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Scalability and costs come to the forefront for Ethereum

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Ilya Abugov

Week In Review | Week #1, 2021 | by Ilya Abugov

Happy New Year everyone! The start of 2021 has been exciting for the crypto industry. BTC has broken through $37K, ETH has topped $1200, and the market’s total capitalization has topped $1 trillion. 

The DeFi market capitalization according to CoinGecko has surpassed $27B, while the games and collectibles sector saw incredible sales take place during the week. There is a lot of anticipation regarding product development and upcoming updates and the industry has opened the year on a strong note.

Source: CoinGecko.com

Echos from 2020

Amidst the excitement of last month’s close of 2020, Dfinity conducted a very under the radar launch. The announcement came in a blog post this week and shows a different approach to handling a major release, then what is commonly observed in the industry.

Dfinity has been considered one of the biggest potential challengers to Ethereum and raised $195M back in 2018, but having spent most of the time since out of the spotlight, it is unclear now how competitive its ecosystem will be.

Source: Medium

Scalability and costs have once again come to the forefront for Ethereum, with gas prices skyrocketing, but the balance of power is very different than in 2018. Moreover, with more and more projects opting for second-layer solutions, it may become progressively more difficult for challengers to find meaningful adoption.

The Basis revival

Once upon a time, there was a project called Basis, that attracted $133M to develop an algorithmic stablecoin, and then shut down because regulations made it impossible to implement the intended design. The project utilized bonds and shares within its system, which were regarded as securities.

Fast forward to 2020 and the rise of the anonymous developers, and the concept comes back in the form of Basis Cash. The algorithmic stable coin sector has seen a whole host of various forks and variations on the theme throughout Q4 including ESD, ZAI, and Mithril Cash.

Source: Medium

These became especially popular in December, and the start to the new year has seen the trend continue. Blockchains outside of Ethereum may be starting to see similar projects arrive as well. For example, Bitr Cash has announced itself on the Binance Smart Chain.

With the news that OCC will allow US banks to use stablecoins, the sector may see even more activity. Nevertheless, with the Stable Act hanging over the industry, excitement may be premature.

The rise of anonymous developers, especially when it comes to stablecoins, may frighten regulators. Projects with anonymous founders appear to not be concerned with regulations and while that may catalyze innovation, it can also lead to a conflict with the regulators.

The good and the bad from the Yearn ecosystem

2020 ended with Andre Cronje launching yCredit, and it attracted some attention, as does almost everything that Andre makes. However, soon after there were not one, but two attack vectors discovered.

With the way the ecosystem and the DeFi space, in general, has been evolving, hacks and exploits have become an almost expected part of a release, and some on Twitter have wondered if that is a cheaper and faster way to do audits than waiting for an official review.

Still, the Yearn ecosystem moves fast, and now Twitter is debating the potential implications of wYFI or mini YFI.

Source: Twitter

The NFT race

While during the second half of 2020 rivals have been trying to emulate Ethereum’s DeFi ecosystem, 2021 may be starting with mirroring of NFTs.

At the end of last month, Tron announced its NFT standard TRC-721. Tron’s attempts to replicate the Ethereum DeFi ecosystem with projects like JUST and JustSwap have had minimal impact, the arrival of wBTC and wETH may help, but it is unclear how much. So it remains to be seen if a similar attempt with NFTs will lead to a different outcome.

Still, with Ethereum transaction costs going up again, operations will be challenging for games on Ethereum, which may help rivals lure some away to their networks.

Matic Network becoming the L2 for games

While different optimistic and zk rollups implementations battle it out over the DeFi space, Matic has seen a flow of gaming titles come it’s way. Recently Aavegotchi and SkyWeaver announced that they will be launching on Matic Network.

Source: Twitter

While Matic Network wasn’t designed specifically for games the accumulation of gaming titles on the network may make it Ethereum’s L2 for the sector. DeFi has shown that composability is an important driver of growth and adoption, and if games follow that path being on the same L2 may become more important. Matic has already attracted some top titles to its solution, and if composability starts to play a role will gain networking efforts from that.

More eye-catching NFT sales

CryptoPunks continues to generate record sales, this time a Punk was sold for just over $150K. This NFT set has been making a lot of noise recently and over the past 7 days has topped volume figures among NFT dapps on just 94 sales.

NBA Top Shot, a popular title running on Flow, has also set a personal record, reaching a $250K trading volume.

The art sector, contributed to the headlines, with AI-Generated Nude Portrait #1 going for over $112K.

Still, the biggest sale of the week came from Mirandus, where a citadel went for $800K. The MMO universe has not yet seen the start of gameplay, making the figure even more impressive.

Still, some have pointed out that given the fact that the acquisition was made by Polyient Games, which is heavily engaged in the games ecosystem, the sale looks more like an investment.

Source: Mirandus

It will be interesting to see if MMO publishers will take this up as a funding model. Mirandus has 4 more citadels up for sale. If they are sold, it would net a tidy sum rivaling those of traditional capital raises in the sector.

Some of the recent run-ups in sales figures may be attributed to the rising price of ETH in which many of the transactions are made. Still, the recent headlines have made NFTs hard to ignore.

The information provided here is for informational purposes only. This is not investment advice and should not be treated as such. Strategic Round Capital and/or the author of this article holds a position in BTC, ETH, YFI.

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