The Rise of DeFi on Cosmos and Relative Valuations: Part One

A wise man once said a rising tide lifts all boats with DeFi painted on the side.

DeFi’s breakout quarter and the liquidity mining frenzy has benefited once-stagnant projects in the sector and has prompted others to pivot towards lending or similar services seeking the same treatment. So far, it’s been an effective strategy.

For the most part, these gains haven’t escaped the Ethereum ecosystem. It’s a logical outcome considering Ethereum houses almost all on-chain lending and trading activity, and the network’s composability standards and deep liquidity pools make switching costs prohibitively high. Even Ethereum’s bevy of layer-2 scaling solutions, the hailed saviors to the network’s fee woes, haven’t been able to attract significant volume as moving up a layer would break the money legos bond.

Challenges aside, one potential avenue for Ethereum competitors to brute force adoption is to capitalize on the growing DeFi trend. In short order, Cosmos has quietly amassed the likes of Band Protocol, Kava, Terra, and THORChain, which in many ways mirror the offerings of Ethereum’s DeFi protocols. They also represent the critical infrastructure pieces required to build a decentralized financial ecosystem.

Despite the similarities, these Cosmos-based chains have market capitalizations that have been historically lower than their Ethereum counterparts. Several of them though have started to see some lift in the markets, suggesting DeFi enthusiasm is beginning to bubble over into other networks. This current valuation disparity makes it worthwhile to explore the relative value of the Cosmos ecosystem to that of Ethereum.