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Too little, too late? Ethereum losing DeFi ground to rival blockchains

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2021 has been a great year for Bitcoin (BTC) and crypto in general. However, Ethereum and the decentralized finance, or DeFi, sector have outshined other niches of the cryptocurrency space, dazzling the community with enormous growth in terms of popularity, engagement and sheer volume, with the total value locked currently sitting at around $56 billion, according to DappRadar.

The nonfungible token, or NFT, space is also seeing unprecedented growth. Many believe 2021 is shaping up to be the year of NFTs. However, DeFi continues to thrive, especially on the Ethereum blockchain where developer and user activity surpasses that of any other blockchain.

However, it’s no secret that Ethereum is currently at a decisive point. Congestion and high gas fees are plaguing the network and making decentralized exchanges, or DEXes, almost impossible to afford for common users who want to make small to medium-sized trades. Even simple transactions can cost more than $10. Banks aren’t so jealous anymore.

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DeFi is looking for alternatives

On March 3, SushiSwap, the popular Uniswap fork known for its contentious inception through a vampire mining attack, announced that the DEX had added multiple Ethereum alternatives to its platform, deploying contracts on xDai, Moonbeam, Binance Smart Chain, Polygon (previously called Matic) and Fantom.

SushiSwap has received a lot of negative criticism from the community and even from Hayden Adams, founder of Uniswap, who has expressed little appreciation for the fork and even less for the conduct of its pseudonymous founder, Chef Nomi, who exited the project early on with a pocket full of tokens, only to return them soon after. In a recent Twitter thread, Adams stated:

“I’ve seen tons of comments about sushi being a high quality dev team building a differentiated product. While I really wish this was true, I’ve seen no evidence of this whatsoever to date. Just liquidity mining and marketing so far.”

Nevertheless, the project has seen major success, being the second biggest DEX in terms of volume, according to Dune Analytics. Now, SushiSwap is providing users with new alternatives to Ethereum and allowing them to move away from the huge gas fees that have recently become a norm, even if reluctantly so.

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It’s not just SushiSwap

It seems that projects are generally looking for alternatives even though they don’t intend to fully give up on Ethereum. While these are not “moving away” from Ethereum, they are adding multiple alternatives to their platforms, which will be a major game changer for some of these blockchains, especially Binance Smart Chain, which seems to be the most popular choice.

Balancer recently announced it will be deploying ports onto Moonbeam and Polkadot. Furthermore, exchange aggregator 1inch recently added support for Binance Smart Chain. Users can change networks with the simple click of a button and enjoy lower fees and faster transaction times.

Although 1inch has added support for BSC, the team doesn’t seem to be moving away from Ethereum anytime soon. Sergej Kunz, co-founder of 1inch, told Cointelegraph:

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“We don’t plan to move completely away from Ethereum. Our expansion to BSC is just an add-on as we’ve gotten a lot of requests from the 1inch community because there’s a lot of money and activity on BSC.”

Projects haven’t removed Ethereum as the main option for their platforms, and while Binance has been standing out among the rest, Ilya Abugov — an advisor at DappRadar, an aggregator of decentralized application statistics — believes that the future will hold a multitude of options for DeFi users. He told Cointelegraph: “This is an indication that the multi-chain future is much more likely. BSC projects have achieved significant enough TVL where it makes sense for new projects to consider BSC as a viable ecosystem.”

Binance is certainly the most popular alternative at the moment. Recently, DappRadar also added support for Binance Smart Chain in its portfolio tool, but there are other projects that are growing and becoming viable alternatives, and these may begin to gain more traction as time passes. Abugov continued:

“There is also Polkadot, Flow and a number of others that are showing viable ecosystems. Before projects were almost forced to build in ETH, now they have an actual choice. As bridges become more developed this trend should become stronger.”

Layer-two options are also gaining traction

While Ethereum alternatives like BSC and others are becoming popular, layer-two options are also being integrated at lightning speed. SushiSwap chief technology officer Joseph Delong noted that the decentralized exchange is planning additional future deployments, including on Optimism.

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SushiSwap would be just one of the latest to do so. Other projects such as Synthetix, a decentralized derivatives trading platform, are also experimenting with layer-two options, the most popular of which seems to be Optimism. Kain Warwick, founder of Synthetix, told Cointelegraph:

“Every project currently on Ethereum will need to adopt a Layer 2 solution. There are fast-moving teams that now have considerable treasuries and highly skilled engineers, and allowing more users to interact with a protocol is a huge incentive to move quickly into scalable solutions.”

Will Ethereum 2.0. restore trust, or will it be too late?

While Ethereum is currently facing scalability issues and becoming very hard to use, Ethereum 2.0 is currently in development, and its staking and sharding features will allow the experience to return to normal for the common user and improve on many other aspects. Not only will the network be able to handle more transactions without congestion, which results in lower fees, but staking will also improve on the wasteful proof-of-work model that requires miners to burn electricity to validate the network.

However, the current issues experienced in Ethereum are opening doors for others to become popular alternatives. This means that Eth2 may not be enough to regain Ethereum’s previous market share, according to Abugov: “ETH 2.0 is significantly far away that competing blockchains can establish their own ecosystems. When ETH 2.0 launches it will likely be just one of the options for project teams.”

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While projects are now exploring other options, Ethereum’s network effect is still standing strong. Developers don’t seem to be moving away from the blockchain, but they appear willing to look for additional options that can give Ethereum 2.0 developers more time to perfect the upcoming launch and present users with new, exciting options for DeFi interaction.

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Bitcoin Price Flash Crashes for Second Time in a Month in the US

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The price of bitcoin (BTC) on Binance.US, the US-based exchange affiliated with Binance, briefly crashed to as low as USD 8,200 today – a drop of 87% – before recovering again. The crash marks the second time in a month when bitcoin prices in the US have briefly disconnected from the rest of the world. 

Today’s flash crash, which was one of the most significant on a major exchange in bitcoin’s history, all happened within less than 1 minute, the BTC/USD price chart from Binance.US showed. 

Although the flash crash was all over within a minute, the trading volume showed that a significant number of coins did change hands during the crash, indicating that some traders may have been able to fill orders for bitcoin at extremely low prices.

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BTC/USD on Binance.US. Source: TradingView

Flash crashes can happen when large market sell orders are sent to exchanges without sufficient liquidity on its order books, for instance, because a large trader accidentally placed the order as a market order instead of a limit order.

Today’s flash crash on Binance’s US exchange is the second such incident in a month in the US. On September 20, a data feed for crypto prices called Pyth that is used by some of the largest financial institutions on Wall Street showed a 90% crash in the price of bitcoin.

The feed briefly showed bitcoin at a price of USD 5,402. However, a similar price crash was nowhere else to be seen. Two days later, in a report about the incident, Pyth concluded that the abnormally low price was indeed a technical glitch, “caused by the combination of (1) two different Pyth publishers publishing a near-zero price for BTC/USD and (2) the aggregation logic overweighting these publishers’ contributions.”

Discussing today’s incident on Twitter, many traders complained about being forced by US regulations to use exchanges such as Binance.US, which has thin order books and low liquidity compared to the international version of the exchange.

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No statement has yet been made from Binance or Binance US regarding today’s flash crash.

At 16:11 UTC, BTC trades at USD 63,180 and is down by almost 6% in a day, trimming its weekly gains to 10%.

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Mt. Gox Bitcoin Payouts On Horizon After Creditors Approve Plan

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The light finally appears to be at the end of the tunnel for the Mt. Gox creditors, who have approved a plan that will let them choose to receive some of the coins they have been waiting years for.

In a translated letter, Nobuaki Kobayashi, the Japanese lawyer and trustee for the now-defunct bitcoin (BTC) exchange, explained that “approximately 99%” of the creditors had voted in favor of an offer that has since been put before a branch of the Tokyo District Court.

A voting process that began back in May this year wrapped up earlier this month.

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The court has since confirmed the order, although there was no mention of an exact timescale for the token refunds.

The trustee wrote that an announcement “will be made to rehabilitation creditors on the details of the specific timing, procedures and amount of such repayments.”

However, Kobayashi wrote that the process would “finalize” and become “binding” in “approximately one month from” October 20.

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The creditors will then be able to file their claims through a website, by filing a proof of rehabilitation claim.

Kobayashi wrote that the trustee “would like to express sincere gratitude to all involved parties for their understanding and support.”

The BTC exchange was once the world’s biggest, but spectacularly folded in 2014 following a spate of hacking attacks that saw raiders make off with thousands of BTC tokens.

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Creditors have been trying to recover their funds ever since, but have been locked in a protracted legal struggle that has rumbled on over the years.

The Fortress Investment Group has previously offered creditors some 80% of claims. But the trustee promised a higher figure, closer to about 90%. The tokens lost in the hacks will likely have to be written off, however, meaning that payouts are going to be a fraction of the original amounts held.

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JPMorgan: Inflation Hedge Narrative Propelled Bitcoin’s Price to ATH

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According to some JPMorgan analysts, bitcoin hit an ATH because people started investing in it as a better hedge against inflation than gold.

Strategists at the financial institution JPMorgan Chase & Co. argued that the reason behind BTC’s all-time high price is not the launch of the ProShares Bitcoin Strategy ETF. Instead, concerns about the rising inflation made the digital asset an attractive investment option, and that led to its recent rally.

Gold Failed, BTC Prevailed

The moment, which many people in the cryptocurrency community have been waiting for, finally arrived on October 19th when the ProShares Bitcoin Strategy futures-backed ETF, named BITO, started trading on the New York Stock Exchange. It became the first such product approved in the United States.

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During the first day of its launch, it generated massive trading volumes and even became the second-highest traded fund ever. Shortly after, BTC’s USD value headed straight north towards a new all-time high at roughly $67,000.

Still, according to JPMorgan strategists, including the managing director Nikolaos Panigirtzoglou, another factor drove bitcoin to that milestone. The specialists indicated that the cryptocurrency had replaced gold as a hedge against inflation in recent months, which had propelled the price north:

“By itself, the launch of BITO is unlikely to trigger a new phase of significantly more fresh capital entering bitcoin. Instead, we believe the perception of bitcoin as a better inflation hedge than gold is the main reason for the current upswing, triggering a shift away from gold ETFs into Bitcoin funds since September.”

JPMorgan’s team noted that the last couple of weeks were not that successful for the precious metal. Taking a look at a broader period, bitcoin ETF’s have significantly outpaced gold ones, as the strategists revealed:

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“This flow shift remains intact supporting a bullish outlook for Bitcoin into year-end.”

Bitcoin Funds vs. Gold ETFs: Source: JPMorgan
Bitcoin Funds vs. Gold ETFs Inflows: Source: JPMorgan

Can BTC Now Change The Stance of The Big Boss?

Jamie Dimon – Chief Executive Officer of JPMorgan – is among the most prominent critics of the leading digital asset. Still, it seems like he has started releasing the tight grip on it.

It all started in 2017 when the top executive called bitcoin a “fraud.” Dimon did not stop there and warned that “it’s worse than tulip bulbs. It won’t end well. Someone is going to get killed.” Shortly after, though, he regretted making that comment, and his financial institution became much more accepting of BTC.

Last year, Dimon weighed in on the matter once again. This time he was softer in his comments saying that bitcoin is not his “cup of tea” and that he has no personal interest in it.

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A few days ago, the CEO returned to his negative phase, describing BTC as “worthless.” Nevertheless, he acknowledged that most of JPMorgan’s clients do not share his opinion and show an increasing demand for digital asset services.

With BTC charting a new all-time high, the crypto community is yet to find out whether Dimon will maintain his hostile viewpoint on the matter or rather soften a bit and allow more offerings to his bitcoin-hungry customers.

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