DeFi started on Bitshares, but most of the capital and users eventually migrated to Ethereum. ETH, however, grew heavily congested amidst the recent DeFi hype. This congestion produced slow transactions and high network fees. These obstacles created an urgent desire for faster, cheaper blockchains. Since many retail investors can’t afford to pay the fees necessary to participate in ETH’s DeFi, they started testing other blockchains. The DeFi growth on other chains indicates we could see a multi-chain DeFi future. This multi-chain future is not a sub-zero game, but certain blockchains may cultivate a settlement layer for interchain communication. EOS is one blockchain to potentially mirror a DeFi hub for this multi-chain evolution. There are three key factors for EOS to actually grow into this core, blockchain settlement layer. (1) EOS creators, Block.one, are launching a long-awaited financial product to ignite EOS DeFi. (2) Current blockchain devs and users are searching for better DeFi functionality. (3) DAPP Network, the most technically advanced middleware solution, built a strong foundation on EOS.
Block.one – ProFi
DeFi’s potential is huge and there’s still plenty of time for EOS to capture their share of the market. According to Blocktivity, EOS actually processes the most transactions of any blockchain. But EOS lacks the necessary liquidity to onboard larger DeFi users. Coinbase offers an on-chain Ethereum wallet. And Binance provides access to its own smart contract ecosystem. But EOS lacks a centralized exchange devoted to onboarding blockchain newbies.
Block.one’s new ProFi (programmable finance) product might very well compete with Coinbase and Binance. This application could potentially solve the liquidity problems on EOS. Block.one has already confirmed they have well over their initial 140K BTC. But there’s speculation they have over 240K BTC. They could use this capital to provide liquidity and potentially scale Bitcoin on EOS.
Once Block.one deploys ProFi with 240K+ BTC, the EOS ecosystem could undergo a massive change. Block.one previously indicated programmable finance will drive value back to asset holders. If they shared profits with ProFi users, blockchain newcomers would have a strong financial incentive to access EOS.
There's speculation this product will be released in the second half of 2021.
Since their product likely resembles a large KYC exchange, Block.one will probably attain a level of centralization and privacy while hashing their block headers to EOS. There’s a number of reasons they’d hash to EOS mainnet.
When developers hash to a public chain, they’re provided tamper-proof transactions.
EOS is the only chain withstanding years of tested smart contracts, processing enough throughput and minimal fees to support their projected user-base.
They launched the EOS public blockchain in order to build scalable applications.
Ethereum’s DeFi works by using stablecoins, like USDC, which are supported by Coinbase and other KYC exchanges. The exchange users can withdraw their USDC, or another stablecoin, and then bootstrap other ecosystems like Curve or Yearn Finance. Thus, it’s absolutely necessary to have both centralized KYC and DeFi applications.
There’s no escape from KYC if you’re using a stablecoin and touching USD. Ethereum users can’t swap tokens to fiat without using a centralized exchange. DeFi users must first convert USD to crypto.
ETH was initially successful as a funding mechanism using ERC-20 tokens. The next achievement was DeFi products like DAI, then Curve and Yearn Finance. There’s also a new progression towards synthetic assets. But users can’t participate without buying BTC, ETH, or stablecoins and then depositing them onto DeFi platforms.
The DeFi groundwork has already been laid by EOS developer teams. Block.one’s ProFi app will exist and provide KYC services, but so will other DeFi applications without central points of authority. There’s already DAOs on EOS DeFi, but the projects are lacking in capital and users compared to ETH and BNB. The technology, however, is primed for mass adoption.
Not only will Block.one provide the EOS on-ramp for institutions and retail investors, they’ll also provide the necessary liquidity to ignite all existing EOS DeFi projects. Institutions will prefer using centralized custodians to manage their capital. But there will be smaller players whom simply use this ProFi application to make deposits and flow into EOS DeFi.
ETH and EOS both possess something the other blockchain desperately needs. While ETH needs lower fees and more transactional throughput, EOS needs more developers, capital, users, and liquidity. Fortunately, there’s a solution to help each of these blockchains work together – cross-chain bridges, using the LiquidApps DAPP Network technology.
DAPP Network – Multi-Chain DeFi
DAPP Network recognizes collaboration is the best way to bridge DeFi platforms like ETH and EOS. The dApps implementing DAPP Network bridges will allow users to move stablecoins across chains. Bancor and DAPP Account DAO currently lead the pack in building DAPP Network bridges.
One blockchain alone will not process millions of users coming on board at the same time. All previously mentioned chains (ETH, BNB, and – even the potential hub – EOS) will need to utilize bridges to handle millions of users and transactions. This multi-chain world is the only way forward when considering mass adoption or serving every possible dApp user.
Since anyone can run a DAPP validator (DSP), this network could quickly escalate DeFi apps. The end-user doesn’t care if they’re using Ethereum or EOS. They just want their applications to work.
We're still very early and there's not many dApps yet. But DeFi and layer 2 technologies are showing incredible growth.
Bitcoin was the world’s first dApp and it continually struggled to gain traction as digital gold. The initial four to five years were full of uncertainty. And the majority of people did not learn about Bitcoin until 2017’s bull run – 9 years after its creation. Thus, great tech like DAPP Network and EOS could show a similar timeframe to reach maturity and adoption.
EOS – The DeFi Hub
EOS is missing a regulated fiat on-ramp or a way to onboard new users. If Block.one establishes a financial product filling this void, it’ll be easy to migrate DeFi users to EOS. And these users will certainly enjoy a faster blockchain without paying fees.
“The tools are here,” says Raman Bindlesh. “It’s a question of bringing liquidity now. It’s fair for the community to wait for Block.one (in this case) because they have the liquidity.”
Not only will Block.one’s financial product connect EOS to much-needed liquidity, it'll expedite the use of stablecoins.
The EOS public blockchain received a waiver from the SEC. And regulators just announced banks can use public blockchains for stablecoin adoption. This clearance means Block.one is now free to launch their financial products without suffering illegalities.
Public blockchains exhibit the largest, most decentralized role in finance. While USDT and other stablecoins were late to EOS, the ecosystem has shown much progress since their arrival. Block.one's new financial product will advance EOS to better reflect adoption happening on ETH and Binance.
EOS DeFi is looking Bullish.
This article was prepared and accomplished by Wes Carmichael in his personal capacity. The opinions expressed here are my own and do not reflect the views or opinions of LiquidApps.
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