One of the best things to have gone in Ethereum’s favor in 2020 is the massive growth of the decentralized finance (De-Fi) space because it has helped in propping up the network, along with Ether, its currency. However, this surge is now giving a boost to a number of other Ethereum-affiliated products. This includes Metamask, the leading wallet provider, which has achieved a significant milestone, thanks to this growth. A browser wallet application based on Ethereum, Metamask had announced earlier this week that for the first time, they had recorded one million monthly users. When making its announcement, a number of De-Fi protocols were mentioned by the wallet application.
These included Aave, Uniswap, Curve, and Uniswap, and were credited with being major drivers of its growth. The developers of the wallet application also said that they were committed to supporting De-Fi projects as much as possible. The last few months have been quite good for both De-Fi and Metamask. The wallet managed to triple its user base since February and during this time, the total value locked in De-Fi has increased by 1000%. Currently, Ethereum and De-Fi have a beneficial and strong relationship. Its currency, Ether, is thriving as it has been adopted by developers and the price of the asset has also stabilized over time due to a surge in De-Fi adoption.
With the exception of the market reactions and unusual swings, Ether has proven to be a solid crypto investment for any potential crypto investor in 2020. However, there is a steep cost associated with this relationship. Ethereum has become a lot less scalable because of the boom in the De-Fi sector. Data from Glassnode that was obtained early last month confirmed that the gas fees on Ethereum had reached $500,000 an hour, which is extremely high. Simultaneously, Ether had consolidated by nearly 10% within 24 hours, which caused it to sit at $486.
A lot of people are of the opinion that this increase in network activity was primarily due to SushiSwap, which is a fork of Uniswap, the top decentralized exchange. It was able to cross the billion-dollar mark in total value locked in a single day. Although miners will certainly benefit from the increased network activity, it does highlight the ever-present issue of sustainability and scalability on the network. There is no doubt that De-Fi has played a very important role in an Ether bull run, but it has also led to a lot of technical difficulties.
With activity surging in the decentralized sector, the Etherum network will soon reach capacity. If the network becomes congested, transactions could go unconfirmed, which will lead to longer wait times and also increase transaction fee. If this problem is left unchecked, it would have an impact on the usability of smart contracts. This outcome could create a significant problem, as the entire operation on Ethereum depends on the ability of its smart contracts to work. For now, De-Fi cannot ditch Ethereum and switch to a different network either.