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, Ethereums 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 farming took the DeFi ecosystem by storm in the last two weeks of the quarter. Crucial metrics like ETH locked and daily active users soared after being fairly stagnant earlier in the quarter. However, data suggests the frenzy did not bring many new users into DeFi, demonstrating that DeFis innovation must be paired with education and UX before we see the DeFi community grow beyond its current borders.

As confirmed in the report, Uniswap, a leading non-custodial Ethereum-based exchange, Lendf.me, a DeFi protocol, and Bancor, a decentralized liquidity network, all experienced serious security issues during Q2 2020, which led to $26 million in assets being stolen. Notably, most of these assets were returned by the hacker(s).

The importance of these hacks, according to the ConsenSys Codefi team, are that we should realize theyre inevitable in new or experimental technology.

They added:

The DeFi community continues to develop strategies to hedge against [hacks and security breaches,] including: auditing services, security products, and insurance applications. All of this is benefited by the OS nature of DeFi, which allows third parties to monitor DeFi dapps, provide suggestions, and analyze attacks to help protect the entire community in the future.

(The full report, which contains more details about the hacks and other key Ethereum DeFi events, can be accessed here.)

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Ethereum Dominated DeFi Space Experiences Steady Growth with Increasing Adoption of Compound and Other Lending Protocols: Report - Crowdfund Insider