Is It Game Over For Defi As Traders Move Ethereum from Defi to ETH 2.0
ETH 2.0 made its official debut on December 1st with the launch of the Beacon chain starting a new era for Ethereum. The complete ETH 2.0 chain will come into force after the complete roll-out of all three phases which would approximately take two years time. The new Ethereum chain would see a complete mining overhaul, moving away from Proof-of-work towards Proof-of-stake.
Due to the change of mining consensus, staking would be a core part of ETH 2.0 in fact it played a crucial part in the launch of ETH 2.0 Beacon Chain as well. For Beacon Chain to be launched on time a total of 16,384 validators were required to be available on the network where each validator must stake 32 ETH totaling 524,288 ETH threshold for the launch.
Skeptics have pointed towards comparatively lowers staking rewards on ETH 2.0, it seems ethereum proponents have other plans as not only the threshold of 524,288 ETH which looked almost impossible at one point was met on time, the amount of staked ETH has grown over a million in the ETH 2.0.
The growing number of staked ETH raises the obvious question of where is the supply coming from? Well, the answer seems to be another popular staking space i.e decentralized finance or defi.
Traders Are Moving ETH From Defi to ETH 2.0
Defi was the success story of 2020 for the crypto ecosystem before bitcoin started to climb rapidly. Defi managed to expand its market by many folds in the three quarter of 2020 and is still going strong. The total value locked in the defi space is still rising and it is currently at $14.5 billion.
However, despite the increasing value of locked assets, the locked ETH started to dip in November one month prior to the ETH 2.0 launch. Many believe that traders are actively moving their ETH from defi to ETH 2.0 staking pools.
The bullishness around a new system that promises to introduce new scalable techniques like sharding is understandable, however, the fact that they would not be able to take that ETH out for quite sometime added with the fact that staking rewards aren’t among the most lucrative ones either makes many people wonder on how long the staking enthusiasm last.
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An engineering graduate, Prashant focuses on UK and Indian markets. As a crypto-journalist, his interests lie in blockchain technology adoption across emerging economies.