Editor's Note: This article comes fromUnitimes（ID：Uni-times）Editor's Note: This article comes from
, by Mohamed Fouda, published with permission.
This angle is not unique to Ethereum. In fact, DeFi is a wildly popular topic across all smart contract ecosystems, and understandably so. Competing smart contract platforms are seeing the number of DeFi users grow over time. For example, the growth trend of DeFi users on the Ethereum platform is as follows:
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The growth trend of DeFi users in the Ethereum ecosystem. Source: Alethio
The decentralization of Ethereum, its network effects, and the richness of developer tools have created a moat, making it difficult for DeFi protocols to leave Ethereum and switch to other competing smart contract platforms. Some, including the team at derivatives platform Synthetix, take this view:
Initially, Synthetix decided to build their DeFi products on Ethereum and EOS platforms at the same time, but eventually found that their initial logic was wrong, and thought that building DeFi products on platforms other than Ethereum was a waste of time[1] .
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The Eth1 -> Eth2 transition：
Cross-shard DeFi composability：
competitor of ethereum
competitor of ethereum
Predictably, this skepticism surrounding Ethereum 2.0 is an exciting opportunity for other competing smart contract platforms. EOS, Tezos, Cosmos, Algorand, and several other upcoming platforms all hope to surpass Ethereum in their respective fields and become the de facto DeFi platform.
It is for this very reason that many competing platforms have huge capital reserves. It is not uncommon for these competing platforms to encourage developers to build dApp/DeFi protocols on top of their smart contract platforms by launching ecosystem funds or offering generous grants.
The bet for these competing platforms is that Ethereum’s shift to PoS will create enough uncertainty and friction for DeFi projects that developers will turn to other blockchain platforms. Their other bet is that the Ethereum 2.0 upgrade will degrade the user experience, forcing DeFi users on Ethereum to migrate to DeFi projects that are currently being built on these competing platforms.
So the question is: Are Ethereum’s competitors ready to seize the opportunity? Did they have hope to replace the Ethereum DeFi project from the beginning?
01. EOS
This article will attempt to answer this question by examining the DeFi infrastructure of these competing platforms and assessing the potential of these protocols to win the upcoming DeFi wars.
EOS is Ethereum's most established competitor. Since its launch in 2017, EOS has positioned itself as a higher-performance alternative to Ethereum. Its goal is to attract dApp developers to migrate their dapps from Ethereum to the free-to-use EOS platform to provide better user experience and easier dApp adoption.
EOS has successfully attracted certain types of dApps that don’t need to be too decentralized or censorship resistant, such as gaming and gambling dApps. However, in terms of DeFi applications, the success of EOS is quite limited. Although there are many DeFi efforts in the EOS ecosystem, most DeFi applications on the EOS platform are only slight modifications of related DeFi applications on Ethereum.
For example, the EOSDT system has about 5 million EOS collateral (~$19 million), which is nothing compared to the 290 million ETH collateral in the MakerDAO system.
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Arguably, the most well-known DeFi application in EOS is the EOS REX platform, which allows resource leasing in the EOS system. EOS REX allows developers and users to borrow resources (such as CPU, RAM, NET) required to operate EOS at a certain fee (rent). Although the value of EOS locked in EOS REX is higher than the value of ETH locked in MakerDAO and Compound, the actual loan amount is less than that of the latter two DeFi products. See below:
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The EOS network also has some decentralized exchanges (DEXs) that do not get a lot of trading volume. The main reason is that most tokens issued on EOS never capture significant value in the first place. Many of these tokens are dApp tokens that are only used within a single dApp. However, since EOS transactions are essentially free, DEX volumes are especially vulnerable to manipulation and wash trading. Therefore, it is impractical to compare these transaction volumes with those of Ethereum-based DEXs.
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02. Cosmos
Daily volume trends for some major DEXs based on EOS. Source: DappRadar
Although Cosmos is a newer competitor, Cosmos has attracted a lot of attention for its unique approach. Cosmos’ focus is on enabling interoperability between different blockchains, which makes its use cases directly competitive with Ethereum.
For example, using the Cosmos SDK (Software Development Kit), dApp applications can have their own Cosmos Zone chain instead of being built on top of the Ethereum blockchain. A recent event is that the DAO project Aragon announced that it will partly leave and use the Cosmos SDK to build its own Aragon chain.
Remarks: The Cosmos network uses a hub-zone model to achieve interoperability between each chain, where a zone (an independent blockchain) can communicate to other zones through the Hub (also an independent blockchain)" Send tokens". The protocol used by Cosmos is called IBC protocol (Inter-Blockchain Communication protocol, that is, cross-chain communication protocol), which is a protocol for transferring information representing token transfers between different blockchains. See below:
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The DeFi vision of the Cosmos system: to realize the interaction between the currency and the zone chain of the dApp
The first step to realize this vision is to create the Cosmos zone chain and bring these encrypted assets into the Cosmos ecosystem. Therefore, the early DeFi efforts in the Cosmos ecosystem did just that, such as Kava trying to introduce XRP into Cosmos [2], and Nomic.io trying to create a Zone chain (Bitcoin-peg zone) that bridges Bitcoin in Cosmos [3 ]. Once these Zone Chains and the IBC protocol are running, the corresponding dApp zone chains can follow.
a. Bridge the Zone chain of Bitcoin
Currently, there has been a lot of interest in introducing Bitcoin into smart contract platforms for use in DeFi protocols. Projects such as WBTC and TBTC are working to achieve this on Ethereum.
However, a considerable part of the Bitcoin community is looking for a solution so that Bitcoin can still be used as a service fee in these DeFi projects.
Cosmos offers the possibility for such a solution. It is possible to use the Cosmos SDK to create a Zone chain that bridges Bitcoin, which can speed up the settlement of Bitcoin, and it is possible to develop a DeFi protocol that can use Bitcoin locally.
In this regard, nomic.io’s bitcoin-peg (nBTC) project is dedicated to creating a “PoS consensus-based bitcoin sidechain” in the Cosmos system — the Bitcoin-peg Zone chain. Users can lock a certain amount of BTC assets in a multi-signature wallet, and then mint a corresponding amount of nBTC tokens in this Zone chain.
These newly minted nBTC tokens will enable instant settlement and will unlock multiple DeFi use cases. These DeFi products can be implemented in the nBTC Zone chain, or on other Zone chains that interact with the nBTC Zone chain (via the IBC protocol).
b. Decentralized price oracles
A second interesting project on the DeFi side of Cosmos is Microtick, which is trying to solve one of the toughest problems: pricing with decentralized oracles.
Currently, Ethereum-based lending protocols such as Compound use delegated price feeds to determine whether the value of user collateral is sufficient to cover their loan amount. There are many projects trying to provide a more decentralized price oracle.
03. Tezos
Microtick brings a new market-based decentralized oracle design. In this system, market makers propose a price for an asset and provide financial support for their own price proposals. The system then averages the different price proposals to arrive at a consensus price. By using this consensus price, traders can trade these price proposals as options. This process inhibits market makers from proposing wrong or inaccurate prices, leveraging market dynamics to create a decentralized price feed.
Although Tezos has been around since June 2018, interest in DeFi on the platform only started to emerge in mid-2019. The term DeFi did not appear in Tezos’ Request for Proposal (RFP) until the second round of voting in June 2019.
The reason may be that, since Tezos’ ICO, there has been a focus on implementing on-chain governance of the protocol. However, as the DeFi space grew, the Tezos Foundation began to turn some of its attention to this area. The DeFi protocol has now become the first choice in the RFP (request for proposal) for funding in the Tezos ecosystem.
However, the lack of developer-friendly languages and other developer tools in the Tezos ecosystem limits the ability of developers to build such protocols.
Probably the most interesting DeFi protocol built on Tezos is Checker. Checker is a secretive project developed by Tezos co-founder and CTO Arthur Breitman that is implementing a collateralized stablecoin for Tezos. Full details of the project are currently unknown. However, available information suggests that the project has similarities to MakerDAO: users lock their XTZ tokens in smart contracts. But the token stabilization mechanism will be different from MakerDAO.
As further information on Checker was revealed, it became clear that the project could become a cornerstone of the Tezos DeFi ecosystem, as MakerDAO was to Ethereum.
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Is Ethereum's DeFi throne under threat?
Given the DeFi efforts on other smart contract platforms, is there a real threat to Ethereum’s DeFi lead?
The answer to this question depends on two important factors: the first is how the Ethereum community and influential players handle the uncertainty surrounding Ethereum 2.0 composability. Second is the perception of the developers, and whether they are ready to change the flag.
These factors are not static and can change rapidly over time. But so far, the wind still seems to be in Ethereum's favor.
First of all, the Ethereum Foundation is doing its best to deliver Ethereum 2.0 on time, and at the same time communicate the progress of related upgrade plans to the Ethereum community. The best example of this is Vitalik's research work during Devcon, including addressing concerns about the transition from Ethereum 1.0 to 2.0 [4] and concerns about cross-shard composability of DeFi projects in Ethereum 2.0 [5].
Second, developers are still largely leaning toward Ethereum. Almost all new ideas are built on top of Ethereum. We often see some DeFi projects being built on various Ethereum hackathons on a certain weekend. There are several examples, including:
The Enable project [6], a P2P social lending platform using Dai, was born in a hackathon of ConsenSys Labs;
The LSDAI project [7], a synthetic asset that hedges the floating rate of the Compound protocol, was born at the ETHBerlin hackathon.
The richness of Ethereum development tools and the maturity of its infrastructure allow developers to transform their DeFi products from mere ideas to operational products in a relatively short period of time.
These are exactly the factors that EOS, Tezos and other Ethereum competitors currently lack. As a result, the gap between Ethereum’s DeFi ecosystem and its competitors has widened. This is why projects that initially targeted competing Ethereum platforms have gradually added support for Ethereum to benefit from the growing DeFi ecosystem.
