While the launch of the Ethereum 2.0 protocol is still months away from a complete launch, it appears that third-generation blockchains are eager to dethrone Ethereum as the ‘go-to’ hub for DeFi and dApps. A lot of people are recently discovering it, but the fact is that blockchain technology has been around for quite some time, enough for it to move from the first and second-generation to third-generation protocols that exist today. The first generation had obviously begun with Bitcoin, which had been proposed as an alternative to centralized finance. It established the foundation for launching a decentralized financial system, but the functionalities of the Bitcoin network were quite limited.
Moreover, it lacked interoperability and also needed immense computational power for operating. This resulted in the launch of Ethereum back in 2015, which marked the beginning of the second generation of blockchain protocols. The smart contract functionality was introduced by Vitalik Buterin on the blockchain, which led to a paradigm shift that allowed cryptocurrencies to become more practical instead of just being used as financial tools. Ethereum became the gateway to the world of decentralized finance, now known as DeFi. That was the start of the Ethereum domination and it has established itself as the go-to option for anyone wanting to introduce NFTs, dApps as well as DeFi projects.
Adopters and developers had embraced Ethereum and had launched their own ERC-20 tokens. Social media platforms had even begun discussing the possibility of Ethereum replacing Bitcoin in terms of market capitalization. However, it didn’t take long for the problems to become apparent on the Ethereum blockchain despite its success. Scalability issues popped up because of new projects entering the ecosystem en masse. The gas fees went up and transaction throughput was limited, which became an everyday issue. The founder of Ethereum, Vitalik Buterin has also shared his own doubts about Ethereum’s scalability.
An Ethereum 2.0 upgrade was proposed for offering solutions to the existing problems in the Ethereum network, but things haven’t been going as planned. Even though it had been scheduled for a rollout in 2019, the first phase began in December 2020. There are still two more phases to go, which means the full-fledged release would probably happen in 2022. While layer-2 scaling solutions have been introduced, but they cannot fix the problems pertaining to the core mechanisms and this is where third-generation blockchain protocols come in. Some of these are designed to complement existing blockchain networks, others are completely new and boast a wide range of functionalities and features.
From innovative consensus mechanisms to multi-layered architectures, these third-generation blockchain protocols are fast, highly interoperable, efficient and fully capable of resolving any scalability problems. There is no denying that Ethereum led to the defi boom and the protocol is still dominating the market, but its authority is going to be challenged with third-generation blockchain protocols being used for developing new defi projects. The next boom is probably going to come from some of the emerging chains that are more focused and agile than earlier innovations in the market.