- DeFi has exponentially grown over the past years and is still growing, but with newer challenges to face
- Ethereum believes that adopting the Layer 2 technology like that of Polygon would facilitate the support to the DeFi industry
- Interoperability could be another positive initiative and would allow the users to view one blockchain’s assets on another
Decentralized finance is emerging to be the most popular kind of digitized currency in digital market currency history. With this exponential growth rate, many challenges are waiting for DeFi in the upcoming days to make it difficult for it to grow and thrive. But one of the most important keys to long-term success for DeFi is its interoperability.
DeFi is a very nascent body in the finances sector; it has disclosed how it maintained such a cutthroat year with borrowing and lending. Another key work of DeFi includes their trade market and exchanges with aplomb. DeFi has delivered several unique and extremely profitable instruments of finances in the financial markets with massive amounts of liquidity followed by mining.
Layer 2 adaptation and its benefits
We have witnessed how efficiently DeFi had gathered its goodwill and profitable working skills. It is not unheard that challenges go hand-in-hand with success. The ETH networks have been pulled under pressure due to the increasing popularity of decentralized finances. On February 5, 2021, the prices had struck as high as $21.50 due to the pressure created over the company. The user cost is completely prohibited, although ETH is making all the necessary efforts to support the industry at large. Vitalik Buterin, the founder of Ethereum, is entirely aware of the stressful situation but is not exactly sure about how to cope with it completely. He had called for a Layer 2 adoption by the users in the event that was hosted in October 2020. This step would, in turn, help in the network’s strengthening process.
Interoperability being one additional supporting option.
We have witnessed positive outcomes from the Polygon project by developing a layer 2 of their own under the supervision of ETH. Another possible option that could support the decentralized industry would be the cross-chain technology’s interoperability. It would facilitate the exchange of information between various blockchains. It would allow one particular blockchain’s assets to be viewed on another blockchain’s platform, for example, viewing the assets of Ethereum on the platform of Bitcoin.
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