Many people are eagerly watching the launch of Ethereum 2.0 because the media have touted it as a “game changer” for the cryptocurrency industry. However, the masses seem to be forgetting that viable alternatives already exist.
Is Ethereum 2.0 taking too long?
There has been a lot of excitement about Ethereum 2.0 in the past few days. The Beacon Chain Deposit Agreement has successfully raised enough deposits to kick off Eth2 Phase 0 in December 2020. However, this is only the first phase and it is not expected that full functionality will be operational in the next two years or even longer. Therefore, it will be a while before anyone can see if Ethereum 2.0 can ever do what it claims to be.
Connected: Ethereum 2.0: Less is more … and more is coming
The launch of Ethereum 2.0 is required to save the network from itself. Persistent network congestion and rising gas charges have narrowed the network far too often. As the DeFi industry gained traction, these issues have only become more apparent. Finding a permanent solution is mandatory, but not necessarily easy or straightforward.
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A pro-Ethereum 2.0 argument is that there are second-tier scaling solutions to reduce congestion. Innovative ideas like loop ring illustrate that things can be done differently. However, these layers are not and never can be used in the broadest sense. Such integration can provide short-term relief, but is far from a long-term solution.
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Ethereum has reached its limits
From a design perspective, the current iteration of Ethereum – or Eth1 – is way too narrow as it isn’t significantly scalable. This is a bit unusual as the project has always been marketed as a haven for developers looking to experiment with blockchain technology. More applications, projects, and services only lead to more congestion, leaving users unhappy.
Given that this network is the primary center for financial innovation, a different approach is needed. Ethereum technology is flexible and modular in some ways, but it also leads to bugs, hacks, insecure code, etc. Furthermore, few projects go beyond Ethereum itself, despite the fact that the cryptocurrency is so much larger than the Ethereum ecosystem itself.
This becomes clear when looking at the current DeFi landscape. Hundreds of projects have come and gone, but only a few are still standing. None of these remaining projects introduce cross-chain support. It’s about serving the users of Ethereum, even if it’s not the most fluid ecosystem.
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Bitcoin can become the king of DeFi
To explore opportunities in the world of decentralized finance, Bitcoin (BTC) support should be required by default. Unfortunately that is not the case today. It is true that some DeFi projects support Wrapped Bitcoin (WBTC). This tokenized version of Bitcoin conforms to the ERC-20 token standard, which in my opinion is an unnecessary hurdle that shouldn’t even be there.
Given the market capitalization of Bitcoin and the general dominance of cryptocurrency, the current situation is rather confusing. The lack of support for the number one cryptocurrency in its original form is a glaring problem. None of the major DeFi projects seem intent on changing their business model to include Bitcoin as well. A clear sign of a lack of innovation in decentralized financing.
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DeFi needs Bitcoin to survive
Although decentralized finance is popular in its current form, it remains a fairly niche market today. According to DeFi Pulse, the total value of the top Ethereum DeFi platforms is over $ 23 billion. WBTC accounts for over $ 3 billion of that – a clear sign of what investors and speculators want to see in the future.
Rather than just focusing on Ethereum, the more precise strategy is to examine all of the other major currencies. And the approach of supporting crypto assets that are not Ether (ETH) is unusual. There are other DeFi projects that are happy to support ethers and tokens that are issued on this blockchain.
There is nothing wrong with waiting for Ethereum 2.0 to reach its full potential. Right now, however, nobody knows how long it will take. In the meantime, there is no reason to convert existing assets like Bitcoin or XRP to Ether, as these assets can be used through cross-chain solutions.
Also, one has to wonder whether the Ethereum 2.0 upgrade will really solve Ethereum’s problems. On paper, it seems like a major network upgrade. In reality, everything has yet to be proven and verified by the public. There are other options today and they offer work technology developed by world class engineers. Also, it is often preferred to keep all options on the table rather than putting all of your eggs in one basket.
This article does not contain any investment recommendations or recommendations. Every step of investing and trading involves risk and readers should conduct their own research in making their decision.
The views, thoughts, and opinions expressed here are the sole rights of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Sarah Austin is Head of Content at Kava Labs, a DeFi-for-Crypto startup company based in Silicon Valley. Sarah is the host of the web show Decentralized financing. She is an entrepreneur, writer, and television personality who previously worked with Forbes, MTV, and Bravo, and was the Marketing Manager for Oracle, SAP, and HP.