When the decentralized financial sector exploded in the summer of 2020, that was a moment that opened our eyes to the fact that cryptocurrency was truly capable of revolutionizing finance. However, the barrier has also revealed many of the weaknesses in the Ethereum network upon which most of DeFi’s projects are built. The most dangerous of them are high gas costs and low scalability.

Since then, a bullish cycle has started, pushing ETH price to an all-new high – and now the aforementioned problems are even more serious. People are forced to pay between $ 60 and $ 100 per transaction on Uniswap, while many DeFi projects struggle to facilitate their Ethereum chain transactions on time, causing users to fail. The endless loop of bullish news does not help because it inadvertently distracts society from these problems. Two days passed and your transaction is still pending? But look at the charts: the ethereal price is rising, and one institutional fund has announced that it is buying X million bitcoins (BTC)!

On the topic: Ethereum will be the main interest for investors in 2021

The long-awaited transition to Ethereum 2.0, aimed at solving scalability and gas pricing issues, has begun, but Phase 1.5, which unites Ethereum 1.0 and Ethereum 2.0 blockchains, will not come until 12-18 months at the earliest. Are we really willing to pay tens of dollars to submit a single transaction?

On the topic: Ethereum Factor 2.0: Changing the Way DeFi Ventures Work

Fortunately, a potential solution has already emerged. Tier 2 solutions, which are gaining momentum during the crypto winter, address both problems: they reduce gas taxes and expand the Ethereum network by moving most transactions to sidechains. Very few companies work with such solutions, including Aztec, Offchain Labs, Matter Labs, and others.

There are also projects like Polkadot, which use a multi-chain segmented network that can process many transactions on smaller chains in parallel – which is why they are called “parachains” – instead of treating them one by one like old blockchains.

In the same way, Polkadot’s signature DOT is witnessing unparalleled growth among higher gasoline prices, better than XRP, and rising to become the fourth largest cryptocurrency. In its 2021 outlook, Maple Leaf Capital – a group of researchers focused on speculation and building Web 3.0 – expects Polkadot to improve its infrastructure and applications.

The heavy adoption of Level 2 solutions will provide a lot of space for the cryptocurrency industry – we will breathe a sigh of relief and return to the good news about market cap, bitcoin value and institutional accreditation.

Source: CoinTelegraph