In 12 months, DeFi has grown into a $ 15 billion industry – and the generated control tokens are now worth more than Bitcoin.

But the meteoric rise in the number of protocols has caused huge growth problems … and fears that the sector is not on a sustainable footing. When the interest rate in traditional savings accounts reaches a fraction of a percentage point and the contraction yields three-digit profits, the question inevitably arises whether this bubble is good for bursting.

As Ethereum co-founder Vitalik Buterin recently pointed out in a podcast with Ryan Sean Adams, these high interest rates are “just a temporary campaign created by printing a bunch of combo tokens, and you can’t keep printing tokens.”

SEBA, a regulated cryptocurrency bank in Switzerland, hit the spot in September when it released a report asking, “What happens when the music stops?”

Analysts have warned that the current crop trend in DeFi is not sustainable – and they predicted that only a few protocols will survive in the long run. In fact, Yearn.finance has already initiated a large number of mergers in recent weeks in order to increase development resources and expand the liquidity pool.

While SEBA has made every effort to ensure that not all crops are grown for profit, the company added: “Returning farmers make money by switching from one protocol to another. As long as there are buyers for the new protocol codes, breeders can “continue to switch between protocols. When buyers stop taking the other side of the trade, this disruptive activity will stop. This trend is clearly unsustainable. ”

He cited SushiSwap, a fork of Uniswap as an example. Since the release, countless other food forks have come along. SEBA analysts wrote: “When the markets took a bad turn, everything except SUSHI was corrected by more than 99% and cost almost nothing.”

The bank finally drew parallels with the impressive ICO boom seen in 2017 and 2018 – the most ambitious projects that have not stood the test of time.

Isolated protocols
Sadly, the headache in the DeFi room doesn’t end there. This year, Ethereum has established itself as the most important blockchain on which protocols are based – and according to DappRadar, this network captured 96% of total transactions in the DeFi ecosystem in Q3 2020.

As Cointelegraph reported in September, this heightened worries about Ethereum’s scalability issues – transaction fees hit an all-time high. While Eth2 hopes to dramatically increase network bandwidth, experts warn that it could take several years before the transition to fact-driven efforts is complete … and by then the industry may have had no choice but to look at alternative networks.

Research firm BraveNewCoin addressed these issues in a recent report that identified 18 serious non-financial risks facing the DeFi sector.

“The scalability risk is also the risk that Ethereum itself will not be able to properly scale for the DeFi protocols to work resiliently over time. If the online activity is too high (as has happened recently), it discourages small investors and removes the “available” side of DeFi – because small investors receive fewer rewards than the fees required to receive them. The scalability risk affects not only investors but also protocols, ”writes BNC.

And all of this before we mention the countless flaws in smart contracts that have resulted in attackers absorbing millions of dollars of capital from the DeFi ecosystem. High-profile events seem to be happening almost weekly, affecting investor confidence and jeopardizing the long-term potential of the industry.

Find the answers
According to Unifi, which has already launched five different blockchain chains, there is a need for change if the sector has the ability to establish a meaningful presence in the crypto industry in 2020 and beyond.

At this point, the team behind this protocol believes that space is deeply misleading. On most DeFi platforms, the biggest rewards go to the first to leave the platform and move on to the next – creating distrust and gaining confidence to evaporate. As a result, higher order protocols with a higher total locked value are constantly changing.

“Unifi is specifically designed to be an efficient, cost effective and sustainable system. By leveraging the strengths of every existing Unifi blockchain, we have created a system where all chains participate together to form a complete symbolic model that ensures the success of the entire protocol, ”said Juliun Brabon.

Unifi says it is not a copy of any existing protocol – instead, the project says it offers a robust token system closer to blockchain than the traditional DeFi protocol.

Source: CoinTelegraph

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