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Diversity of other chains

Professor Ellie Rennie walks us through some of the other DeFi chains that may be worth exploring.
(upbeat music) <v ->Hi, I’m Ellie Rennie</v> and I am gonna be talking about alternatives to using Ethereum and issues of scalability. Ethereum, of course, was the platform upon which De-Fi was born, and it still holds the most number of De-Fi DAPs. However, it can be extremely expensive to use. Each time you make a transaction on the Ethereum blockchain, you pay something called Gas, which is the transaction fees, the network. At times gas fees can be in the order of hundreds of dollars. So if you’re doing De-Fi, it’s only gonna be profitable at those times if you have a large amount of crypto to use.
This, I think, creates some financial inclusion issues for Ethereum, effectively, the rich get richer and the rest of us are left watching from the sidelines. Ethereum does have a plan to address this. In its roadmap, after what’s called the merge, which is when it moves to proof of stake in 2022, it will begin implementing and looking at some scalability solutions called shard chains, which will effectively split the ledger into pieces to spread the load across the system of validators. However, in the meantime, Ethereum has really had to start fighting to keep its user base, and it’s done that through what’s sometimes referred to as Layer 2 solutions.
I am going to talk about some alternatives to Ethereum, but it is worth first considering what Layer 2 solutions are. One of them is Polygon. It’s actually a side chain rather than a layer 2, and it can be used with applications, very popular applications like Curve and Aave in De-Fi.
So what it does is it has its own set of validators, and it sends state changes on its side chain back to the Ethereum main net.
It, because it’s using its own validators and it has its own blockchain, it’s not using the security properties that naturally reside within the Ethereum system, so do keep that in mind when you’re using it. Another one is Optimism, which is a layer 2 solution using Optimistic Roll-ups, UniswapV3 and Synthetix are already implementing Optimism. So with Optimism, this is a bit like batch transactions, where you interact with a smart contract on Ethereum, that bundles a number of transactions into one. That makes it faster and cheaper for end users.
And there are other similar Layer 2 solutions out there, including Starkware, so if you don’t want to use these and they can be a little bit tricky to implement and get your head around, your other option is to try an entirely different blockchain. Binance Smart Chain is very much like Ethereum, you might call it a copycat, even. Developers can port apps from Ethereum across to BSC. It’s a lot cheaper to use BSC, but it has very few validators and they’re controlled by the Binance company. So it’s closer to a centralized private blockchain than it is to a public place or Ethereum for that matter.
The main exchange on BSC is Pancake Swap, which is a copycat of Uniswap, and at times BSC has had a very high market cap and it’s possible to participate in De-Fi on BSC with a very small amount of crypto. So it’s been a popular marketplace also for things like mean tokens.
Another interesting rival to Ethereum is Solana, which is a public blockchain that optimizes for scalability. And it does this by automating the order of transactions. It calls this proof of history. Solana requires that developers use its own programming language called Rust, but that is a programming language that’s actually used in many software products, and some developers may actually prefer that to Ethereum’s solidity. You can put Ethereum ERC 20 tokens across to Solana, which is turning them into SPL tokens, or you can use tokens, which are native to the Solana platform. In fact, stable coins, USCC and USDT both have a Solana native version.
The platform has a number of decentralized exchanges in De-Fi apps, including the Serum dex, Mango and Orca.
However, neither of these platforms that I’ve just discussed have anywhere near the number of DAPs as Ethereum, and it’s really important to consider the security properties. Solano is decentralized, it has at the time I’m speaking right now around a thousand validators in its system, but Ethereum has around 200,000 validators that will be, securing the proof of stake beacon chain.
So that is a significant difference and one to keep in mind. Other alternatives to Ethereum, are Algorand and Avalanche, the so-called professor coins because they were created by academic researchers. But do keep in mind that none of these alternatives have the number of DAPs as Ethereum, and they also have different security properties to Ethereum. Solana, for instance, has around a thousand validators. Whereas Ethereum, when it moves to its proof of stake will be secured by at least 200,000 validators, making it far more robust.
So whether these alternatives to Ethereum can endure after Ethereum fixes some of its scalability problems remains to be seen. But if you do want to jump into De-Fi now and want to avoid some of the problems and fees in the Ethereum system, then they’re definitely worth checking out. (upbeat music)

Thus far, we have focused mainly on the Ethereum blockchain but DeFi is not limited to one chain. Watch as Professor Ellie Rennie takes us on a guided tour of some other chains and explains why we might want to explore them.

Now it’s your turn

These alternatives to the Ethereum blockchain allow users to DeFi without paying high gas fees. For the time being, however, they do not have nearly the number of validators that Ethereum does. Are the higher fees associated with Ethereum worth it for the increased security? Share your thoughts in the comments.

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Decentralised Finance: Blockchain, Ethereum, and The Future of Banking

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