This article reviews Ethereum, Tezos, Binance Smart Chain, HECO (Huobi), Solana, and Polygon (MATIC), the most popular blockchains for DeFi applications.
Blockchain is much more complicated than simply a place to trade Bitcoin. In DeFi, this technology is the place for numerous applications that can be used for various purposes.
The days when Ethereum was the only blockchain for smart contracts are long gone. Today, the blockchain ecosystem offers many different solutions, each with its own pros and cons. In this overview, we’ll show how the six most promising blockchains work these days.
TVL in smart contracts: $114,000,000,000
Ethereum is a global platform for decentralized applications. Many people choose this blockchain since its native cryptocurrency, Ether (ETH), is a well-known alternative to Bitcoin. DeFi projects are easy to start in Ethereum: you can write a set of smart contracts via the Ethereum Virtual Machine and use the experience of the largest community of core protocol developers and mining organizations. Nevertheless, this blockchain currently has very high transaction fees and a slow processing speed.
Consensus mechanism – Proof-of-Work: The task of confirming transactions and creating blocks lies with the miners, who put a dataset through a mathematical function to generate mixHash.
Ethereum for DeFi
Ethereum became the first widely adopted platform for smart contracts and decentralized applications, which means that it has the most developed ecosystem of products and many ready-made solutions for developers. As a result, Ethereum dApps have excellent compatibility and a huge user base. Like Bitcoin, whose primacy made it the leader in the crypto market, Ethereum has gained a big head start on other smart contract platforms, despite its technical shortcomings in the form of high fees and slow transaction speeds.
dApp examples on Ethereum
- Uniswap — the largest decentralized exchange in the DeFi industry and in the Ethereum ecosystem.
- Curve — a liquidity pool on Ethereum that was created for efficient, low-risk stablecoin trading.
- Aave — an open-source and non-custodial liquidity protocol for lending and borrowing.
|+ High level of decentralization
+ The largest ecosystem of products
+ A lot of ready-made solutions for developers+ Future Ethereum 2.0 upgrade
|– Scalability issues- Expensive transaction fees- Costly and energy-consuming PoW (PoS transition is planned in the future)
Binance Smart Chain
TVL in smart contracts: $20,000,000,000
After the Binance Smart Chain was introduced in September 2020, it became the most popular blockchain among DeFi newcomers. BSC is a hard fork of the Go Ethereum (Geth) protocol, which has a lot in common with the Ethereum blockchain. However, the BSC developers made changes in some key areas. The most significant was the BSC consensus mechanism, which allows for cheap and fast transactions. DApps and tokens created on BSC are compatible with the Ethereum Virtual Machine (EVM).
Consensus mechanism – Proof-of-Staked-Authority: BSC’s PoSA is a hybrid of Proof-of-Authority (PoA) and Delegated Proof-of-Stake (DPoS) algorithms. 21 predefined validators take turns creating blocks and receiving rewards.
BSC for DeFi
Thanks to its lower gas fees, faster execution, and huge popularity, Binance Smart Chain (BSC) already has numerous projects in the works and has become a key rival to the Ethereum blockchain. Since the fees on BSC are very low and the transaction speeds are high, yield farms are more efficient on Binance Smart Chain. Developers have also put a lot of effort into creating an ecosystem, supporting startups, and helping young projects gain a large user base. This is largely what BSC owes its popularity to.
dApp examples on BSC
- PancakeSwap — the biggest DEX built on top of Binance Smart Chain.
- Venus — a decentralized, algorithmic money market and stablecoin protocol.
- Bunny — a yield farming aggregator on BSC.
|+ The fastest-growing ecosystem+ Cheap and fast transactions+ Support from the Binance team+ Ethereum-like structure
|– Centralization- All network validators on BSC need to be approved by Binance- Binance is dependent on Ethereum’s innovation
Polygon (MATIC Network)
TVL in smart contracts: $6,300,000,000
The Polygon (Matic) Network is a Layer 2 scaling solution to Ethereum. Polygon merges seamlessly with Ethereum as an ecosystem. With Polygon, developers can easily create a dedicated blockchain network that combines the best features of stand-alone blockchains (sovereignty, scalability, and flexibility) and Ethereum (security, interoperability, and developer experience). Blockchains created with Polygon are compatible with all the existing Ethereum tools and can interact with each other and with Ethereum.
Consensus mechanism – Proof-of-Stake: Here, each individual token holder can participate in the governance. The user who creates the next block is determined by the amount they have staked.
Polygon (MATIC) for DeFi
Over the past year, interest in Polygon has grown significantly, leading to its acknowledgment as a competitive platform for dApps. The success of Polygon can largely be attributed to the fast and cheap transactions on its network: operations on Polygon are instant and hundreds of times cheaper than those on its older brother, Ethereum. In addition, project migration from Ethereum to Polygon is quite simple due their common underlying architecture. Many notable projects appear in the Polygon ecosystem, including SushiSwap, Aave, 1Inch, and more.
dApps examples on Polygon
- Adamant — a yield optimizer vault in which many farmers pool funds to earn the best DeFi yields on Polygon.
- QuickSwap — An Ethereum-built decentralized exchange on Matic Network’s Layer 2 scalability infrastructure.
- Polycat Finance — a yield aggregator on Polygon, which offers yield farming (farms & pools) and yield optimization (vaults).
|+ Low transaction fees+ Ethereum interoperable+ Very fast transactions
+ Staking rewards
|– Ethereum dependent
– Risk of decreasing popularity of Polygon after Ethereum 2.0 update- Competition with similar solutions (Cardano, Polkadot, Optimism)
TVL in smart contracts: Over $100,000,000
Tezos is a self-amending blockchain network designed to create and scale the use of smart contracts and decentralized applications. Thanks to the unique consensus mechanism on the network, Tezos allows seamless updates to improve blockchain parameters. The Tezos blockchain differs from Ethereum as it’s secured and ultimately managed by Tezos Bakers, has no computer storage, and includes Tezos staking where you delegate coins to Baker and earn between 5-6% per year.
Consensus mechanism – Liquid Proof-of-Stake: Transactions on the network are confirmed by Bakers (holders of over 8,000 XTZ). Unlike the classic Proof-of-Stake, on the Tezos network, any user can delegate their assets to the baker without locking them in a contract or transferring them to an external wallet.
Tezos for DeFi
The use of functional programming languages Ligo and Michelson to create smart contracts in Tezos makes it more safer and reliable. The smart contracts written with the use of functional languages can be mathematically proved, unlike imperative programming languages, where the developer writes specific step-by-step instructions. Low transaction costs and seamless network upgrades make Tezos a good choice for dApps.
dApp examples on Tezos
- QuipuSwap — the largest and main decentralized exchange on the Tezos blockchain.
- Plenty — a token-to-token DEX and yield farming platform in the Tezos ecosystem with TVL exceeding $46 million.
- Kolibri — a Tezos-based stablecoin built on Collateralized Debt Positions.
|+ Community-based governance+ Delegating without locking assets+ Tezos aims to provide safety and code correctness+ Seamless network upgrades
|– Low user base
– Underdeveloped DeFi ecosystem
– Low transaction speeds
Huobi ECO Chain (HECO)
TVL in smart contracts: $5,700,000,000
HECO, or Huobi Eco Chain, is a blockchain that focuses particularly on Ethereum developers. Similar to Ethereum, it adopts EVM and has smart contract compatibility. Chainlink is integrated into Huobi ECO-Chain as the oracle solution for all smart contract applications launching on the HECO blockchain. According to the HECO Chain developers, the transaction gas fee is so cheap that it can reach 1/18,000 of the Ethereum Gas fee. Another difference is a transfer from PoW to the HPoS consensus mechanism.
Consensus mechanism – Hybrid Proof-of-Stake: In this consensus mechanism, Proof-of-Work is used to produce new blocks, and Proof-of-Stake is used to validate transactions. In the HECO blockchain, there are 21 active validators.
HECO for DeFi
dApps on HECO boast low transaction costs, low transaction delays, and cross-chain asset transfers. Ethereum developers can use web3j, web3js libraries to build decentralized applications on HECO. The non-obvious benefits for dApp developers on Huobi ECO Chain include:
– High-quality projects can be listed on Huobi Global;
– Possibility to apply for marketing service packages;
– Opportunity to get an official news report supported by Heco.
The success of Huobi ECO Chain is ensured by the ecosystem of one of the largest crypto exchanges, Huobi Global, as well as its convenient interoperability with Ethereum.
dApp examples on HECO
- MDEX — a decentralized exchange that supports Ethereum, Binance Smart Chain, and Huobi ECO Chain.
- LendHub — the multi-chain, decentralized, secure lending platform of BSC and Heco, fork Compound.
- O3Swap — a proprietary cross-chain aggregation protocol that provides consumers with access to cryptocurrency-based financial services.
|+ Support from Huobi Global
+ Extremely cheap transactions+ Cross-chain asset transfers+ Ethereum interoperable
|– Centralization- Close ties with the Chinese government- Non-transparent elections of validators
TVL in smart contracts: $2.5 billion
Solana creators have worked hard on network throughput to make a very fast blockchain. Solana ensures composability between ecosystem projects by maintaining a single global state as the network scales. The incredible processing speed of the Solana blockchain (potentially over 50,000 transactions per second) has attracted several serious partners, including FTX and Alameda Research, Metaplex marketplace, and others.
Consensus mechanism – Proof-of-History: The proof of historical events validates transactions by assigning a timestamp that determines their order. Technically, each Solana validator maintains its own clock by encoding the passage of time in a simple SHA-256, sequential-hashing verifiable delay function (VDF). This provides cryptographic proof of the relative order and accurate time of each message in the historical record.
Solana for DeFi
Solana Labs has created an easy-to-use Solana-web3.js SDK that allows you to talk to the blockchain and Solana programs in a way that feels just like talking to any other API you’ve used. Many 3rd party SDKs have also been built on top of the JSON RPC API, such as Java, C#, Python, Go, Swift, Dart-Flutter, and Kotlin. Each of these SDKs gives you the power to build fully functional dApps on Solana in your favorite languages.
Decentralized applications built on the Solana blockchain form an incredibly scalable ecosystem of products, attracting users with cheap and instant transactions and the ability to use smart contracts.
dApps examples on Solana
- Serum — a decentralized derivatives exchange with cross-chain trading.
- NFT Solar — a social NFT Platform leveraging the Metaplex protocol.
- UPFI — a stablecoin pegged to the U.S dollar, built on Solana.
|+ Very high processing speed+ Cheap transaction fees+ Excellent scalability+ Ethereum interoperable
|– High hardware requirements for Nodes- Questionable distribution of tokens
– The Solana team is not transparent about certain aspects of their activity- Young technology, not yet tested by time
Basically, all six of these blockchains are good for DeFi. You can find interesting projects for your crypto investment activity in all of them. We recommend picking the consensus mechanism you find the most effective and fair and considering all the relevant data from the chain explorer to make an informed decision.
To explore the DeFi ecosystem on different blockchain protocols, you can use the following universal platforms and tools:
- Dapp Radar — an aggregator of dApps;
- Metamask — an extension multi-chain wallet;
- TheBlockCrypto — an analytical and research platform;
- Dapp.com — an aggregator of dApps.
No matter which blockchain you choose, the basic rule remains the same: do your own research and don’t focus only on the nice-looking numbers. Look for the value, ecosystem, use cases, and technical details. Don’t forget to learn about the team, the principles of protocol governance, and the technical capabilities of the network.
Remember, decentralized finance is a high-risk industry. Most decentralized applications are not regulated by laws, assets are highly volatile, and technical security is far from ideal.