Few predicted the swift acceleration in the decentralized finance (DeFi) economy this year. The fervent activity in the space has sent DeFi assets – equivalent to almost twice the size of the . Similarly, assets under management held by Decentralized Autonomous Organizations (DAOs) have hit bumper levels, supported in large part by the continued growth in the decentralized economy.
Ethereum, the rails on which most open finance and DAO governance runs, needs to keep pace. Soaring DeFi transaction levels are adding significant demand and strain to the current network, with many DAOs adversely impacted by higher voting costs and slower transactions.
As things currently stand on Ethereum, only the most liquid, hyperconnected protocols will be able to thrive under the current demand on the network.
Back when the Aragon project released its first on-chain voting implementation, it cost just a few cents worth of (ETH) to vote. Now, with Ethereum being congested, it can cost up to $30 for a user or token holder to place a single vote.
The network congestion on Ethereum inspired the Aragon community and Balancer Labs to devise a via the Snapshot DAO governance tool. The solution arose not out of choice, but out of necessity for the respective communities.
Before a scalable version of Ethereum arrives in Ethereum 2.0, it’s likely many social innovators, DAOs and DeFi protocols will look to off-chain systems to meet their needs.