Cryptocurrency aims to make money and payments accessible to everyone globally, no matter where they are located. The Decentralized Finance (DeFi) movement helps in taking a step towards that goal by creating an open, global alternative to the financial services that are in use today to anyone with a smartphone and an internet connection.
In simpler terms, DeFi is an ecosystem of financial applications built on blockchain networks. DeFi aims to create an open-source and transparent financial system available to everyone and operates without any overriding central authority. Users of this system would've complete control over their assets. Interaction with the ecosystem would be through peer-to-peer (P2P) and decentralized apps (dapps).
The core benefit of DeFi has already been mentioned, which is easy access to financial systems. This is hugely beneficial for people isolated from the financial system. A lot has been written about DeFi and the advantages and disadvantages of this ecosystem. According to DappReview, most of the transactions that take place on the Ethereum network are from the DeFi ecosystem. However, today we will look at the projects on DeFi outside of the Ethereum network, platforms like EOS, Tron, Algorand, etc. We will not analyze technical details, protocols or blockchain architecture. Instead, we take a closer look at Ethereum competitors and understand the global situation of the decentralized finance market.
Why did platforms like EOS and Tron not become “Ethereum Killers”
EOS is Ethereums’ closest competitor when it comes to becoming a leader in smart contracts and DeFi applications. Projects like DeFiBox, backed and launched by Newdex, have been gaining considerable momentum among DeFi projects on EOS since being launched. However, some feel that the high-profile start and the hype may not be justified as many developers have left the platform.
EOS's bandwidth has decreased due to network spam that has been associated with EIDOS token mining. Data from Defiprime shows that 22 out of the 214 projects on the portal work on EOS. A more detailed look shows only four DeFi applications with a fair number of users based on an EOS blockchain. These applications are Vigor Protocol, Equilibrium, EOS Microloan, and Chintai.
Over the past year, TRON has released more than two billion USDT stablecoin tokens (TRC-20 standard) on its blockchain. These are the most sought after stablecoin tokens. TRON provided the ability to conduct free USDT TRC-20 transfers, which received considerable positive feedback from users. The founder, Justin Sun, aims to shape TRON to service one of the blockchain industry's leading sectors. If you look at the sources that have been provided by DappRadar, three significant DeFi applications exist on the TRON blockchain. These are Oikos, a synthetic assets platform similar to Ethereum’s Synthetix analog, Zethyr Finance. This is the first blockchain on the TRON platform that allows you to take out TRX and other popular TRC-20 token based loans. The third DeFi application is Justin Sun’s own creation, the JUST platform. The JUST platform has been announced as the latest decentralized financial ecosystem providing stable lending and management mechanisms for users. A JUST tokens IEO was recently held on Poloniex exchange, which is controlled by Justin Sun.
Kava is a cross-chain platform for decentralized finance. It is built on the Cosmos SDK working with the Tendermint-based Proof-of-Stake (PoS) consensus mechanism. Although it works similarly to MakerDAO, it utilizes Cosmos zones to add cryptocurrencies running on independent networks. Kava aims to become the default DeFi platform, providing stablecoins and decentralized lending against major cryptocurrency assets.
Kava relies on two tokens - KAVA, its governance token, and USDX, a stablecoin. The platform has three primary use cases. Users can Kava’s stablecoin USDX. By locking collateral in a smart contract, users can stake USDX for yield. Users can take out a series of collateralized loans, creating synthetic leverage for any supported crypto asset.
Kava's project's oddity or peculiarity is the interaction with collateral assets from other blockchains, one of which was BNB. Due to this, several BNB holders now have the means to use it as a collateral asset in the DeFi ecosystem, which was previously impossible. Cosmos SDK also has support for Binance Chain. This helps in simplifying the co-integration of BNB and Kava. Kava labs have promised to add XRP, ATOM, and BTC as collateral assets.
Algorand joins the DeFi Momentum
Algorand has also joined the race by unveiling smart contract capabilities aimed at attracting DeFi projects away from its larger and more well-established competitors. In the latest upgrade to the Algorand network, the project has its sights set firmly on the DeFi space.
Algorand’s head of product, Paul Riegle, emphasized that he believes that the upgrade's three key features make it a very viable competitor in the DeFi space.
Features like the “addition of stateful smart contract functionality to the base layer,” “fast catchup,” and “rekeying” will help in increasing efficiency by storing some information in user accounts, rather than in its own code, which would allow Algorand to scale faster than competing DeFi friendly chains. It remains to be seen if features like “rekeying” will make Algorand a DeFi leader.
Even though Ethereum will remain as the main platform for the rapidly growing Decentralized Finance industry, some projects on the EOS blockchain can play a vital role in the field of DeFi.