In the latest episode of Blockchain and Booze, Adam Levy of Draper Gorem Holm sat down with three blockchain industry leaders to talk about layer 2 solutions on the Ethereum network. He was joined by Stani Kulechov of AAVE, Jack O’Holleran of SKALE and Antonio Giuliano of dYdX. What began as a discussion of high fees quickly turned into a broader commentary on the potential power of DeFi.

Ethereum puzzle

For those unfamiliar with the Ethereum situation, sending chain transfers becomes prohibitively expensive. At the time of publication, the average cost of sending an Ethereum transaction is just under $20. Complex smart contracts, such as those in decentralized financial protocols, can easily cost more than $100 when network congestion increases. Tier 2 solutions are blockchain solutions that can ease the burden and provide much faster and cheaper transactions.

As Av Stany Kulekhov explains, the disruptive potential of Layer 2 solutions is enormous. Not only are they incredibly promising, but they are an emerging technology that has yet to be fully implemented:

Many of these (level 2) developments have not even been implemented on Ethereum yet. We are in the early stages of scaling up, but the number of people working at Layer 1 is a problem.

All three of our guests are proponents of Layer 2 solutions because they can provide solutions for distributed systems. But how do these protocols actually work? Jack O’Holleran provides an elegant example: He compares the settlement layer of Ethereum to a poker game and the solutions of layer 2 to a profit and loss ledger.

Shift-2 explained

Imagine a group of friends coming to play poker. After an evening of play, players don’t take their winnings home, but write them down in a book at the table. Players can play multiple games, track their wins and losses and pay out only or use the settlement level if they don’t want to play anymore. Similarly, Layer 2 solutions like Polygon ETH and ERC20 allow users to use the Layer 2 network until they want to cash out their tokens on Ethereum.

By broadening the scope, Layer 2 networks also open up the DeFi space for those who can’t or don’t want to spend high fees per transaction. O’Holleran said the focus is on financial inclusion within the development community, which translates into cost-effective solutions. The more people that can participate in the DeFi, the stronger the DeFi network becomes.

Past DeFi

At the end of the presentation, Levy asked the group what the end goal of the DeFi was, or what would happen after the DeFi was disbanded. After a break, O’Holleran spoke about the potential that deFi systems can offer the world at large:

The performance of these systems goes beyond De-Fi. Markets, social media, gaming – they can all be disrupted by decentralization. Ultimately, we want to democratize finance.

Giuliano echoed this sentiment, adding:

The target is really big. The financial system is the most permissive and trusting system in the world. We could build something in parallel in DeFi, small in the beginning, but eventually it would be more advantageous to use DeFi because of the better interest rates.

To insiders, the DeFi industry seems mature and huge, as its total value recently crossed the $100 billion mark. But this is a very low estimate, almost bizarre for the financial world. Although the traditional financial world is currently interested in DeFi, Giuliano believes there is still a lot of work to be done behind the scenes. O’Holleran joined this sentiment and predicted the future intersection of CeFi and DeFi:

Smart CeFi companies will figure out how to infiltrate DeFi. And the DeFi room will be improved.

Tier 2 solutions may not be as sensational as the latest NFT or bitcoin with record value, but if our panel of experts is to be believed, they can be just as important.

frequently asked questions

Does Ethereum have a future?

The live rollout of Ethereum 2.0 in 2020 is one of the most important events in the cryptocurrency world, comparable only to events twice as fast as Bitcoin. The introduction of Ethereum 2.0 will happen in several phases. Phase 0 is expected to be completed by late summer or early fall.

How much will Ethereum cost in 2030?

It is possible that Ethereum will be worth more than $100,000 per coin by 2030. Dan Morehead, CEO of Pantera Capital, believes ETH will reach six figures within 10 years, as does Nigel Green, founder of theVEre Group, who also expects ETH to reach the $100,000 mark in the next decade.

Will ethereum reach 1000 again?

ETH will never again come close to or above $1,000 Since there is little demand for Ethereum, one crypto analyst believes Ethereum will never again reach a price near or above $1,000 per ETH, even as Bitcoin reaches $50,000 per BTC.

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