The historic tax burden plaguing the Ethereum blockchain is forcing one of the hottest projects in decentralized finance (DeFi) to consider a runaway train change.
A strategic sidechain
According to CTO Ben Chan, digital asset-based company BitGo is in the process of "contacting" community partners to build an Ethereum sidechain due to increased fees. BitGo's flagship product, the Wrapped Bitcoin (WBTC), is an ERC-20 token with a 1-1 bond on bitcoin.
It currently insures around 46.000 BTC worth just over $ 500 million through a custody patchwork - here it is quotation in real time. “During the time this white paper was written, we wanted to consider potential solutions to rate increases.
What we have seen this year is that the traction of the WBTC came in large part thanks to the highly composable DeFi industry, ”said Chan. "We will contact community partners to see if they are interested in undertaking a sidechain together."
Ethereum fee pressures have continued to rise over the past six months, reaching all-time highs on August 13. A general technical solution remains months or years later.
As for timing, Chan said BitGo is "not committed to anything in 2020". He said the hardest part of the venture is not technical, but community developer organization (it's worth noting that the definition of generic sidechain remains a highly controversial issue in developer circles). “Community building and operating overheads are what we anticipate will take the longest, and that's hard to estimate,” Chan said.
Is DeFi moving to other blockchains?
DeFi, the latest achievement from Ethereum, has led many competing blockchains to catch up in operations. For example, last April the Tezos community launched its own wrapped bitcoin project.
But there are at least three other larger blockchain players who are approaching Ethereum from a more technical route: entry-level interoperability. For the NEAR, Polkadot, and Cosmos protocol, composability with the Ethereum virtual machine (EVM) could allow consolidated billion-dollar DeFi projects such as Compound or Aave to abandon ship.
NEAR describes itself as a more developer-friendly and EVM-compatible alternative, while Polkadot continues to market itself as a "protocol by protocols" and has at least one Ethereum / Polkadot link in the works.
Cosmos now has a project running too. This week, development houses Chainsafe and Tendermint released Ethermint, an EVM-compatible project built on a variant of the proof-of-stake (PoS) consensus algorithm called Tendermint. The concept of modularity means that the project “supports smart contracts and Ethereum resources”, said Federico Kunze, developer of Cosmos.
