Decentralized finance (DeFi) is often thought of as something exclusive to Ethereum. And while that is mostly the case, there are some DeFi projects taking place on blockchains that are not Ethereum.
This article will cover some of those projects and blockchains.
Polkadot is a newcomer to the cryptocurrency space as it was publicly released in August 2020. However, it has made huge waves in the DeFi space and quickly became the 9th largest cryptocurrency by market cap.
This is partly because of the founder – Dr. Gavin Wood. Dr. Wood was a co-founder of Ethereum, which gives him the expertise to solve many of the problems facing Ethereum.
Anyway, Polkadot has some interesting DeFi projects. Especially considering it is the newest DeFi blockchain. Some of the projects we like the most include the following:
Acala is the most popular decentralized exchange on Polkadot. It has received the lion’s share of investment capital, about $7 million, and publicity since its founding in August 2020.
The company plans to launch a stablecoin, staking, and a decentralized exchange. The goal, of course, is to become a financial hub of DeFi on Polkadot.
We certainly view this as a possibility because Polkadot allows parachains and cross-chain swaps, but the market is young. Anything can happen as decentralized exchanges fight for market share.
Centrifuge is a DeFi project that allows users to lend out cryptocurrency against real assets. But it allows this in a decentralized, trustless manner.
Basically, the main use case for this is businesses can tokenize invoices, which allows them to receive financing with the invoice serving as collateral.
It’s not a new concept for DeFi, but it is the first project like this on Polkadot. We also like that Centrifuge has cross-chain compatibility, just like all DeFi projects on Polkadot.
PolkaSwap is essentially Uniswap on DeFi. It’s a decentralized exchange that allows staking and issues its own tokens.
The difference between Polkaswap and Uniswap is that Polkaswap allows cross-chain swaps. This means you can swap tokens across different blockchains. For instance, you could swap Bitcoin for Ether or Ether for Litecoin.
In our opinion, Polkaswap will become the most popular decentralized exchange in the DeFi ecosystem once Polkadot begins taking more market share from Ethereum.
It’s also worth mentioning that Polkaswap has much lower gas (fees) and faster transaction speed than Ethereum.
EOS has long been a competitor to Ethereum. The main difference between the two is that Ethereum is a proof of work model while EOS is a proof-of-stake model.
It’s generally viewed that proof-of-stake blockchains are better than proof of work blockchains because PoS blockchains have faster transactions and lower fees.
However, many do not view them as a truly decentralized blockchain because transactions are verified by 15 of 21 nodes, which also opens these types of blockchains to some form of attack.
EOS has been around for a long time and has mostly disappeared as an Ethereum-killer, but it still has some interesting DeFi projects. We do not believe EOS will overtake Ethereum for DeFi projects – it’s worth mentioning some of the projects on the blockchain, though.
Defibox is probably the most popular DeFi project on EOS. It’s a sort of combination of different DeFi projects that include a decentralized exchange and staking. A lending platform is in the works for Defibox.
VIGOR is a lending platform on EOS. Users can borrow and loan cryptocurrency. They also have the ability to take out insurance policies on their cryptocurrency holdings.
Again, this is a standard DeFi project that is available on EOS. It also has two tokens related to the project. VIG is used to pay fees on the platform and VIGOR is the token on the project that has backing by cryptocurrencies.
EOSREX is an interesting project because it allows users to borrow resources on the EOS blockchain in exchange for locking in EOS tokens. Of course, the main benefit is that users earn fees from locking in their EOS tokens.
The tokens are held in a decentralized locker, so it’s a safe protocol. It’s also the native protocol on the EOS blockchain. In other words, it’s a built-in feature of EOS.
EOSDT is a decentralized stablecoin available on EOS. Ether and EOS are both offered as backed stablecoins by EOSDT.
The main advantage of EOSDOT is that it allows investors to protect against the very volatile cryptocurrency market. The token is available on decentralized exchanges. A huge advantage of EOSDOT is that it’s decentralized. In our opinion, decentralized stablecoins are the only stablecoins worth using.
Finally, Bancor is an automated market maker decentralized exchange available on EOS. It’s a fairly standard decentralized exchange, but it does offer fast and easy conversion between EOS and ETH.
That’s a huge positive.
It also gives users the ability to convert different EOS tokens for a low fee – a convenient, albeit typical, feature.
Overall, Bancor is a necessary DeFi project on any DeFi focused blockchain, so it’s nice to see it on EOS. And the ability for cross chain swaps is a huge boon.
First, Cosmos is not technically a blockchain. Instead, it’s an entire series of multiple, parallel blockchains.
This allows for massive scalability as it greatly reduces the amount of network congestion. Think of Cosmos as a sort of decentralized blockchain. A blockchain is inherently decentralized, but Cosmos takes this to a new level by having different blockchains operating in parallel rather than everything occurring on a single network.
Just like EOS, we don’t really expect Cosmos to overtake Ethereum in the DeFi space. In fact, the founding team of Cosmos split up in early 2020 due to differences in the direction of the project, which is never a good sign for the long term viability of any crypto project. But it does have one interesting project worth discussing – TomiEx Exchange.
TomiEx Exchange is a decentralized exchange based on Cosmos. What makes TomiEx Exchange a little different from other decentralized exchanges is that it relies on a proof of stake model until 200,000 users are reached.
The similarities between TomiEx is that it does offer a token in order to draw users to the exchange and has a fairly standard automated market maker to buy and sell cryptocurrency.
The big difference is that once 200,000 users are reached, tokens will then be burned. In theory, this will cause the price of the token to increase for those early adopters that received tokens for joining the exchange.
What cryptocurrency can “kill” Ethereum in DeFi?
There have been many cryptocurrency projects that have billed themselves as Ethereum killers over the years.
Some examples include EOS, Cosmos, and TRON.
None of them have even come close to approaching the market cap and popularity of Ethereum due to reasons that include leadership problems and a lack of dApp developer interest. And it does not appear that any of them will overtake Ethereum.
However, there is one cryptocurrency project that has a good chance of overtaking – Polkadot.
As we mentioned previously, Polkadot was founded by Dr. Gavin Wood – the co-founder of Ethereum. The difference between Polkadot and other Ethereum competitors is that Polkadot does not bill itself as a replacement for Ethereum. Instead, it’s working to solve the interoperability problem that Ethereum faces.
Of course, Polkadot will have much less network congestion due to the parallel blockchains it uses, which gives it the opportunity to overtake Ethereum.
Most importantly, Polkadot has a cohesive leadership team that seems capable of reaching milestones at the stated date.
The Two Problems with DeFi on Ethereum
DeFi on Ethereum has a lot of problems with it. These problems include the following:
- High transaction fees.
- Slow transaction times.
That’s right, Ethereum sometimes has insanely high transaction fees. This is because all the projects operate on a single blockchain, which has become increasingly slow as more and more projects are built on top of this blockchain.
It’s a massive problem for Ethereum and one they are looking to solve.
This single blockchain problem also
Is it worth using blockchains for DeFi?
Not really, no. You’re most likely better off using Ethereum for all your DeFi activities at the time of writing.
Ethereum simply has the most number of DeFi projects compared to other blockchains.
Sure, we know the network fees can sometimes be massive and it’s oftentimes slow, but there are not enough DeFi projects occurring on other blockchains to make it worth using them.
It’s sort of a “chicken or the egg?” paradox for these other blockchains.
If the blockchain does not have many DeFi projects, then why will people join it? But why would developers built DeFi projects on a blockchain other than Ethereum if said blockchain does not have many users?
The reason does not really matter – the result matters. And the result is low liquidity on many of these DeFi protocols that exist outside of Ethereum.
For those that don’t know, liquidity is a necessity in any financial environment that involves transactions.
That covers it for DeFi outside of Ethereum. As we have shown, there are DeFi projects outside of Ethereum, but these projects are not nearly as popular as the projects on Ethereum.
It is good to see some competition and know that you do not have to use Ethereum, though.