DeFi Race Is Ethereum’s to Lose, Say Crypto Companies

In brief

  • A Crypto Compare survey of DeFi projects found more than 60% think Ethereum will be the dominant DeFi blockchain for at least the next three years.
  • Security is a top priority for DeFi, but how best to achieve it is up for some debate.
  • DeFi builders acknowledge most of the existing traffic comes from speculation, not utility.

Fees may be high and competitors may be gaining traction, but the top DeFi projects don’t see Ethereum losing its industry dominance any time soon.

In a new survey conducted by cryptocurrency market data provider Crypto Compare, more than 60% of respondents from Ethereum-based DeFi projects said they strongly disagreed that Ethereum would be overtaken by a competing protocol as the number one DeFi network within the next three years. 

It’s a vote of confidence for the Ethereum network and a counterpoint to the idea that competitor blockchains with improved transaction throughput and/or lower costs will be able to build out their own DeFi offerings before Eth2 scaling arrives.

The Crypto Compare survey spoke with representatives from token swap and pooling protocol Balancer, DeFi insurance provider Nexus Mutual, and swap protocol Kyber Network. Other respondents included representatives from Augur, Argent, DDEX, Loopring, and Staked. (Crypto Compare did not specify how many DeFi projects it included in the survey.)

Respondents also weighed in on the importance of security for the growth of DeFi in the coming years. Half of those surveyed said security was a 10-out-of-10 concern for the DeFi industry, and no respondent gave it a priority below 8.

There was some disagreement on how best to protect the growing DeFi user base75% of respondents thought that outside regulation wouldn’t be necessary for the industry to reach mainstream adoption. Furthermore, while about 40% thought it was of utmost importance for DeFi protocols to offer insurance protection for potential loss of user funds, others ranked it a 3 out of 10 in terms of priority.

Notably, DeFi builders have no illusions about the source of much of the activity currently taking place in the industry. A majority of those surveyed guessed that between 10% and 30% of value within DeFi protocols currently comes from everyday users, compared to those seeking to get in on speculative income.

The rest of respondents indicated they think less than 10% of current DeFi users are using products for their intended financial purposes instead of speculation. In other words, everyone thinks the DeFi market is being used for speculative purposes.

DeFi has a long way to go before bringing trustless, decentralized services to the masses, and the Ethereum network will obviously need improved transaction throughput promised by Eth2 before it’s ready for primetime. Those betting on Ethereum as the best place to get in on the action, however, seem to be in the good company of existing movers and shakers in the DeFi world.