable Cardano to expand into the defi field. The platform and its constituent protocols are designed from a macroscopic perspective, aiming to provide users with the required functions to help maintain all types of decentralized economies on the Cardano chain. It will serve as a financial foundation layer to support Cardano’s decentralized economy by adopting a protocol model of historically proven composability, capital efficiency, and stability.

As part of its strategic roadmap, Ardana will soon launch dUSD.This verifiable, on-chain mortgage-backed stablecoin will help users transfer their Have Work with other supporting assets. The platform will also launch its AMM dex (decentralized exchange) Danaswap for a stable multi-asset pool. According to the Ardana team, Danaswap will provide capital-efficient swaps while targeting minimal slippage and enabling liquidity providers to take advantage of low-risk income opportunities.

Another ambitious plan is to take over the baton of the Ethereum interruption Akara, A defi liquidity center that utilizes the built-in functions of the third-generation blockchain protocol Polkadot. Currently, almost all stablecoins are built on the Ethereum network, restricting adoption and use. Acala hopes to change this reality by leveraging Polkadot’s speed, cross-chain interoperability, and cost-effectiveness to provide defi centers with built-in liquidity and ready-made decentralized financial applications.

Similarly, Acala claims to settle transactions with a fraction of what other networks require, establishing a quantitative advantage in the defi competition. The platform will support small gas fees that are minimally affected by transaction complexity through Polkadot’s weight-based fee model. In addition, Acala will also introduce an “algorithmic risk adjustment” function, which will automatically modify the risk parameters of its lending agreement, including interest rates and collateral ratios.

Finally, in this ongoing battle for defi market share, Hot valleyIt is an all-in-one encrypted trading platform built on the Solana blockchain network, and another heavyweight competitor that needs to be monitored. The platform provides free encrypted trading tools and cooperates with top exchanges such as Kucoin, Binance, Okex, Bitfinex, Poloniex, etc., to provide users with lower transaction fees.

Atani recently launched a new dex aggregator on Solana to provide order routing functions, as well as additional components such as portfolio tracking, price alerts, and technical analysis. With the inherent qualities of this aggregator and Solana, Atani’s plan is to reduce the friction between the decentralized defi ecosystem and provide the liquidity of cexs (centralized exchange) and dexs to the Solana ecosystem while ensuring multi-chain support .

The way ahead

When it comes to tapping the true potential of defi, we haven’t really touched the surface yet. Web 3.0 is developing, and the global village is becoming smaller and smaller. At the same time, defi services are revolutionary for people with no bank accounts and insufficient bank accounts around the world. They need more space to expand, just as existing agreements push network capacity restrictions.

From a fair perspective, Polkadot, Cardano, Solana and several other third-generation blockchain platforms provide much-needed solutions to hinder the scalability and interoperability of traditional chains. They are faster, safer, more cost-effective and have low resource consumption, positioning them as an all-in-one solution that can broadly benefit the entire cryptocurrency industry. With the debut of Ethereum 2.0, there is still a long way to go. The third-generation blockchain protocol has completed the heavy work here and has taken defi to a new level.

Which network do you think will win the defi competition? Please let us know in the comments section below.

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