Regulators are closing the door on the multichain era as firms are forced to re-evaluate their blockchain strategies. The cost and complexity of understanding and implementing multiple chains has caused many firms to reconsider their plans. As global blockchain leader Paul Brody of EY says, it costs up to $500,000 to add a new chain to their platform, and blockchain networks are constantly changing, making it difficult to stay up to date.
Liquidity has also become an issue and the lack of regulation combined with price manipulation has the SEC rejecting Bitcoin ETF applications. EVM compatibility is not a reliable factor in de-risking a chain’s adoption and may in fact, increase the risk.
The biggest regulated firms have limited their offerings to Bitcoin and Ethereum and are moving slowly in expanding that footprint due to increased regulatory scrutiny. Many firms have had to slash their burn rates and focus on compliance, signaling an end to the multichain era.
DeFiLlama, a scorecard that tracks nearly 140 different chains, shows Ethereum’s dominance of the DeFi market. With its high liquidity and the familiarity of the underlying ecosystem, Ethereum is the frontrunner in the crypto asset market.
The reality of the situation is that firms can no longer ignore the challenges posed by the multichain era. With all the looming regulations and costs, the blockchain market environment is undergoing a massive shift.
- Adding a new chain to a platform can cost up to $500,000
- The lack of regulation and liquidity has caused the SEC to reject Bitcoin ETF applications
- EVM compatibility may increase risk
- Biggest regulated firms are offering Bitcoin and Ethereum only
- Ethereum is the frontrunner in the DeFi market
Regulated firms are struggling to keep up with the ever-evolving blockchain network. With increasing costs and regulations, these firms have to focus more on compliance and control expenses. As a result, Ethereum has become the most dominant chain in the DeFi market.