Total DeFi TVL is off 16% from peak, but market players argue it's just a bump on the way to growth
The bears might have you believe it’s a down market for decentralized finance (DeFi) chains, with total value locked across all decentralized finance (DeFi) chains down from all time highs, but that hasn’t been true for most of the major protocols over the past week.
Of the top 100 chains, only 18 have lost value over the past seven days, according to DeFi Llama data. The rest, it appears, are riding a rising wave on the back of demand and early adopter enthusiasm.
Blockchain protocol Terra hit a new TVL peak on March 22 at $27.45 billion, rising over 68% from a month earlier, and Curve, a decentralized exchange liquidity pool on Ethereum, took the No. 1 spot in terms of TVL, seeing a 13.4% increase from a week ago to $20.41 billion.
Total value locked, or TVL, across all DeFi protocols is the sum of all staked crypto assets that are earning rewards, interest and so on.
The total amount locked on chains has dropped about 16% from a peak in early December 2021, but market players feel the DeFi space is still in its early stages and has room to grow.
“At a high level, TVL is a good indication of the trust that users have in the various DeFi protocols, namely the blue chip ones like Maker, Aave, Uniswap,” Derek Lim, head of crypto insights at crypto exchange Bybit said.
“It is also representative of the users’ recognition that DeFi protocols do have some substantive value-add. However, although TVL does paint a certain picture of the DeFi landscape, it doesn’t paint a full one.”
FAQs
DeFi protocols consist of standards, codes, and procedures that govern decentralized financial applications. SaucerSwap is the first decentralized exchange built on the Hedera network and offers single-sided crypto staking. Other top protocols are 0x Protocol, UniSwap, Curve, Dydx, Maker, Oasis.
Why is DeFi down? ›
Infrastructure and consumer subsector tokens are also underperforming, according to Arch indexes. Traders have been better off holding ETH than DeFi tokens in the bear market.
What is the difference between DeFi and crypto? ›
The biggest differentiator between DeFi and Bitcoin is their concept. While DeFi is a decentralized financial services system, Bitcoin is a cryptocurrency. Simply put, DeFi is the environment that facilitates Bitcoin transactions between two individuals or parties.
Can the complexity of some DeFi protocols make it difficult? ›
Protocol complexity: The complexity of some DeFi protocols can make it difficult for average users to fully understand the mechanisms and associated risks.
How do DeFi protocols make money? ›
Decentralised Finance (DeFi) protocols are applications on the Ethereum blockchain that offer financial services such as trading, lending, and borrowing. They generate revenue through various methods, including transaction fees, interest from loans, and trading fees.
What is the largest DeFi protocol? ›
What are the best DeFi protocols in 2024?
| Protocol | Category | TVL |
|---|
| Uniswap | Dex | $3.2 billion |
| Summer.fi | Lending | $2.1 billion |
| Curve Finance | Dex | $2.1 billion |
| Compound Finance | Lending | $1.8 billion |
6 more rowsAbsence of Consumer Protection and Regulatory Frameworks
In 2021 alone, over $10 billion was lost to DeFi scams. The absence of a regulatory framework also complicates issues like tax collection and anti-money laundering efforts, creating a challenging environment for both users and regulators.
Is DeFi good or bad? ›
Complexity and User Error: DeFi can be complex and challenging to understand, even for experienced users. One small mistake, like sending funds to the wrong address or interacting with the wrong smart contract, can lead to a total loss of funds.
How much money has been lost in the DeFi? ›
“Hacks of DeFi protocols largely drove the huge increase in stolen crypto that we saw in 2021 and 2022, with cybercriminals stealing more than $3.1 billion in DeFi hacks in 2022. But in 2023, hackers stole just $1.1 billion from DeFi protocols,” the researchers said.
Is crypto DeFi risky? ›
Faulty smart contracts are among the most common risks of DeFi. Malicious actors eager to steal users' funds can exploit smart contracts that have weak coding. Most decentralized exchanges enable trading through the use of liquidity pools. These pools generally lock two cryptocurrencies in a smart contract.
DeFi attempts to eliminate the fees banks and other financial service companies charge while promoting peer-to-peer transactions. DeFi, like the blockchains and cryptocurrencies it supports, is still in its infancy.
What is the purpose of DeFi coin? ›
With DeFi, you can do most of the things that banks support — earn interest, borrow, lend, buy insurance, trade derivatives, trade assets, and more — but it's faster and doesn't require paperwork or a third party.
Why will DeFi fail? ›
DeFi's vulnerabilities are severe because of high leverage, liquidity mismatches, built-in interconnectedness and the lack of shock-absorbing capacity.
What are the weaknesses of DeFi? ›
Now let's look at the disadvantages of DeFi:
- Low optimization and many bugs. ...
- Most DeFi applications are slow because blockchains don't run as fast as their centralized equivalents. ...
- Hacking attacks. ...
- Changes made to the blockchain are irreversible.
- Network users are responsible for any mistake they make.
1 Smart contract bugs. One of the main risks of DeFi is that smart contracts may contain bugs or vulnerabilities that can be exploited by malicious actors or cause unintended consequences.
What is the DeFi 2 protocol? ›
DeFi 2.0 is a new phrase in the blockchain world that refers to a subset of DeFi protocols built on prior DeFi breakthroughs like yield farming, lending and other things. Many on-chain systems with native tokens experience liquidity constraints, which is a crucial focus of notable DeFi 2.0 implementations.
Is MetaMask a DeFi protocol? ›
DeFi with MetaMask
With MetaMask you can step into this global financial ecosystem easily to swap, stake, and earn yield on your tokens. Swapping tokens is easy and safe with MetaMask. Utilizing data from decentralized exchanges and market makers is aggregated within the wallet for you to get the best prices.
What are DeFi asset management protocols? ›
Asset management in DeFi refers to the strategic oversight and optimization of digital assets within the decentralized ecosystem. In the world of DeFi, users can engage in various financial activities, such as lending, borrowing, and trading, without relying on traditional intermediaries like banks.
