Developers

The hype around DeFi is not fading away and is only just beginning, said Neo founder Da Hongfei, during a live stream on China’s Hub on Sept. 25.

Da said DeFi created a process in just a few years that traditional finance took hundreds of years to perfect.

DeFi projects are now experimenting with all sorts of financial products and services. He added that:

“Lending and borrowing, decentralized exchanges, insurance and all kinds of derivatives are on the rise in DeFi. The initial stage DeFi infrastructure has a solid good start, and now it is time to see more and more applications to be built and innovated on DeFi.”

According to Da, DeFi has brought numerous new possibilities in the financial arena, including creating a new type of asset that allows users to access cash at any time. DeFi, Da said, will have a significant impact on future economic life.

He predicts people will not need banks in the future as they turn towards DeFi services. And this scenario may already be happening. Using China as an example, Da said:

“Chinese people have done this more or less, probably dealing with banks, dealing with Alipay and WeChat, at least doing this kind of financial behavior without going to the bank.”

Da, and Binance co-founder He Yi, revealed in the live stream that Neo and Binance are actively looking into DeFi applications. One such application is Flamingo, an interoperable, full-stack DeFi protocol built on the Neo blockchain. It allows users to participate as traders, stakers, and liquidity providers.

Binance has announced it listed Flamingo on its launch pool on Sept. 23. Both are also looking to build DeFi infrastructure further.As Cointelegraph previously reported, China’s state-endorsed public blockchain is looking into building a regulatory compliance platform that can bridge global DeFi applications and government regulations.

This column has written in recent weeks about the surprising possibility that cryptocurrency markets might have become the new home for capitalism, in an environment where central banks and governments are intervening deeply in markets while picking corporate winners via emergency aid. 

If anything, the ridiculousness of the recent weeks’ saga involving the deliciously named startup protocol SushiSwap shows that not only are market signals alive and well in digital assets, but competition is, too. 

While from the outside these markets may seem like a den of rampant speculation, the innovative mania now taking place in the fast-growing arena of decentralized finance , known as DeFi, is providing a test of just how much the 11-year-old digital-asset markets can bear. 

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The proving ground for most DeFi projects is Ethereum, the second-biggest blockchain, preferred by many developers for its facilitation of “programmable money” through “smart contracts” – bits of programming that stipulate conditions under which transactions occur, as well as any outputs.

The ultimate goal of these DeFi systems is to automate the functions of banks and other financial firms, making them less expensive, more efficient and maybe even fairer in their allocation of capital.

Put another way, entrepreneurs are trying to make a buck by building things they hope people will use. 

DeFi applications have jammed up the Ethereum blockchain, roughly quadrupling median transaction fees, known as “gas,” since the start of the year.

But as the research firm Dapp Radar points out in a new report, the network’s usage has continued to increase. 



Ethereum monthly transaction volumes, USD.Source: Dapp RadarGambling applications appear to be getting crowded out, but activity has swelled on decentralized lending platforms like Aave and automated, network-based trading systems like Uniswap and Curve.

Total transaction volumes reached nearly $25 billion in August, from less than $5 billion a month earlier in the year. 

“High Ethereum gas prices have not affected the DeFi ecosystem yet,” the publication wrote in its “Dapp Ecosystem Report” for August. Nor have the elevated transaction fees sowed many doubts in the minds of investors.

While prices for ether, the native token of the Ethereum blockchain, have retreated in recent weeks, they’ve still nearly tripled since the start of the year, to about $367. 

John Todaro, director of institutional research for the cryptocurrency-analysis firm TradeBlock, estimated this week in a report that daily fees collected on the Ethereum network have climbed to an average $5 million a day, implying an annual run rate of about $1.5 billion.

“Users have flocked to trading DeFi tokens as they have become the hottest new sector in the space,” Todaro wrote. 

Shiv Malik, co-founder of the Intergenerational Foundation think tank, wrote Thursday in an op-ed for CoinDesk that a lot of the DeFi activity might just be “token speculation” and “manufactured out of nothing,” with “no actual coffee under all that froth.”  

But based on the recent data, the market appears to be working. And customers are apparently willing to pay. 


Ether median transaction fees (in green, right-hand scale), with ether price (in red, left-hand scale), both in USD.Source: Coin Metrics

Second generation blockchains were presented as being faster, cheaper, and more scalable than Bitcoin. Third generation chains (basically anything that came after Ethereum) promised even greater optimizations.

In the event, these networks have run into the same difficulties as Bitcoin, with competition for scarce resources leading to mounting costs and congestion. To tackle these problems, an array of scaling solutions has been proffered – some of which could also benefit UTXO blockchains such as BCH and BTC.

Also read: 80% of Crypto Trade Volume Tracked by Blockchain Surveillance

The Great Scaling Debate

At the annual Ethereum developers’ conference in Osaka last week, most of the talks were about scaling. So was a good chunk of the informal talk between delegates, many of whom have grave concerns about Ethereum’s ability to meet growing network demand.

 Eth 2.0, the much-vaunted upgrade that will involve a transition from PoW to PoS, is still years away, with many Devcon attendees conceding that it may never happen.

This impasse has prompted rival smart contract chains such as Qtum to position themselves as more scalable alternatives.




This year’s Devcon was held in Osaka, Japan.Over on EOS, there are similar problems stacking up. Unlike Ethereum, EOS isn’t really gunning for the decentralized finance crown, but it does share one thing in common: growing demand for finite resources.

On Ethereum, those resources manifest as block space which pushes up gas prices. On EOS, it takes the form of computational resources: RAM (virtual storage) and CPU, which is the amount of time a block producer will allocate to transactions from a particular account.






Ethereum gas prices rose sharply last monthRising and erratic computational costs on EOS have forced developers to seek scaling solutions of their own.

The architecture of blockchains such as Bitcoin, EOS, and Ethereum differs substantially, but this much holds true: onchain resources are limited and there is an open market competing for space.

Just as your car moves more slowly and is less fuel efficient during rush hour, at peak times on crypto networks, your transaction is likely to be slower and more expensive. Fixing this problem calls for some out the blocks thinking.

Current EOS costs according to EOS Resource Planner

Virtual CPU and Offchain Transactions

For EOS, scaling salvation has come courtesy of Liquidapps, whose vRAM product has now been complemented by a vCPU counterpart. This approach involves taking these precious resources off-chain to a separate network of nodes that perform the computation at low cost, before broadcasting the verification to the EOS main chain.

Although currently being provisioned on EOS, the same technology can be applied to Ethereum, or even to Bitcoin Cash, for developers seeking to create decentralized applications that require access to cheap storage.

For Ethereum, the scaling solution presented as the likeliest to succeed is Plasma, which can handle hundreds of transactions per second, and now supports smart contracts.

As co-founder Jinglan Wang puts it, defi projects saying they don’t need Ethereum scaling solutions right now is like a New Yorker saying they don’t need a Metrocard in rush hour. Plasma is a layer two solution, whose BTC analogue is Lightning Network.

Dapp Developers Must Choose Wisely

Developers pondering the best network on which to launch decentralized applications have some tough choices.Ethereum has a large ecosystem of users, devs, and companies, but it’s running near capacity, and network fees have been rising for months. Scaling solutions such as Matic can help.

EOS provides free transactions at the point of access, making it more consumer-friendly, but popular dapps risk landing their developers with rising computational costs. Secondary solutions such as vRAM can mitigate this however.

Qtum has just undergone its first hard fork, adding a new EVM that’s enhanced its smart contract capabilities, while retaining the UTXO model first pioneered on Bitcoin. It’s basically Ethereum without the scaling problems, albeit with a smaller ecosystem at this point in time.

Horizontal vs Vertical Scaling

Taking transactions offchain, be it to a sidechain or layer two, is not without compromises. Generally speaking, there is a reduction in decentralization and in transaction finality.

The architects of these solutions stress that a micropayment doesn’t need the same level of security and trustlessness as a $1 billion BTC transaction.

Gaming and gambling dapps, for instance, are fine to use a product like Liquidapps’ vRAM for offchain storage, or Plasma for low-cost transactions.To return to the traffic analogy, side streets can be used to skirt the traffic snarling up the freeway, but they’re not designed to support 16-wheelers.

Blockchain scaling solutions can therefore be more accurately described as scaling options: choices that will be suitable for some projects, and unacceptable to others.




Vertical scaling is the process of increasing throughput by increasing block or node capacity. It’s the approach taken by Bitcoin Cash, for instance. The solution to Bitcoin blocks becoming full, its proponents argue, is simply to add a couple more lanes to the highway.

It’s a simple approach, but one that has proven very effective so far. Horizontal scaling entails taking as much of the load off the main chain as possible, pushing it out to third party solutions that add extensibility.

Despite the millions of dollars and tens of thousands of hours poured into blockchain scaling, the truth is, we still don’t know which solutions will prevail. Bigger blocks; more sidechains; building up the stack; developing horizontally.

Through trial and error, discourse and debate, a path will be found to make blockchains ready for the mass adoption that all crypto advocates see as inevitable.

In the here and now, though, the architects of so-called next-generation blockchains are learning a lesson that bitcoiners learned long ago: onchain, there’s no such thing as infinite scalability.

Which blockchain scaling solutions do you believe have the best chance of success? Let us know in the comments section below.Images courtesy of Shutterstock.

Did you know you can verify any unconfirmed Bitcoin transaction with our Bitcoin Block Explorer tool?

Simply complete a Bitcoin address search to view it on the blockchain. Plus, visit our Bitcoin Charts to see what’s happening in the industry.

Microsoft is very proud of its Azure Blockchain-powered smart contract auditing tools for Ethereum – so much so it decided to flaunt some of the benefits of the software in a new blog post.

“One of the key drivers making blockchain-based applications programmable, accessible to enterprise customers, and able to meet the diverse needs of a variety of sectors [are smart contracts],” the post reads. “They foster trust in adversarial environments, but also make it challenging to secure compared to traditional code.

”But worry no more, the software Goliath believes it has the solution to this quandary: Verifier for Solidity (for those out of the loop, Solidity is a programming language specifically developed for Ethereum) – or VeriSol for short. The tool, which pairs with Azure’s blockchain suite, purportedly streamlines the code auditing process with automated security checks.

“VeriSol allows us to iterate more quickly because of the automatic and continuous checking, and it allows us to catch bugs faster without having to worry about potentially affecting customers,” said Azure Blockchain engineer Cody Born.

IT professionals have often downplayed the effectiveness of automated security checks, but Microsoft insists there are several reasons why smart contracts are an exception to this rule.

“The modest code size and the sequential execution semantics of smart contracts make them amenable to scalable verification, and the open operating environment substantially reduces the need to manually model the environment in which a smart contract operates,” said Microsoft principal researcher Shuvendu Lahiri.

“The use of formal verification for production software requires individuals skilled in highly specialized formal languages and tools, which imposes on development teams a steep learning cost and often several person-years of investment to break down the highly sophisticated task of verification into those that can be discharged mechanically by the verification tools,” he continued.





Credit: MicrosoftMicrosoft is quick to point out that VeriSol, which was first unveiled in April 2019, is still in a prototype phase. Still, its research team is pretty bullish on the future of the software. 

“We envision empowering not just Azure Blockchain developers and customers, but contributing to a full blockchain ecosystem that is safer and helping people realize the full potential of the technology without being plagued by the costly mistakes in smart contracts,” Lahiri said.

Those interested in a more technical breakdown of VeriSol can check it out on GitHub – it’s all open source.

Microsoft might be a bit too enthusiastic about blockchain

Curiously, Microsoft cites research by consulting firm Gartner, which suggests blockchain tech can bring businesses added value upwards of $360 billion by 2026.

Coincidentally, it makes no mention of another recent report by Gartner which speculates that 90 percent of enterprise-grade blockchains will soon be obsolete – unless they roll out significant upgrades by 2021.

Speaking of enterprise distributed ledger tech, Microsoft has been dipping its fingers all over the decentralized software market. It has developed a number of software suites for building decentralized tech, like its cloud-based blockchain development kit, Visual Studio for Ethereum dapps, and a decentralized digital identity management system.

So far, the Redmond giant has provided blockchain solutions to a bevy of high-profile firms, including banking behemoth JP Morgan Chase, EY, and Nasdaq.

The Bill Gates-founded company even helped Louis Vuitton put its overpriced rags on the blockchain recently.

Say what you will, but for a company that blocked nearly 5 million cryptocurrency-related ads in 2018, Microsoft is really not shying away from blockchain. Guess we can add the Windows-maker to the growing list of corporates ruling by the “blockchain, not Bitcoin” mantra.

Getting funding for their startups is not an easy feat for blockchain entrepreneurs.

Despite the rising prevalence of blockchain in today’s world, it still isn’t enough to push blockchain at the forefront of investment. More startup companies are turning to outside funding in order to gain the money they need to run their digital business.

Unfortunately for them, it's not that easy to ask investors to fund a blockchain startup. This is what blockchain investors look for in a startup before they decide to take the plunge.

Real innovation
Blockchain may be an innovation all in itself, but that isn't enough for investors who want real innovation from an individual company. Real innovation, in this case, can be defined as something new and unique that a company has managed to come up with using current or upcoming technology.

Blockchain is a technology that can potentially contribute to the modernization of our businesses and our economy. And it's involving very fast.Based on this statement, it would seem like investors are the ones not having enough projects to invest in.

If entrepreneurs can focus more on developing their blockchain-capable businesses more, they will be able to attract investors who are specifically looking for something new created out of blockchain technology.

Tech connectivity
Investors are not interested in using blockchain in isolation. They are interested in seeing how blockchain can be used in relation to other technology, such as artificial intelligence, for instance.Although both have remained as standalone technologies in the last decade, more and more academics have been trying to combine the two.

The convergence of blockchain and artificial intelligence could lead to several benefits in various sectors, including healthcare and finance, the two sectors that see the most identity fraud cases in recent years.

With blockchain and AI integrated together, companies in these sectors can create an encrypted method of storing sensitive data that can then be securely unlocked using the knowledge and sophistication of AI.

This is just one example of the way blockchain can be used to improve existing technology and even create an entirely new technology altogether.

Useful solutions
Investors are also interested in a startup that can suggest and develop useful blockchain solutions that even the mainstream public can accept and adapt.Many companies use the word blockchain as a buzzword in order to entice investors, which is why many investors tend to avoid those.

These investors prefer companies or projects building something with the core value that comes from a set of functions native to blockchain and cannot be attained in the absence of blockchain.

Valuable data
Another thing that investors look for in a startup is valuable data. Valuable data can lead to valuable discoveries, and at the same time, help create projections and forecasts for specific startup products. Like any serious investor, most investors prefer to invest in a product when it’s still fresh on the market, as long as its forecasts are positive.

One of the biggest problems with blockchain startups is that they try too hard to look for problems to solve, instead of solving problems that are already in front of them. Investors want someone with a clear vision for what they're building, a balanced skill set, and an ability to get things done.

Attentive Founders
Lastly, investors are attracted to startups with founders who are attentive to industry happenings and are quick to adapt their business based on current situations.

The reason for this is two-fold. One, staying updated on whatever's happening within the industry ensures investors that the founders themselves are interested in blockchain and are thus motivated to improve the sector.

Two, knowing how to adapt to remain sustainable and profitable is extremely vital in running a business in the digital realm.Just using the word blockchain in your business proposal is not enough to secure funding from investors. If you can integrate all these factors that affect the decision-making process of investors, you'll stand a better chance of getting your company funded.




Chris Porteous

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I'm a serial entrepreneur and owner of three internet ventures, including My SEO Sucks. A contributor to ZeroHedge, Entrepreneur.com, Forbes, Inc.com, and dozens of other media outlets, I believe in SEO as a product. I developed a proprietary technology fueling the #1 rankings of My SEO Sucks clients. In guest speaking ventures across North American, I advocate for organic search traffic as the backbone of any comprehensive digital marketing strategy.