At the very dawn of crypto technology, around a decade ago, the question of mainstream adoption seemed far-fetched. However, after several financial disruptions and growing scepticism towards the traditional market system, today there is a strong push — led by younger generations — towards alternative methods of finance. With the momentum in the crypto and DeFi space gaining speed, questions are being raised about the feasibility of turning such a new technology into a user-centred service.
One such question is whether current blockchain networks can process the large surge in demand. It turns out that many cannot. The solution for this is to scale the technology.
The scalability problem has often been mentioned by developers and crypto advocates, and now with the growing move towards crypto and DeFi, the need to scale these networks has become even more urgent. In the past year, since DeFi has become more popular, the Ethereum network — which hosts most of the DeFi protocols — has become strained, facing problems with scalability and increasing transaction costs. In early February, the average cost of an Ethereum transaction shot up to all-time levels, above $22. Such high costs become a hindrance to adoption and essentially weaponise the very mission of crypto, which is to financially empower individuals.
Because of this issue, many DeFi projects have moved to other blockchain networks that are able to overcome these limitations while still being compatible with Ethereum, to benefit from its prosperous ecosystem. However, these new Ethereum-like blockchains have no specialised framework, nor do they share a protocol.
The good news is that many blockchain technologists are aware of the problem and have created solutions. One of them is Polygon, which has envisioned a network of Ethereum blockchains to avoid fragmentation and allow for interoperability among different networks.
Launched in 2017 as Matic Network, Polygon focused on creating solutions to enable decentralised applications built on Ethereum. Over the years, the platform has grown in popularity and is now backed by two of the largest crypto exchanges, Binance and Coinbase. Some of Polygon’s investors include IA Capital, MiH Ventures, ZBS capital and Coinbase Ventures, the venture arm of Coinbase.
Through Polygon, DeFi projects enjoy the best of both worlds: they keep the features of stand-alone blockchains, such as sovereignty, scalability, and flexibility; as well as the benefits of being on the Ethereum mainnet, such as security, interoperability and developer experience. Platforms like Polygon are necessary to ensure that the DeFi space delivers on its promise to be borderless, decentralised, accessible and user centric.
“Our objective is to extend the Ethereum transactions,” says Arjun Kalsy, Vice President for Growth at Polygon. The platform’s mission is to become ‘Ethereum’s Internet of Blockchains’. Polygon already has more than 80 dApps in their platform.
Despite the infant nature of DeFi projects, many are anticipating technical constraints and development problems, thus they are implementing solutions right from the start.
On top of providing a technical tool to protocols, Polygon offers a comprehensive suite of products and services to bolster the development of DeFi projects. It offers various benefits for developers working on Ethereum projects by providing support via grants, technical guidance, security audit support, marketing and promotional support, and assistance with investor connections.
This is the case of the newly launched DeFi protocol Umbria. Umbria has just launched its governance token in Uniswap, but the team is already seeking partnerships and collaborations to make sure its platform can support an increase in adoption and user demand. Earlier this week, Umbria announced a partnership with Polygon to leverage its protocol.
Watch our latest #FinancialFox interview with Oscar and Barney Chambers, co-founders of Umbria Network, and Arjun Kalsy, Vice President for Growth at Polygon.
Other projects addressing scalability in Ethereum include Loopring, a Shanghai-based decentralised exchange (DEX) platform. Loopring offers services as a crypto exchange, as well as a smart wallet for users to manage Ethereum assets. Loopring incorporated scalability solutions in its platform with throughput increased by 1000x and cost reduced to just 0.1%, so that more users can pay affordable fees when using the exchange.
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