DeFi’s impact on Ethereum will exceed ICO?

The decentralized financial market has largely withstood the economic storm this year and has further matured. Although the overall crypto market is still relatively flat, the development of DeFi is still impressive. This new financial pattern may have a much greater impact on Ethereum than IC0.

Ethereum provides the foundation for DeFi. It is currently a global standard for smart contracts, and various encryption protocols are built and run based on this standard. Well, since Ethereum is at the core of the entire financial landscape, the growth of this ecosystem will be very beneficial to it.

DeFi market grows rapidly 

According to DeFi Pulse data, the total value of the DeFi market is slightly less than 1 billion US dollars. However, according to the report of BlockBeats, the total market value of the DeFi market has exceeded 1 billion US dollars at least twice this year. The market plunge since 3.12 caused TVL to fall to US$550 million, but now the DeFi market has recovered 77%.


In just 18 months, if the U.S. dollar is used to value crypto mortgage assets, the value of DeFi’s mortgage assets has increased by nearly 300%. Of course, this number will change with the rise and fall of cryptocurrency prices, but its growth rate exceeds 110% of the total market value of the crypto market over the same period.

As far as ETH is concerned, it is the backbone of this new financial ecosystem. According to rhythm statistics, 2.5 million ETH are currently locked, accounting for 2.25% of the entire supply. Maker is undoubtedly the dominant force of DeFi (although Compound has gained momentum recently), accounting for almost half of the DeFi market share, with about 2 million ETH locked in Maker. Other popular platforms include Synthetix, Compound and Aave, which are currently distributing tokens. And interestingly, new platforms appear almost every week.

DeFi reached several important milestones in May. According to Rhythm, the number of new DeFi assets has exceeded 1,000, and DeFi’s user base has reached an all-time high of nearly 200,000.

Evgeny Yurtaev, CEO and founder of the DeFi project Zerion, released a chart showing that the monthly increase in DeFi assets is growing exponentially. “The increase in the supply of DeFi assets can be explained by Ben Thompson’s aggregation theory. Just like The impact of the Internet on content is the same as DeFi’s impact on finance. DeFi is a new financial technology.”


Another chart from Dune Analytics shows that since the beginning of this year, the number of DeFi users has almost doubled to nearly 200,000.


More powerful influence than IC0


More than one person holds the same view. Rhythm found that Chris Burniske, a partner of venture capital firm Placeholder, also believes that DeFi’s impact on Ethereum will exceed the impact of IC0 on Ethereum in 2017 and 2018: “The prosperity of IC0 has weakened Ethereum. Ability to provide financial services: early capital formation. DeFi’s flexibility will stimulate Ethereum’s ability to perform *all* financial services.”


The IC0 issuance provides a way for crypto projects to raise funds on Ethereum through token sales. Although this bubble is relatively small compared to traditional investments, it pushed the price of Ethereum to sky high, reaching US$1400 in January 2018.

Unfortunately, most of the projects that issue tokens have no “products” in the end. In addition, there is a lot of “hype”, which explains that during the 6-month period from the fourth quarter of 2017 to the first quarter of 2018, almost every cottage token suffered a big dive. By mid-2018, failed crypto projects began to sell off the Ethereum funds they received, causing prices to plummet by 94% that year.

Fast forward to 2020, there are more and more on-chain activities, especially for Ethereum. At the same time, DeFi has naturally achieved impressive growth without the frenzy or buying frenzy that occurred in previous years.

Traders and analysts pointed out that this growth will continue and is likely to exceed 2017.

Compared with 2017, the continued growth of ETH 2.0 and DeFi may bring higher capital flows in the next two months and 3 months. IC0’s prosperity will be replaced by another entrance. However, compared with the style of 2017, the encryption technology itself is still unnoticed. Each cycle will strengthen the previous narrative methods and introduce new narrative methods to further promote the transformation of users, suppliers, developers and investors.

DeFi expert Ryan Sean Adams compared DeFi to the stock market in his latest issue of Bankless newsletter. He said that the stock market pretends to be a capital asset, but in fact has become a savings account for the rich. The stock market is based on the Fed’s current actions and its continued efforts to artificially inflate by printing more banknotes.

Adams went on to add that DeFi has been around since 2017, but it was called IC0s at the time, as mentioned above. Since those crazy speculative days have passed, DeFi has matured in several ways. DeFi is now a complete financial ecosystem, not a speculator’s casino. It can perform a variety of operations, including payment, lending, borrowing, savings, trading, investment, profitability, management, hedging, and margin trading.

The economic bandwidth is expanding, the value of stablecoins is more than US$7 billion, and half of the value of ERC-20 tokens is built on Ethereum. As the scale of operations expands, real-time transactions can now achieve thousands of transactions per second. The cash flow generated by stocks is settled in the legal system, and the cash flow of these non-fixed assets of cryptocurrencies is settled on the chain. Now, we are injecting rocket fuel into DeFi assets by opening up new growth and governance mechanisms.

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