Is Ethereum Destined to be King of DeFi?

Alternative networks offer additional Security, Speed, & Scalability, but can they challenge Ethereum’s primacy in DeFi?

About a week ago, in the mundane world beyond blockchain, scientists confirmed the existence of a particle that may change the laws of physics as we know them. 

In news closer to home, Bitcoin pushed well over $60,000 and Ethereum climbed to nearly $2,300. However, as the value of crypto continues to climb with gravity-defying consistency buoyed by the lift of mainstream acceptance from institutional investors and new retail buyers, the fact is that true mainstream usage of blockchain is still a work in progress. 

We in the blockchain community are used to looking for the big picture of this technology that will certainly change the human world and it can put us at risk of blindness to criticism -- the “normies” don’t have the same generous vision. They will use blockchain when it is the best solution available for something they want to do -- and with no consideration for our finer goals of democratized and decentralized finance.

Decentralized Finance (DeFi) projects have us covered with viable use cases that can extend to everything from loans and insurance to games and Non-Fungible Tokens (NFTs). However, DeFi relies on Ethereum smart contracts -- and despite the triumphant launch of Issue 0 of Eth 2.0 in December 2021, Ethereum is still in the position of innovating to overcome issues of global enterprise scaling, speed, and Gas fees. The April 14 launch of Ethereum Berlin is an upgrade and attempt to address the Gas fees issue.

Not intending to diminish the brilliant innovation that drives the Ethereum Network, but they still have something to prove, not only to our little community but to the world at large. This raises the question -- if the DeFi race to progress is still ongoing, is Ethereum the only viable competitor?

We requested commentary from alternative networks and gaming projects that use them to examine the pain and advantages of doing DeFi while not on Ethereum. 

Alternative DeFi Networks

Though Ethereum and DeFi are sometimes considered almost synonymous, the fact is other networks have made inroads in advance of the launch of Eth 2.0 and so far the upgrade has not diminished their shine. As one respondent said, “it’s not hard to beat Eth 1.0’s performance” -- and some alternative blockchain networks have been doing it for a while.

Launched in 2014, Syscoin is an alternative network that claims to have the best of Bitcoin and Ethereum -- Bitcoin security, Eth-style general computation, and Eth compatibility. Syscoin supports fractional and non-fractional atomic trading of tokens, NFT marketplace and trading, borrowing/lending platforms, and cross-chain bridging. Syscoin has recently increased nearly 30% over the past two weeks. 

“Syscoin brings an overall more scalable, secure, and interoperable base layer for DeFi applications than Ethereum through our research and development efforts targeting speed and scale of transaction processing,” Dan Wasyluk, CEO of Blockchain Foundry Inc., and co-founder of Syscoin said. “The (Syscoin) platform is highly extensible supporting both fungible and non-fungible, or NFT, tokens. The development focus has been focused on solving the trilemma of a system that is decentralized, stable at scale, and secure. We have achieved this through our own patent-pending innovations related to payments and notarization, use of layer 2 rule sets to provide increased scalability and ledger only value-related data and interoperate with other best-in-class blockchains to leverage each other’s strengths,” 

Rubix Network stakes its claim on greater security than Bitcoin and Ethereum and claims over 5 million corporate users and 3 million weekly users. Its testnet was made public in March, it recently announced its NFT launchpad, and has an NFT Auction coming up.

Rubix CEO Nithin Palavalli sees major limitations with Ethereum that his network is ready to address, particularly in the matter of capital lockups. 

“Today the DeFi based on Ethereum is limited to a very few applications that require capital lockups, in reality for a true DeFi application there is no requirement of any capital being locked up... All the transactions are settled on-chain in real-time in RubiX against the secondary scaling of smart contracts on Ethereum which inevitably needs the capital to be locked up,” Palavalli said. 

Founded in 2017 and launched to users in 2019, Zilliqa describes itself as the “world’s first public blockchain platform built on sharded architecture.” It currently supports staking, stablecoins, and decentralized exchanges among its DeFi use cases and it promotes additional levels of security and scalability over what is available through Ethereum. 

“Our launch of Zillion, our staking service, is unique as Zilliqa is not a proof-of-stake blockchain. Hence, this is an additional service on top of the network that’s not contingent for its operation. ...staking allows us to push our network’s decentralization to new heights while bringing about additional monetization opportunities for our community,” Amrit Kumar, President & Chief Scientific Officer of Zilliqa said. 

Moonbeam Network has been in development since 2019 and is scheduled to fully launch in Q2 2021. Given the interest in Polkadot, projects like Moonbeam -- though not a launched Layer 1 solution -- are worth keeping an eye on once Polkadot enables parachains later this year. 

It describes itself as “a highly specialized Layer 1.5 chain that mirrors Ethereum’s Web3 RPC, accounts, keys, subscriptions, logs, and more” and extends Ethereum’s feature set with on-chain governance, staking, and cross-chain integrations.

Katie Butler, Director of Marketing for Moonbeam, said, “Moonbeam is quickly emerging has a DeFi hub and has a bunch of projects building on it. Many recognizable DeFi platforms have expanded to Moonbeam, in addition to their Ethereum instance, because it's an easy entry point. We have been gaining developer adoption because we're the easiest way to expand an existing Ethereum application to a Polkadot-based environment...The value comes from being able to tap into Polkadot and all the other parachains and bridges connecting to it, but with minimal input/changes.”

With the launch of Eth 2.0 in December 2020, there is the promise to address Ethereum’s need for speed of transactions and the need for enterprise-level scalability and has left some to wonder about the viability of alternative networks. But Palavalli is unconvinced that Eth 2.0 is really the progress users need.

“Eth 2.0 is a step backward. The very reason PoW came in place is to replace the existing PoS consensus used by the central banks and the governments. In PoS, the rich get richer and the poor get poorer and the Elite controls the system, exactly like the old way. ...we have completely eliminated the concept of Elite and made every single node as an equal. Anyone… is able to download and run the full node of RubiX and shall be able to act as a Validator Notary without consuming extra electricity than their regular usage,” Palavalli said. 

Bring in the Gamers

If given the choice between financial gain and entertainment, it’s hard to say which is a greater motivator for users, but digital currency has its origins with in-game currency so gaming is predictably an important part of blockchain’s future in terms of mainstream adoption. 

Gamers are also reliably a first-adopter audience -- give them something fun to do and they are more likely to take the time to learn the process as long as there are incentives. 

Any gaming platform using Ethereum up to this point was likely to run into scaling issues, so we spoke to several projects that chose a different network instead of or after trying the most known DeFi network. 

Launched in 2020, Bitspawn Protocol claims over 10,000 users playing mainstream titles such as Call of Duty Warzone, Counterstrike, Dota 2, Call of Duty Modern Warfare, Fortnite, Rainbow 6 siege, FIFA, Hearthstone, PUBG, League of Legends, and Call of Duty Cold War. Bitspawn was originally tested on Ethereum but is transitioning to Solana to address scalability concerns. 

“We support networked gameplay and challenges, we are a tournament solution provider, so anyone can create prize pools and tournaments for our platform,” Rhys Boulanger, COO of Bitspawn Protocol said. “We had some scaling concerns initially with our Ethereum solution however we are migrating to Solana and our scaling issues are non-existent now.”

Boulanger believes that the blockchain gamer is looking for a combination of easy gameplay entertainment and the financial incentives of blockchain.

“Large gaming developers have their roadmaps set ahead for a number of years, so it is hard for them to quickly adopt new technologies (like blockchain) without disrupting their business in some way,” Boulanger said. “Video game publishers operate in closed ecosystems and are apprehensive to opening up to standardized currencies. The main reason is this control allows gaming companies to extract full value from players without providing anything back to them. Blockchain gamers want easier access to rewards and more ways to earn money,” Boulanger said.

FYX Gaming started its test builds in 2020 and, like Bitspawn, started on Ethereum but they moved -- in this case to the Bitcoin SV ecosystem -- due to scaling issues. They offer an original game title, CryptoFights which seems to be a multiplayer game and they have more than 15,000 users registered going into their mainnet launch.

FYX Gaming is counting on cash incentives and the transparent record of blockchains to differentiate gameplay on their platform. 

“We are focusing on cash tournaments inside of the game. For example, with CryptoFights…  the players can select PVP arenas that have associated entry fees such as $1. Both players battle and the winner gets the pot, minus our tournament operator fee. All the moves are essentially bitcoin transactions that are forever stored on chain by the players’ private keys. This allows all moves to be displayed inside of our data explorer that provides transparency into any battle, at any time, and also re-renders that actual battle inside the game engine. Think of it as a permanent cloud-save stored on bitcoin. This becomes better than twitch because we store the data, instead of just the video of actual gameplay,” FYX Gaming CEO, Adam Kling said. 

As most of us are spending more time than ever on our computers, FYX predicts a new breed of gamer that will expect profit as well as entertainment.

“The way games are currently set up in the mainstream are forms of entertainment, but the games of the future will be more economic and risk-based. It’s merging new forms of adrenaline and opportunities into the gaming world, or an extension of social interaction... You can get really into how the game works, develop strategies, customize your character, and venture off into a new world of that game. Why wouldn’t the next evolution be merging real-life economics into it? Professional gamers are the future,” Kling said. 

Uplandme, Inc. launched open beta in January 2020. It is built on EOSIO and available on iOS, Android, and online and currently claims over 150,000 monthly players of their game Upland, a metaverse mapped with GIS to the real world, allowing users to buy, sell and trade virtual properties as NFTs that are mapped to actual addresses. 

“Upland is on the path to becoming one of the most dynamic NFT-based economies and follows the principles of an open market economy, using blockchain technology to ensure true ownership of digital assets. I believe most want to get entertained in the first place and then the possibility to truly own assets so they are able to sell them again,” Dirk Lueth, Co-Founder of Uplandandme said. “Early data shows that engagement, retention and monetization for blockchain gamers is a magnitude higher than for average gamers. I believe most want to get entertained in the first place and then the possibility to truly own assets so they are able to sell them again.”

FYX Gaming started its test builds in 2020 and, like Bitspawn, started on Ethereum but they moved -- in this case to the Bitcoin SV ecosystem -- due to scaling issues. They offer an original game title, CryptoFights which seems to be a multiplayer game and they have more than 15,000 users registered going into their mainnet launch.

FYX Gaming is counting on cash incentives and the transparent record of blockchains to differentiate gameplay on their platform. 

“We are focusing on cash tournaments inside of the game. For example, with CryptoFights…  the players can select PVP arenas that have associated entry fees such as $1. Both players battle and the winner gets the pot, minus our tournament operator fee. All the moves are essentially bitcoin transactions that are forever stored on chain by the players’ private keys. This allows all moves to be displayed inside of our data explorer that provides transparency into any battle, at any time, and also re-renders that actual battle inside the game engine. Think of it as a permanent cloud-save stored on bitcoin. This becomes better than twitch because we store the data, instead of just the video of actual gameplay,” FYX Gaming CEO, Adam Kling said. 

As most of us are spending more time than ever on their computers, FYX predicts a new breed of gamer that will expect profit as well as entertainment.

“The way games are currently set up in the mainstream are forms of entertainment, but the games of the future will be more economic and risk based. It’s merging new forms of adrenaline and opportunities into the gaming world, or an extension of social interaction... You can get really into how the game works, develop strategies, customize your character, and venture off into a new world of that game. Why wouldn’t the next be evolution be merging real life economics into it? Professional gamers are the future,” Kling said. 

Uplandme, Inc. launched open beta in January 2020. It is built on EOSIO and available on iOS, Android, and online and currently claims over 150,000 monthly players of their game Upland, a metaverse mapped with GIS to the real world, allowing users to buy, sell and trade virtual properties as NFTs that are mapped to actual addresses. 

“I believe most want to get entertained in the first place and then the possibility to truly own assets so they are able to sell them again,” Dirk Lueth, Co-Founder of Uplandandme said. “Early data shows that engagement, retention, and monetization for blockchain gamers is a magnitude higher than for average gamers. I believe most want to get entertained in the first place and then the possibility to truly own assets so they are able to sell them again.”

Conclusion

Waiting is hard and, as someone who writes for a gamer audience, we can safely say gamers are not universally a patient audience. 

Of course, the race to DeFi will likely have more than one winner. These alternative networks have had a head start on beating Ethereum 1.0 performance, but as Eth 2.0 continues to become further operational, and greater interoperability and Layer 2 solutions allowing the promise of benefits from multiple networks, the future remains uncertain.

Recommended lectures: WHAT IS LAYER 2 ON ETHEREUM?, and BEST ETHEREUM LAYER 2 INVESTMENTS