This column has written in recent weeks about the surprising possibility that cryptocurrency markets might have become the new home for capitalism, in an environment where central banks and governments are intervening deeply in markets while picking corporate winners via emergency aid.
If anything, the ridiculousness of the recent weeks’ saga involving the deliciously named startup protocol SushiSwap shows that not only are market signals alive and well in digital assets, but competition is, too.
While from the outside these markets may seem like a den of rampant speculation, the innovative mania now taking place in the fast-growing arena of decentralized finance , known as DeFi, is providing a test of just how much the 11-year-old digital-asset markets can bear.
The proving ground for most DeFi projects is Ethereum, the second-biggest blockchain, preferred by many developers for its facilitation of “programmable money” through “smart contracts” – bits of programming that stipulate conditions under which transactions occur, as well as any outputs.
The ultimate goal of these DeFi systems is to automate the functions of banks and other financial firms, making them less expensive, more efficient and maybe even fairer in their allocation of capital. Put another way, entrepreneurs are trying to make a buck by building things they hope people will use.
DeFi applications have jammed up the Ethereum blockchain, roughly quadrupling median transaction fees, known as “gas,” since the start of the year. But as the research firm Dapp Radar points out in a new report, the network’s usage has continued to increase.