The DeFi Catalyst: Multi-Chain solutions

While smart contract platforms such as Ethereum and Binance have significantly appreciated year-to-date, newer blockchains such as Solana, Fantom, Polygon and Terra have been amongst the top performers this year returning over 5,000%. Better scaling solutions and lower fees have attracted the DeFi community resulting in increased activity on these blockchains.

In order to keep that momentum going, several blockchains have started to launch incentivization programs to further lure DeFi organizations and developers to their platform. These programs are aimed to support continued development of the DeFi ecosystem.

The top 5 smart contract platforms reached an all-time high valuation of $714 billion by market cap on September 7, 2021 with Ethereum dominating the pack (63%). The contenders (Cardano, Binance, Solana and Polkadot) all pushed the valuations higher in recent months, each representing less than 15% of the $714 billion valuation.

To further understand if these valuations are justified one can look at the total value locked by the applications that are running on top of these blockchains. When looking at the top 5 blockchains by this figure we are able to better understand their market share based on DeFi.

The total value locked on Ethereum was 77% when compared against the other top 5 smart contracts, each representing 10% or less. When observing the total value locked on Ethereum (77%) you will find that it is higher than its valuation (63%) which demonstrates that Ethereum is priced at a discount relative to the adoption of the DeFi ecosystem.

Following Ethereum, the leading contenders in terms of total value locked in DeFi have been Binance and Solana. As a result, other blockchains have taken notice and launched incentivization programs. This has led the market share for Ethereum to decrease while giving way to the multi-chains: Total valuation of $47 billion as of September month-end.

Despite the competitive multi-chain world, Ethereum has plans of its own to continue its dominance within the DeFi ecosystem. Not only will Layer 2 scaling solutions such as Optimism and Arbitrum continue to lead Ethereum to greater adoption but the “merge” which is set to happen early next year will allow for Ethereum to realize a more scalable, sustainable and safer blockchain. Until then, volatility will most likely continue amongst the multi-chains and while Ethereum temporarily lose market share. Thankfully, DeFi users only stand to benefit from such vibrant and competitive multi-chain world.

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James Chung

Founder and Contributor @DigitalBankr. I write exclusive research, analysis and market news on all things blockchain, including crypto-assets.