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A Glimpse Through Ethereum Transitioning in DeFi Ecosystem
The upcoming launch of Ethereum 2.0 in January is long-anticipated and it would be the most important and comprehensive update in the network’s history. The transition seems to be conducive for the finance industry especially as we have been witnessing a series of pilot projects taking place on Ethereum-Powered platforms, growing interest in its deployment across the various industries is observed.
The latest instance being, Banco Santander has successfully managed to redeem a bond worth a $20 million on the Ethereum blockchain.
While the French based credit institution, ‘Societe Generale SFH’, which is a subsidiary of one of Europe's largest financial services groups, Societe Generale Group, has also issued a 100 million euro ($112 million) bond as a security token on the Ethereum (ETH) blockchain. But their redemption has not yet been confirmed through the DLT platform.
Hence, the 2.0 launch appears to be highly significant as it is going to reconfigure and adjust many existing Ethereum network dynamics. Existing Ethereum Dapp and token operators will need to consider how a switch to the new sharded blockchain will affect their daily operations.
One of the key reasons Blockchain Dapp builders prefer to choose their developmental activity on Ethereum is the access to network effects and developer tools offered through its high composability. It is easy for apps to interact with each other because of the nature of Ethereum smart contracts without any authentications. Composability describes the degree to which various components in a software stack can combine together.
Within some Dapp-building communities, particularly DeFi, composability significantly speeds up development timelines.
DeFi apps can bootstrap the user experience design of their apps by offering connectivity to tools like liquidity, banking services, and unique trading pairs.
An example of this composability is a DEX like Uniswap which could be used to sell funds sitting in a MakerDAO CDP if one of their positions is liquidated.
Ethereum 2.0 is structured differently from ETH 1.0, in that it focuses on Dapps existing as unique shards under the umbrella of Ethereum. Transactions within an individual shard can operate the same way they did before, but sending tokens cross shard will involve using a receipt.
In early October, Ethereum creator Vitalik Buterin sheds some light on how ‘cross-shard DeFi composability’could function fluidly in ETH 2.0.
Nevertheless, for current and prospective Ethereum 1.0 Dapps, the shift to the new network can also be potentially disruptive. These projects will be weighing up their options, and will need to decide whether to stay with Ethereum 1.0, transition to Ethereum 2.0, or jump ship to a non-sharded platform blockchain alternative like EOS. Courtesy: BNC