Cryptocurrency is becoming mainstream, DeFi enters the era of hundreds of billions of dollars in market value

With the listing of Coinbase, many analysts are looking for a valuation of 100 billion. Coinbase achieved this goal briefly after listing, but COIN has now stabilized at a not-so-high valuation.

At the same time, CoinGecko calculated the total market value of DeFi to be 128 billion U.S. dollars. DeFi is a subdivision of the cryptocurrency industry, which almost completely represents various lending, trading, and betting activities that use tokens as revenue and collateral on the blockchain network. The top five tokens on the CoinGecko list are UNI, LINK, LUNA, AAVE and CAKE.

The following chart from CoinGecko tracks the market value of all DeFi tokens.


 Figure | Market value of all DeFi tokens (Source: CoinGecko)

It is worth noting that Coinbase listed DeFi as a potential competitor when applying for a public listing, but for whatever reason, market value is not the way we usually talk about the DeFi market. Usually we are talking about the amount of funds deposited by users into the DeFi agreement.

But this indicator gives a similar interpretation: there are currently more than $100 billion in assets locked in DeFi.

This amount of lock-up is very large, and it is worth reviewing to clarify a story that even though cryptocurrency has begun to become mainstream, it is still neglected.

At CoinDesk, we have always focused on Ethereum’s DeFi, because DeFi originated from Ethereum, and the most famous entrepreneurs are committed to developing and operating on Ethereum.

The above asset value stored in DeFi is called the total lock-up value (TVL). At the time of writing, the TVL on Ethereum was $66 billion, more than double the $15 billion on January 1.

At the same time, DeFi has also achieved great success on Binance Smart Chain BSC. According to defstation reports, the current TVL scale of BSC is 38 billion U.S. dollars, and PancakeSwap has the largest lock-up scale, followed by a currency market similar to Aave and derivative solutions similar to dydx.

The growth rate of DeFi on BSC is much faster than that on Ethereum, and BSC reached a TVL of $1 billion at the end of January.

 DeFi vs. ICOs

The following chart compares the funds that Ethereum has entrusted to many DeFi smart contracts in the past year or so with the funds raised by the founders of various projects in 2017-2018:


Figure | ICOs v DeFi (Source: CoinDesk Research)

It is worth noting that when this graph was made, DeFi Pulse was updating its way of tracking Yearn Finance’s TVL, so these numbers are not included in this graph. However, according to Year’s own statement, it already has billions of dollars in funding.

Although the DeFi wave in 2020 is called “DeFi Summer”, the market now is obviously much larger.

For example, TVL exceeded US$1 billion for the first time in February 2020. In September of this year, the TVL on Ethereum exceeded $10 billion. Earlier this month, the money market platform Compound has already surpassed $10 billion on TVL on its own strength.

On Tuesday night, the veteran of the DeFi protocol and stablecoin maker MakerDAO also exceeded $10 billion for the first time.

1 million DeFi users? Or 2 million?

Richard Chen of 1confirmation, a venture capital firm, has been using Dune Analytics to collect on-chain data about users. Here is a chart worthy of special reference:


 Figure | DeFi Total Wallet Address (Source: Richard Chen)

The picture shows that at least 2 million wallet addresses have interacted with the DeFi protocol. So this could mean more than one million users, or even close to two million? This is difficult to say, but it is also worth noting that sometimes individuals also participate in DeFi through third parties. Therefore, although some users have many wallet addresses, some wallets may also represent many users (exchange proxy addresses).

Regardless of the number of real users, the amount of money that changes hands indicates that these applications are real businesses. The Crypto Fees website has been tracking the usage fees of different DeFi applications. It lists the most popular DeFi applications (Uniswap, SushiSwap, and Compound), showing that the average daily charge for 7 days ranges from US$1 million to US$4 million.

If there is one kind of finance that everyone understands, it is lending. The blockchain software company ConsenSys has just released its first quarter report on Ethereum DeFi, demonstrating the growth of the lending market:

1619860063480610Figure | DeFi lending on Ethereum (source: ConsenSys first quarter DeFi report)

DeFi represents a more credible narrative, suitable for more substantive businesses, because it showcases products with real returns, and provides a way for people to get a decent return on deposits, rather than making crazy bets. Note and greedy expectations.

Crazy gambling is the best way to describe most of the investments that occurred in the 2017~2018 ICO boom. That boom promoted the previous round of bull market, and the public can easily participate in it, so they can understand the connection.

Four years later, the cryptocurrency industry entered a bull market again, but the public seems unable to associate DeFi with this bull market in this new iteration of finance. Regardless of the reason, the main topic is the price of Bitcoin, as well as NFTs and Dogecoin.

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