After rather chaotic previous years, Ethereum (ETH) exceeded many expectations in 2020. Not only the decentralized finance sector (DeFi), but also the non-fungible token market (NFT) recorded enormous growth. In addition, the first phase of the long-awaited Ethereum 2.0 upgrade began. We take a look at the most burning topics and review 2020.
Ethereum 2.0 Phase 0 is live
The wait is finally over. Ethereum 2.0 has become a bit of a reality in 2020 and on December 1, the long-awaited upgrade by the community started in the first phase. As planned, the mainnet went live successfully at the first attempt and there were no major complications. On the contrary, the rush to the ETH-deposit contract, which makes the Punting ether possible was overwhelming.
Currently, over $ 1.2 billion worth of ethers are staked. Put simply, by staking, investors help secure the Ethereum network and receive an ETH return in return. However, it is not yet clear how long ethers will be bound in the so-called deposit contract – possibly years. The enormous amount of Ether that is already staked is a good demonstration of how optimistic many investors are about the future of the smart contract platform.
One of the most important functions of Ethereum 2.0 is known as “sharding”. “Sharding” allows transactions to be processed at the same time, which is intended to take the current speed of the Ethereum network to the next level. This will make it possible for developers of decentralized applications (dApp) to develop cheaper, more complex and more user-friendly dApps. Solving the scaling problem could therefore help emerging sectors like DeFi and the NFT space to innovate, and some of the most pressing problems that have plagued ETH for a long time may finally be solvable. In addition, completely new sectors could emerge, for which it did not make sense to build decentralized applications on Ethereum for reasons of cost.
Decentralized Finance: Revolution of the Financial Sector
2020 was without a doubt a successful year for Decentralized Finance. While a few crypto enthusiasts were already fairly familiar with the emerging sector in advance, DeFi experienced a huge hype in 2020.
What is DeFi?
DeFi shakes the traditional understanding of the financial world and redefines some rules of the game. There are no central institutions or intermediaries in DeFi. This means that banks, brokers and all other middlemen are eliminated because the blockchain doesn’t need them to function. Everything is regulated decentrally via the Ethereum blockchain and smart contracts.
Still, the sector is in its infancy and can currently be considered experimental. Not all DeFi projects are 100 percent decentralized yet, but the way there is paved.
One of the most important indicators to analyze DeFi space growth is the Total Value Locked indicator. The indicator measures the total value of all ETH and all other ERC-20 tokens tied in the corresponding Smart Contracts of the DeFi protocols, in US dollars. For this reason, not only Ethereum is one of the assets that are in DeFi protocols, but also stablecoins, tokenized Bitcoin and in some cases even NFTs.