DeFiEthereum (ETH)News

Ethereum Network is Not Capable to Host DeFi Environment

Analysts and experts are agreed on the point that Ethereum is not yet ready to host DeFi projects. Even Ethereum 2.0 is not able to handle the complex DeFi environment.

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Every DeFi project is rushing towards the Ethereum network, but the network is not made to host decentralized finance. Martin Froehler, the founder of the crypto trading platform Morpher, admits that Ethereum is the only possible solution for DeFi, but the network has not required capabilities.

“Ethereum can only handle about 15 transactions per second and has a block-time of 15 seconds, which is an eternity in finance. By design everyone interacting with it needs Ether. That is a huge barrier to entry and mass adoption,” Froehler said while talking to a crypto news outlet.

He admires Ethereum and calls it a pure smart contract network that is fully decentralized. But developers behind the network still need to address the issues and go for better solutions. He said:

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“There is cryptographic proof for everything that happens on the sidechain on Ethereum. (…) People are able [to] trade without needing Ether. They don’t pay any fees, enjoy a settlement time of one second, and are completely independent of the many congestions on the Ethereum network.”

Ethereum 2.0 and DeFi

The high network fees are not a good thing for new users, and the issue of high fees is also present in Ethereum 2.0. Sergej Kunz, CEO of decentralized exchange 1inch, also pinpoints the incapability of Ethereum to host DeFi. Kunz stated:

“You have to rethink everything. You can migrate smart contracts to the code but it’s not scalable. To be able to scale, you have to create standards and bring new protocols based on the new sharded architecture, such as NEAR which is similar to Ethereum 2.0.”

Mounir Benchemled, CEO of middleware layer ParaSwap, explains that all DeFi projects cannot migrate towards Ethereum 2.0. “For it to work, all applications would need to move towards one single platform. Major projects might have consensus. However, for other projects who have their own agendas, it might be hard. New bridges will be built to allow interoperability,” Benchemled said.

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Hassan Mehmood

Hassan is currently working as a news reporter for Tokenhell. He is a professional content writer with 2 years of experience. He has a degree in journalism.

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