Pt 2 — Chains
Tl;dr Just use Arbitrum or Optimism unless you have specific reasons for another chain.
If you are going to do DeFi, you have to do it on a particular chain. This brings the question, what blockchain should you use?
It used to be simple. There was Bitcoin and Ethereum. Now there is Ethereum Classic, Litecoin, DOGE, Cardano, Near, Monero, TRON, Binance Chain, Polygon, Tezoos, Algorand, Polkadot, Avalanche, Hedera, and others. These are just the Layer ones. With Optimism and Arbitrum came Layer 2 rollups and making a chain became very easy. Now there are hundreds of chains, with more starting regularly.
First, it is important to understand that most blockchains exist to make their investors' money. They are fundamentally investment schemes that masquerade as technical innovation. For these blockchains, user interactions are secondary. What they are really interested in is enthusiasm, momentum and liquidity. These blockchains will actively market to users and offer tokens and incentives. Remember, they are not really interested in the users, they are interested in the enthusiasm and metrics making the token go up. Your interactions as a user are not their priority.
Some blockchains exist solely to build enthusiasm to a centralized exchange. Base for CoinBase and Cronos for Crypto.com are examples.
Some blockchains are truly interested in advancing the technology level of blockchains. ZkSync Era with ZK proofs is an example. Most other ZK chains are just investor chains profiting on the enthusiasm of the ZK name.
This guide is targeted at conservative users. So what should be important for you? The priorities for users (in order) are safety, stability, inexpensive, have adequate liquidity and be fast. Let's dive in, one at a time.
Safety
A safe blockchain consistently does its job without surprises. The risk of surprises in the future should be virtually zero. What is its job? A blockchain should execute transactions or smart contracts consistently upon request. The output should be immutable and a record of each transaction should always be available.
A blockchain should have a management team that will evolve it to meet future requirements. By this, I mean it should be able to improve effectively.
Examples of safe blockchains are Ethereum, Arbitrum and Optimism. Examples of unsafe blockchains are Solana, Tron and Binance chain. Tron and Binance are run by small private operations. They have the ability to change the rules at any time, which makes them unsafe (by my definition). Solana is so fast, record keeping of transactions is spotty.
Stability
A stable blockchain must have a history of consistent operation and an organization structure that will ensure continued operation. It should be immune to most government interference. Here decentralization in blockchain operation and management is important.
Examples of stable blockchains are Ethereum, Arbitrum and Optimism (along with others). An example of an unstable blockchain is Solana, which has a history of unscheduled shutdowns.
Inexpensive
Transactions should be consistently inexpensive. Examples of cheap blockchains are Arbitrum, Optimism and Solana. An example of an expensive blockchain is Ethereum.
Adequate Liquidity
The blockchain needs adequate liquidity (in the assets you transact, more on assets later) so the your transactions take place without price impact. In most cases, that’s a low bar. However, as a general rule more liquidity is better. Ethereum has the most liquidity. Solana is second. Arbitrum has quite a bit. Optimism significantly less right now.
Fast Transactions
Faster is better. But, speed is rarely an important metric, as long as it is not slow. If the transaction is confirmed within 30 seconds, this is usually acceptable.
So what Chain?
Overall, I would use Arbitrum. It ticks all the boxes. I have some hesitation on Base as CoinBase is a US public company, it must follow US rules. I don’t like Tron because it is a private chain and the rules can change without warning. Arbitrum, as a Layer 2. gets the security of Ethereum with the speed and low cost of bundled transactions. For most uses it is the best chain. Optimism is a close second. I would avoid the ZK chains for the moment as the technology is still too new.
DeFiSafety is available to answer questions or give more detailed consulting as you advance in this process.
The next article starts the voyage on chain with the first step, exchanges.