Three key events defined the Ethereum (ETH)-dominated decentralized finance (DeFi) space during Q2 2020. As mentioned in ConsenSys’ Q2 2020 DeFi Ecosystem Report, these events included: Bitcoin on Ethereum overtaking BTC on the Lightning Network (LN), three critical security incidents that led to $26 million in losses, and the release of COMP tokens and the yield farming craze.
In May 2020, the amount of Bitcoin on Ethereum (represented by tokens like WBTC which are a tokenized form of BTC) surpassed the amount of BTC on the LN, which is a layer-two scaling solution for the Bitcoin network.
As noted in ConsenSys’ report, this event was important because Ethereum developers argue that cross-chain interoperability is “anti-maximalist,” and is the “more likely future” of blockchain or distributed ledger technology (DLT).
The report added:
“The teams enabling the tokenizing of BTC on Ethereum have been embracing this belief (cross-chain operability will improve blockchains), and it is paying off. Also, Ethereum’s DeFi ecosystem has such a strong gravity that even BTC holders have been finding ways to use it.”
Compound, a leading DeFi protocol, introduced its COMP governance token during Q2 2020 (around mid-June 2020). COMP tokens have been distributed to Compound users, including borrowers and lenders, on a daily basis.
As mentioned in the report, the result has been that many DeFi users have been focused on maximizing their COMP yield (now called “yield farming”) by using various DeFi mechanisms to gain access to capital and then borrowing and lending (simultaneously in many cases by the same user, so basically “lending” funds to themselves) on Compound.
According to ConsenSys’ report, this event is important because:
“Yield farm ..
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