Is ETH DeFi Dying?

in LeoFinance2 months ago

It's rather strange indeed to post such a question when ETH makes new ATHs above $1600, TLV balloons, and DeFi coins go straight to the Moon. The future looks bright indeed, except for one little problem.

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Yeah, the fees.

Mooning ETH price and DeFi hype means ETH transaction fees go higher both in USD terms and in Wei terms. Right now Etherscan shows 140 Gwei (about $4.8) as a "low" fee. These 140 Gwei is the (theoretical) cost of slow transferring some ETH from one address to another, using smart contracts will be several times more expensive.

The Grayscale guys say high fees have a bright side. Well, the Grayscale guys are smart, so they're probably right. However, I still have some questions...

High fees mean fewer transactions. I don't think many unbanked will be ready to pay $20 to swap $10 of ETH for some SHT. Overall, the average amount of a transaction (i.e. how much ETH is transferred at once) will become larger, but the total number of transactions will become smaller. In other words, we will have a few whale-size transactions instead of many-many shrimp-size ones -- and these whale-sized transactions will pay the same fees as the shrimps would. I hope you got the idea because at this point I've reached the limits of my English.

Now it became a bit more expensive to jump into an SHT/ETH pool, get some SHT while APY is high, and dump that SHT at Uniswap several hours later. Now it became a bit more expensive to launch yet another DeFi-ish clone and dump your pre-sold stake right on the incoming noobs. But I'm afraid it was those SHT deals that made ETH DeFi so popular. Now less newbies, less shitcoin flippers, less DeFi-ish shitclones, less transactions are what I think ETH DeFi will face in the near future and what will result in fewer earnings for DeFi-ing everyone. But TLV will continue to balloon in USD terms, thanks to "the institutions" buying ETH "at any price". Today ETH is a "store of value", you know.

There's news that Mr. Buterin and his friends are working on reducing the fees, allegedly by fixing the code with moar code and piling "layers" one on top of the other. Those guys are smart and I hope they will find a way to fix the shit Mr. Buterin didn't think about when he was designing ETH back in 2014...

Or maybe I'm simply too pessimistic about ETH DeFi's future.

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If they manage to fix the fees I don't see why ETH won't have a price explosion similar to BTC.

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Yes, if.

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Here here

Isn´t ETH 2.0 being developed right now exactly to fix this problem?

Yes, ETH 2.0 as well as other things are being developed right now. But when it will come into production? Will today you pay $20 to transfer $1 even if you know that Mr. Vitalik will fix it in a year? And will those things at all be able to deliver what they promise (and ideally, without introducing any new bugs, vulnerabilities, or architectural flaws)? Uncertainty and time are an issue.

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I agree and also find it strange that so many are willing to pay those high fees!

Well, maybe so many see how e.g. AAVE goes 3x in about a month and urgently wants to stake some. Besides, ETH and DeFi tokens are also traded on CEX'es, they don't care about ETH fees at all, except for deposits and withdrawals.

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