[ad_1]
The Polkadot blockchain platform only launched its mainnet in May, but is already pushing to become a major competitive force in the industry. In late August, following a DOT token renaming, Polkadot entered the top 10 cryptocurrencies, outperforming established altcoins such as EOS, Litecoin (LTC), and others.
Kelvin Koh of Asian cryptocurrency fund Spartan Black had previously stated that Polkadot could rank in the top three blockchains. Elsewhere, Pantera Capital Management’s Dan Morehead also recently shared his feelings with Bloomberg, noting that although Polkadot is currently trading at around 10% of Ethereum’s value, his company believes it has “a much more than 10% chance of trading. be a competitor of Ethereum. “
Although there is endless speculation as to what factors determine Ether’s price, a trend has emerged over its lifetime: As more developers create applications with user value and appeal, Ether’s price outlook looks more bullish.
If the same goes for Polkadot, analysts’ forecasts look promising. The popularity of decentralized finance has doubled the price of ETH this summer. Now, DeFi developers also seem to be looking to Polkadot, eager to take advantage of fast throughput, the Substrate development framework and, ultimately, interoperability.
However, Peter Mauric, head of public affairs at Parity Technologies, told Cointelegraph that there is vast potential for Polkadot to expand the DeFi ecosystem beyond its current capabilities, stating that parachains are a different type of smart contract that will enable a different degree of implementation. He elaborated further:
“Once we have these primitive DeFi turbos, the potential for new innovations is greatly expanded and we see exciting new possibilities such as decentralized SWFs and cross-chain money markets that provide the foundation for the next generation of DeFi protocols.”
Many of these new DApps and parachains are also receiving the boost in grant funding from Polkadot’s main sponsor, the Web3 Foundation. Mauric confirmed that the Polkadot Treasury is also providing trustless, on-chain funding to projects seeking to build on Polkadot. So who is involved in Polkadot’s DeFi ecosystem and how do they compare to their Ethereum counterparts?
A complete DeFi platform
Acala is a decentralized financial hub, classified as an “all-in-one DeFi service center”. It offers some features comparable to Maker, allowing users to lend and borrow its stablecoins to USD. However, it also operates a decentralized exchange under an economic model called a “decentralized sovereign wealth fund”, designed to provide a continuous means to support the development ecosystem. Acala was also one of the first to participate in a new Polkadot-specific crowdfunding model known as the parachain starter offering.
Acala is a classic example of a project that takes advantage of Substrate’s high customization capabilities. Bette Chen, co-founder of Acala, told Cointelegraph: “By using Substrate to build Acala, we can, for example, customize pricing and allow users to pay commissions in any accepted token. The benefit of innovation is unlimited, as we can add new features and solve problems without a hard fork. “
Stake and loan
Mantra DAO is a community-governed DeFi platform for staking, lending and governance. The platform’s OM token grants voting rights that influence various factors such as inflation levels or interest rates. Mantra DAO will operate on the Rio Chain infrastructure and is well on its way to becoming a fully decentralized DAO governed by its community.
Mantra DAO sees scalability and interoperability as the main strengths of being based on Polkadot, as Will Corkin, co-founder and board member, explained to Cointelegraph: “Interoperability is a step towards the mainstream. of DeFi and the elimination of the current network problems that platforms on the face of Ethereum. “He further added:” Not only can we bring Ethereum DeFi to Polkadot, but we can bring all DeFi to all peers on all platforms. “
Another project, StaFi (short for Staking Finance) is a protocol that allows users to unlock tied liquidity in staked tokens. It works comparable to Yearn.Finance or Compound, issuing synthetic tokens called rTokens that represent a share in the pool and can be used in other protocols. Along with Web3 grants, the project received support from B-Tech, a technology accelerator affiliated with the Bitmax exchange.
DEX and liquidity
Uniswap’s Polkadot equivalent is Polkastarter, a decentralized exchange that allows users to launch interoperable token pools with cross-chain exchanges. Projects can list their tokens and use the platform for crowdfunding in a decentralized auction. The development team created a proof-of-concept on Ethereum, with a roadmap that includes migrating to Polkadot from the beginning of 2021.
Equilibrium is another project that migrates to Polkadot from a different blockchain: EOS. It started as an equivalent of MakerDAO, but with the move to Polkadot, it plans to expand its product range to include a decentralized exchange, synthetic asset platform, and recently interoperable stablecoin.
A bridge to Ethereum DeFi
Moonbeam is a polkadot parachain bridge to Ethereum, which allows developers to create Ethereum compatible smart contracts. Using Moonbeam, DApps can integrate with other blockchains, including Bitcoin. It also means that existing Ethereum-based front-ends can connect to Moonbeam to interact with Polkadot-based DeFi applications.
Speaking with Cointelegraph, Derek Yoo, CEO of Moonbeam, developer PureStake, delved into the functionality: “Moonbeam allows ERC-20 tokens to move between Ethereum and Polkadot, which is needed to power cross-chain distributions where you have a application instance on both platforms. “
Moonbeam is already finding traction with Ethereum-based DeFi projects looking to expand into Polkadot. He announced several partnerships with major DeFi projects, including SushiSwap, BetProtocol and Linear Finance, and Yoo indicated that there are more in the works.
DeFi infrastructure
Ethereum DeFi has grown organically, with numerous innovators approaching and building on the work of their predecessors. However, many projects on Polkadot are seeing the opportunity to put infrastructure layers in place using Polkadot parachains for cross-chain transfers of assets and transactions.
Rio DeFi’s Rio Chain is a Polkadot parachain built using Substrate and provides a suite of ready-made tools for DeFi DApp builders. These include the Rio Generic Asset Bridge, which supports simultaneous cross-chain transfers of multiple assets. All of Rio’s core tools are accessible via the project website interface, including Rio Wallet and Rio Block Explorer.
The team behind Rio Chain envisions several cross-chain DeFi use cases, including a Bitcoin lending platform, a Bitcoin savings account application, and instant stablecoin loans based on a crypto wallet. Additionally, Rio Chain believes there is room for disrupting the global ecommerce payments market by removing intermediaries like PayPal who earn significant revenue from acquiring a share of merchant payments.
Bithumb Global is also starting their own parachain on Polkadot, called Clover. Aiming to spur DeFi development, Clover will seek to leverage cross-chain capabilities and will include some of Bithumb Global’s internal apps, including decentralized exchange, wallets and lending protocols. Norelle Ng, managing partner of Bithumb Global, told Cointelegraph that the availability of infrastructure layers like Clover will ultimately help improve the DeFi user experience: “The modules made available in Clover will significantly reduce the technology development threshold for applications. of level. “
Akropolis is an established Ethereum project that provides open source protocols for DeFi DApp developers – effectively an operating system for DeFi. In the context of Polkadot DeFi, it received a Web3 Foundation grant to provide Platform-as-a-Service for Substrate nodes. It also offers a stakeout portal as a front end for the Polkadot chain. Akropolis is already integrated with Ethereum DeFi DApps, including Compound and Aave.
A long way still to go
Based on the development scale, things look promising for Polkadot DeFi. Many projects are already starting to take advantage of the interoperability offered by the system. Polkadot is also attempting to make progress in attracting developers from other platforms.
However, it will take some time for the vision of interoperability to realize its true potential, mainly due to the current lack of composability between Ethereum and Polkadot applications. For example, it is not yet possible to take out a flash loan on one platform to profit from arbitrage in several decentralized exchanges on other platforms. Mauric said Polkadot is on track to achieve composability and acknowledged that this is a critical development:
“Cross-chain composability is a must for both DeFi and Web 3.0 as a whole. We already see the thirst for Bitcoin without trust and wrapped in Ethereum to use in DeFi, this is a clear initial indication that cross-chain connectivity and composability is on the way. The solution of cross-chain modularity is an important milestone “.
However, until cross-chain composability is a reality, there is a risk that many DeFi DApps on Polkadot will simply try to replicate existing applications on Ethereum. After all, this has already happened with Binance Smart Chain, where DApps like BurgerSwap or BakerySwap have chosen to copy Ethereum-based SushiSwap.
Related: BurgerSwap High Fry – Binance offers the ultimate dish on the DeFi menu
The value of simply copying existing apps is questionable. Therefore, Polkadot DeFi will have to increase its offering to attract users away from Ethereum’s composable and liquid DeFi ecosystem.
Ultimately, it’s still a matter of time to see if Polkadot will steal the DeFi crown from Ethereum. However, perhaps a more pressing question is whether Polkadot can eventually improve DeFi to improve adoption and make it more user-friendly and accessible to investors and everyday consumers. Beyond interoperability, this would appear to be the end result.
