While decentralized finance is one of the dominant uses for blockchain technology today, it’s easy to forget that the industry is still in its earliest stages of development. After all, just three years ago there weren’t any automated market makers (AMMs), income farms, algorithmic stablecoins, and more.
Thanks to the advent of a host of new technologies, the DeFi ecosystem is now remarkably well developed. However, much remains to be done in several key areas, including:
The focus is on interoperability
If there is one challenge that is paramount in the DeFi arena, many would agree that it was interoperability. This is essentially the problem that different blockchains communicate with each other, usually to securely transfer data or value from one blockchain to another.
Solving this problem is paramount if we ever want to have truly interoperable, chain-independent, decentralized applications (dApps) that can take advantage of the unique capabilities of multiple blockchains.
Fortunately, more than a handful of solutions are being developed to meet this exact challenge – Wanchain is one of the most successful examples. Wanchain achieves interoperability by connecting a variety of different blockchains – including Bitcoin, Ethereum, EOS, and Binance Smart Chain – using secured bridges that allow users to securely move assets from one chain to another and back again at low cost.
# DeFi cross-chain bridges make dodging # Ethereum’s exorbitant gas fees a pretty straightforward proposition.
The cross-chain bridge #Wanchain – #XRP comes to mind immediately.
Not only is it incredibly fast, transactions in both chains are ~ basically ~ free. 👀
– Wanchain (@wanchain_org) May 12, 2021
Wanchain also uses a unique type of node called a Storeman Validation Node to execute and validate cross-chain transactions and ensure that the number of assets locked in the original chain is represented 1: 1, with the assets imprinted on the connected blockchain . This ensures perfect continuity between bridged chains.
With virtually every major blockchain working on interoperability, be it through Layer 2 options, bridges, sidechains, or otherwise, it’s only a matter of time before a breakthrough solution emerges.
Workarounds for gas charges
Transaction fees have become a major challenge when interacting with DeFi apps in recent months – largely due to the rapid congestion on the Ethereum network, which has increased the average ERC-20 transaction fee to well over $ 50.
This has nearly crippled a multitude of DeFi use cases that are simply unaffordable in the current fee market, making DeFi gaming, decentralized trading, income farming and more unsustainably expensive for Ethereum.
Thanks to the myriad of solutions currently in the works, this may not be the case for long.
Some of the simplest include simple dosing techniques – including those used by Roseon – of a yield aggregator that can be used to optimize yield across multiple chains (and both CeFi and DeFi platforms). By bundling user transactions into a single order, gas charges can be drastically reduced so users can continue to make profits from income farms.
Yearn Finance offers a similar solution that allows users to pool their funds to participate in various high yielding products with reduced fees.
However, transaction pooling isn’t the only way projects can lower fees. Other platforms bypass the gas fee using second-layer technologies. This includes Celer, a platform that provides a second layer on top of the Ethereum mainnet that can process data outside the chain before it is stored on the Ethereum blockchain, reducing fees to an absolute minimum.
The platform recently launched l2.finance to apply this technology directly to the DeFi ecosystem of Ethereum, thereby helping to almost eliminate DeFi usage costs through the “DeFi Public Transportation” dApp.
(1/3) layer @ layer2finance v0.1 is started on @ethereum mainnet and faces two major challenges in DeFi: high costs and complexity of use.
You can now use @AaveAave @compoundfinance and @CurveFinance for FREE via https://t.co/LO8Diwuaxr. https://t.co/BHTNvPlsMh
– CelerNetwork (@CelerNetwork) April 23, 2021
If you’re currently looking to create a smart contract, you will likely be using either Solidity or Rust – two of the most popular programming languages for smart contracts.
But there’s one problem with these – it can take months, or possibly years, to start over, and there just aren’t enough Solidity or Rust developers to meet the demands of the burgeoning dApp industry.
With the rapid pace of new DeFi protocols and growing market interest, a more accessible coding language could not only help keep pace with demand but also support a number of novel use cases.
– Agoric (@agoric) February 18, 2021