DeFi is Suffering from a Severe Lack of Competition

By: Fahad
September 22, 2020 12:45 PM UTC
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Decentralized finance is one of the fastest growing industries on the planet, however most of the growth in this industry is taking place on just one blockchain, Ethereum. The Ethereum blockchain is extremely dominant in decentralized finance, and as a result of Ethereum’s dominance most of the DeFi market share is composed of Ethereum DApps. The DeFi Pulse website shows that virtually all current categories of DeFi such as lending, decentralized exchanges, and derivatives are almost exclusively done on the Ethereum blockchain utilizing a variety of ERC-20 tokens. 

Chromia is a blockchain platform that is popular in the crypto market for gaming DApps, but now Chromia is about to begin competing in decentralized financial markets with an upcoming DApp, Hedget. Hedget is an interesting project and it seems like it will provide a valuable service in decentralized financial markets (options). More important, however, is the fact that Hedget is built on Chromia; this creates an opportunity for competition between Ethereum and Chromia. 

Case For Competition

 It is important to keep in mind that the DApps themselves are actually in a highly competitive market, but most of this competition is within the Ethereum blockchain. This means that decentralized finance has a lot of intra-blockchain competition but there is a severe lack of inter-blockchain competition. Lack of inter-blockchain competition can create several problems such as monopolization, market inefficiencies, and stunt innovation.

A great example of market inefficiency in DeFi is already showing. At the time of writing this article the cost of transactions on Ethereum is sitting at 174.32 Gwei, which is an amount exponentially higher than what it was last year, 28.55 Gwei. More information regarding historic Gwei rates on Ethereum blockchain can be found on Ycharts.

Chromia making a leap into DeFi could be good for the entire industry, because Chromia could prove to be just the kind of inter-blockchain competition needed to resolve the issues lack of competition has created in DeFi. Also, the team at Chromia have mentioned Chromia can be good competition for Ethereum because their blockchain has far more scalability and will allow millions of people to utilize their Dapps while still being able to maintain relatively lower transaction costs. 


The Dapp that will pit Chromia and Ethereum against each other is Hedget, one of the first decentralized finance Dapps on Chromia. Hedget is meant to provide decentralized European-style options in the DeFi market. Decentralized options can be used to hedge against unexpected price fluctuations and act as a kind of insurance, especially for those who intend on holding tokens for longer lengths of time.   


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