Five Years Since Launch, Is Ethereum Creating a New Boom?

Published on by Cointele | Published on

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The Ethereum network has just turned five years old.

Could DeFi be the new ICO?Ether became the primary funding mechanism for ICO projects.

Now, some worry that Ethereum is heading down a similar path like in 2018 with the growth of DeFi.

DeFi really driving Ether's price?While price speculation seems to be rampant, it's largely known that decentralized finance's actual financial impact and liquidity are rather insignificant.

With Ethereum recently becoming the biggest blockchain in terms value settled, how much of this activity in Ether can actually be attributed to DeFi?ConsenSys estimates that DeFi protocols collectively hit an all-time high of 3.3 million Ether locked in protocols in the second quarter of 2020.

When comparing DeFi to the actual crypto market, it's also easy to see that DeFi is still but a drop in the ocean, smaller than the market cap of XRP and Bitcoin Cash, and it makes up only 1.5% of the entire cryptocurrency market.

DeFi sector vs. BCH and XRP - Market capitalization.

Is Ether weathering a DeFi boom and bust cycle?While funding rates for DeFi protocols are dwarfed by the 2017-era ICO-based funding campaigns, it could be concerning that a handful of DeFi tokens have rallied thousands of percent in a short period of time.

As the DeFi sector continues to rapidly expand, its biggest challenge may come in the form of future regulation, much like it did with ICOs.Ethereum's future: Stablecoins, institutionalization and scalabilityWhile only time will tell if DeFi is seeing a bubble phase, there are certainly other reasons for why Ether is outperforming Bitcoin, like becoming the basis for stablecoin transfers.

As time goes on, it's likely that DeFi will continue to grow even if it does suffer some setbacks in the short term.