Ethereum Is Manhattan and Everyone Is Moving to the Suburbs

 Few predicted the swift acceleration in the decentralized finance (DeFi) economy this year. The fervent activity in the space has sent DeFi assets skyrocketing to almost $11 billion equivalent to almost twice the size of the economy of Barbados.

 Similarly, assets under management held by Decentralized Autonomous Organizations (DAOs) have hit bumper levels, supported in large part by the continued growth in the decentralized economy.

Ethereum, the rails on which most open finance and DAO governance runs, needs to keep pace.

 Soaring DeFi transaction levels are adding significant demand and strain to the current network, with many DAOs adversely impacted by higher voting costs and slower transactions.

As things currently stand on Ethereum, only the most liquid, hyperconnected protocols will be able to thrive under the current demand on the network.


Back when the Aragon project released its first on-chain voting implementation, it cost just a few cents worth of ether (ETH) to vote.

 Now, with Ethereum being congested, it can cost up to $30 for a user or token holder to place a single vote.

The network congestion on Ethereum inspired the Aragon community and Balancer Labs to devise a solution that offers off-chain voting with on-chain execution via the Snapshot DAO governance tool.

 The solution arose not out of choice, but out of necessity for the respective communities.


Before a scalable version of Ethereum arrives in Ethereum 2.0, it’s likely many social innovators, DAOs and DeFi protocols will look to off-chain systems to meet their needs.

Ethereum’s 'pull' factor

Running a smart contract on Ethereum is like renting an apartment in Manhattan you are hyper connected to “a cultural center and the world of finance” but you pay a lot for a 500-square-foot studio.

 As an alternative, you can move to a new borough, such as Brooklyn or Queens, or out to the suburbs to get a nice house with more space and cheaper rent, but you’ll need to commute and you’ll be less well connected to the center of activity.

Similar to Manhattan, Ethereum could be considered a hive of decentralized activity; congested, but an important economic “‘pull factor”’ for the many different DeFi protocols. While some DAOs want connectivity above all and will remain running on Ethereum, others will not need hyperconnectivity as much as they may need lower costs.

 That’s where solutions like Ethereum 2.0, Cosmos or Polkadot can shine.

Read the full topic at

https://www.coindesk.com/ethereum-manhattan-everyone-moving-suburbs 

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