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Ethereum vs Binance the looming battle in DeFi

Posted by
Ilya Abugov

A real contender is lurking in the shadows

Ethereum has survived several waves of Ethereum killers, and as its anticipated 2.0 upgrade gets closer to launch, it still stands as the number two blockchain project, behind Bitcoin. Much of the credit for the growth of the budding dapp ecosystem may be attributed to the adapting DeFi sector, and its flagship project MakerDAO

The last few weeks have been exciting for the CDP dapp, but now a real contender has been stirring in the shadows. 

Binance has been growing its footprint in the decentralized space and has now delved into the DeFi space. This may be the start of an important race between one of the key decentralized ecosystems and the more centralized behemoth.

Solidifying the base

MakerDAO still feels the aftershock of its near-collapse in March. Most recently it further expanded the list of permitted collateral assets to include USDC-B and TUSD. The initial inclusion of USDC sparked some controversy over-centralization concerns, but the community showed flexibility in the face of tough market conditions.

Most recently, MakerDAO saw a proposal that may allow traditional revenue streams to be collateralized for Dai. The solution being developed by Centrifuge may open MakerDAO to the broader financial markets further expanding its collateral pool, and drawing capital for the entire DeFi ecosystem.

The growing shadow 

While MakerDAO has been trailblazing across the decentralized space, Binance has been quietly growing its footprint. Most think of Binance as a centralized exchange, but the ecosystem also features its own blockchain, a DEX, a native cryptocurrency, and a stablecoin. 

For now, Binance DEX is ranked outside the top 100 on CoinMarketCap, but still above a notable Ethereum player like dYdX.

The centralized exchanges within the Binance ecosystem have the most coveted asset among blockchain exchanges – liquidity and it is not difficult to imagine it channeling it towards its decentralized products if and when the time comes.

With its own standard Binance token and a blockchain that lacks the core scalability and economic issues (like fees dropping activity levels) that Ethereum is trying to solve, the centralized player can prove to be a dangerous competitor.

Now Kava has launched its CDPs with BNB as collateral, a top 10 asset by collateralization according to CoinMarketCap. While other challenges to MakerDAO, such as JUST, are maybe less threatening, Kava should be taken seriously in the context of the Binance ecosystem.

Evolve to survive

For MakerDAO the diversification of its collateral pool has been just one of the attempts to stay one step ahead of the competition. Recently MakerDAO announced bounty winners as part of its gaming initiative to help increase adoption for Dai.

Much of the issue with Ethereum DeFi has been that a lot of the use cases are built around some form of speculation on asset prices. That significantly limits the appeal of the products and so growth. The integration of assets in non-DeFi dapps may help the ecosystem grow and both attract and better spread liquidity within the Ethereum ecosystem.

The approaching challenge for Ethereum

Despite obvious challenges with scalability, Ethereum has remained attractive to users and developers because of its active ecosystem. Its dapps are numerous and their volumes are relatively trustworthy. The DeFi sector has been key in attracting the recent surge of interest.

However, these volume gains are all relative. If one of the biggest centralized players in blockchain was to bring its liquidity to its own native chain, it would instantly become the leader in the field.

Binance has been very diplomatic in its relationship with different blockchain ecosystems, but the continued growth of its chain’s ecosystem may signal the impending race between the Ethereum and Binance brands.

We will continue to watch this space. Make sure you bookmark DappRadar and sign up to our newsletter below to get updates direct to your inbox.

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