Recently, DeFi projects and on-chain Ethereum transactions have seen a positive growth driven by the ‘yield farming’. Nevertheless, while the values have inflated the user base reflects a different story.
The two most popular DeFi application in the markets is lending and DEX (Decentralized Exchanges). Compound, Sytheticx, MakerDAO, Aave and Kyber Network are some the leading tokens which surged. Along with DeFi prices, the DEX volumes have increased by 450% year-to-date. However, the number of unique users has only doubled since then.
This is indicative of larger hands have a strong controlling interest in the projects. Martin Köppelmann, a crypto entrepreneur and founder of Gnisos prediction markets tweets.
Ethereum is becoming a whale-chain. This is a serious problem.
Moreover, the majority of Ethereum transactions are non-ETH transfers (nearly 90%). This is evident in the rise in the number of transactions, while the mean value of transactions is at par with the beginning of the year values.
In another report, the yield farming rewards has created an imbalance in the supply of DAI. The supply of DAI on Compound (cDAI) is more than three times that of the on-chain DAI.
Hasu (alias), a crypto researcher at Deribit Exchange noted,
I think that’s a natural evolution as Ethereum becomes useful. More valuable users and use cases will crowd out less valuable ones, at least from the base chain. Only L2 can counteract that
Nevertheless, this is leading to an increase in the Gas price of Ethereum. Leading Ethereum dev., Ryan Sean Adams, proposes a DeFi roll-up which could work with all DeFi projects and later could forklift DeFi to the roll-up.
Ethereum co-creator, Vitalik Buterin, has similar views. He wishes to add an oracle filter to prevent fraudulent validation and provide future sustainability. He notes,
I wonder if it would make sense to spin up rollup-like chains where the fraud adjudication is guarded by some oracle coin like whatever adjudicates these prediction markets, and then switch them over to proper fraud proofs when all that tech becomes ready half a year from now…
How do you think the crypto markets will see the end to the DeFi bubble building up since May? Please share your views with us.