Camila Russo shared the below Ethereum DeFi Projects Map yesterday that was created by Simone Conti. The map got me thinking - how many of these projects are dependent on each-other and would simply not work without many of the other things built on Ethereum? Well, it turns out the answer is almost all of them!
Now, obviously a lot of projects are missing from this map but I think that just speaks to just how fast the DeFi space is moving. We have multiple new projects launching every week and it has become impossible for a single person to keep up with everything happening (even I’m struggling and I spend every waking hour in Ethereum)! You’ll also notice that most of those projects are Ethereum-based or at least, they’re multi-chain with a heavy focus on Ethereum. So, why is that?
I think the reason we’re seeing so many projects spin up on Ethereum is simply because developers now have so many building blocks (money legos) to choose from. You could go through almost every one of those projects and pick out the blocks that they’re using. As an example, let’s take Loopring - this app is a layer 2 exchange protocol and payments network that wouldn’t be able to exist without zkRollups (the scaling tech they’re using), oracles for pricing data, stablecoins for deeply liquid trading pairs, and of course, a vibrant ecosystem of different assets/tokens that people actually want to trade. Not to mention all of the infrastructure that Loopring and other apps use like wallets, node providers, middleware like The Graph, IPFS and more.
This is what people mean when they say that Ethereum has “strong network effects”. Replicating all of these things on another network is incredibly difficult - especially liquidity, assets and infrastructure. Then you also need to get developers building on your network, have the tooling for them to use and have them buy into the vision of the network & the value they can provide. On top of all of this, you also need to build a community with shared values and a mission that they care about so that a shared sense of culture/belonging can formulate.
In saying all of this, we are going to increasingly see various “app chains” and other sidechains spin up that build bridges to Ethereum in order to tap into its network effects. This is exactly why I believe that Ethereum will become the economic nexus of the entire cryptocurrency space and continue to be the pioneer of DeFi, NFTs, DAOs and much more. This is how Ethereum becomes the worlds greatest and most secure settlement layer for everything - not just financial assets.
Have a great weekend everyone,
All information presented above is for educational purposes only and should not be taken as investment advice.
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