The Original DeFi coin

How to cash in on the Defi gold rush

There has been a lot of talk lately about new Defi protocols coming up. A lot of capital has rushed to Defi-backed tokens helping many people make a lot of money in the process.

The catch is that investing in many of these projects is risky. Many of them are still in beta phase, or the developers and management teams behind them are not so well known.

Let the recent launch of Sushiswap serve as an example. Just a few days before the protocol’s big migration the main developer cashed out of the project, sending everyone involved into a frenzy. Tempers flared, nerves were wrecked, and for a moment it seemed like the project would just go belly up.

So now, just as in 1849 when gold was discovered on the banks of the American River in­­ California, the surest way to riches may not be prospecting for gold. Levy Strauss, Phillip Armour, John Studebaker, Henry Wells and William Fargo all found out that the surest way to riches is to provide the goods and services that those risk takers needed. And that may be the case now.

What is it that all these projects need? A base upon which to develop their governing tokens, and to bankroll the transactions required for the normal operation of these protocols. And it has become perfectly clear that the structure of choice to support these Defi endeavors is Ethereum’s ERC20 protocol.

The website lists some 212 different Defi projects, and 201 of them involve Ethereum, 24 Bitcoin and 20 EOS. There are 27 Ethereum based asset management tools (wallets), 4 Savings apps, 8 Derivatives, 30 decentralized exchanges, 4 margin trading tools, 34 Defi infrastructure and dev tools, 6 DAO platforms, 4 decentralized insurance platforms, 11 asset tokenization 11 KYC and identity, 4 Prediction markets, 22 Analytic tools, 12 Stablecoins, 7 Marketplaces, 11 Payment solutions, and 6 Lending platforms.

201 Defi Ethereum projects

As can be seen, there is much diversification of Ethereum’s exposure to Defi solutions across different types of solutions and protocols. This diversification spreads out the risk of any one particular project, and ensures that Ethereum will be in play in whatever platform or protocol eventually comes up on top of the public preferences.

But Ethereum’s Defi success has not come without a price. The additional transactions that these new tokens bring into the Ethereum ecosystem has added strain on the miners. This has led to higher gas fees per transaction, and together with Ethereum’s current high valuations that translates into unheard-of prices when converted to FIAT currencies.

Now all these problems may soon be solved. Ethereum is undergoing a major renovation in Eth2. The main concept is the conversion of the current network from a proof-of-work blockchain that requires miners and consumes lots of energy, to a proof-of-stake blockchain requiring a lot less resources to confirm transactions.

Also the Eth2 network will be broken up into shard chains, requiring nodes to process just parts of the blockchain to confirm transactions, instead of the whole chain. This reduction in the size of the chains being validated will result in quicker validation times and the consequent increase in the overall network transaction handling capacity.

Phase 0, the beacon chain, has already been implemented, and is being tested thoroughly before phase 1 can be launched. With phase 1 will come multiple shards and the switch to proof-of-stake validation. Full implementation of ETH2 is expected sometime in 2021.

This article is intended for entertainment purposes only. It should not be considered as financial advise.  Please be aware that all investments entail risks, don’t invest more than you can afford to lose.

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Male, Electrical Engineer, from Panama

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