With the emergence of blockchain technology more than a decade ago, new innovations including decentralized finance (DeFi) have permeated the space, with novel projects seeking to revolutionize the monetary and financial provisions of the existing financial institutions.
With DeFi, users can depend on blockchain-backed smart contracts rather than centralized authorities to have access to cheaper credit, and share proceeds for providing liquidity to a lending pool. These smart contracts were primarily debuted on the Ethereum blockchain, and this network today hosts a majority of the smart contracts or DeFi projects.
Following this innovation in the blockchain space, however, a challenge that threatens the future attractiveness of the DeFi products arose and this involves skyrocketing transaction fees resulting from the congestion on the Ethereum blockchain.
As a dynamic ecosystem, blockchain engineers, and entrepreneurs began rolling out other blockchain networks that are more DeFi-centered in a bid to address the high network or transaction fees the Ethereum network is battling.
The emergence of BSC and Polkadot: Aiming to Compete With Ethereum’s Dominance
As noted, two of the emerging blockchain networks out there in the space today with the aim to stripe Ethereum of its dominance in the DeFi ecosystem include the Binance Smart Chain (BSC) and Polkadot. Both networks have similar features and specifically offer a cheaper means to transact than obtainable on the Ethereum blockchain.
To put this in proper perspective, sending $100 worth of cash through the Ethereum blockchain can incur fees up to $20, as against a maximum of 3 cents for the BSC and about $3 for Polkadot. The obvious difference accounts for why a lot of emerging DeFi projects are choosing to pitch their tent with either of these cheaper networks and others with a similar fee structure.
Ethereum is however working to get the fee nemesis off its back through the migration to Ethereum 2.0, a Proof-of-Stake (PoS) model. Should this be done, the fight to concede defeat to these other blockchains may take a new twist.