Ethereum Blocks Don’t Enough Space For DeFi Applications

The Ethereum blocks are not enough for the Defi applications according to the data from Covalent. The reports say that the DeFi importance is growing each day and it could even overtake the Ethereum value transactions in the long run.

Because of the lack of scalability of Ethereum 1.0, the various transaction types are now more cannibalized which means the gas fees will be increasing as well.  The decentralized finance on the Ethereum blockchain has the reputation to become something that could surpass ethereum and will leap into the mainstream quickly. The Ethereum incubator ConsenSys believes that the DeFi applications will reach a billion dollars in value in the near future. However, there is a long way to especially since Ethereum crashed and there are continuous problems with MakerDAO.

The adaptation curve points steeply as Camila Russo of the ‘’The Defiant’’ noted in an analysis. The DeFi transactions could even take up an increasing share of the ETH block size but this could only become a bigger problem for the scalability of Ethereum 1.
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0. Russo noted that there are three different types of transactions in the Ethereum network which can be differentiated by gas fees and can be divided into value transfer of ETH and complex transactions for smart contracts.

Russo used the data from Covalent and summed up the aggregated gas fees from the Genesis block of March 25 for every transaction type per month which reached 665 million transactions. The typical complex transactions are the ones produced by DeFi applications, DAOs, NFTs, and games. Russo predicts that this trend will continue and the use of ETH as money will drop while the complex transactions will dominate the ETH blockchain. This trend could also flip and complex transactions will overtake all of the ETH transfers.

However, there is an upper limit on the amount of gas for all three types of transactions that can enter into the Ethereum blocks. In perfect scalability solutions, all types of transactions can grow but in order for Ethereum to grow, the others have to be destroyed. The growth of the DeFi sector and the increasing block size demand will become quite expensive so there has to be more scalability achieved with Ethereum 2.0.