The State of DeFi - MONDAY ON-CHAIN

An overview of DeFi protocols - What’s going on in the Ethereum ecosystem?


Hey DEFI TIMES community,

What’s DeFi doing? Well, there is only one answer to this question: It’s going up! 

But not so fast. The whole DeFi narrative changed a little bit: Second layer solutions are on fire. Ethereum competitors are taking off! Binance Smart Chain is growing its user-base by several hundred percent per month!

When we talk about DeFi now… we most likely talk about new, exciting, and cheap alternatives to the Ethereum main chain: Polygon, BSC, Cosmos, xDai, and Polkadot!

All the hype around those cost-efficient alternatives makes us forget about what’s happening on the Ethereum main chain itself: the place where DeFi started out!

DeFi summer 2020 was all about Ethereum - not so today. 

DeFi emerged!

But now, it’s time to take a step back and take a look at what’s happening on Ethereum. How are the old DeFi projects doing?

  • Aave

  • Uniswap

  • MakerDAO

They all deserve our attention still! And it seems like.. They are growing just as fine!

Let’s dive in and explore the still flourishing health of the Ethereum based DeFi ecosystem!


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Total Value Locked (TVL) in DeFi

The very first metric everyone should take a look at when first getting started is the Total Value Locked (TVL) in DeFi. This metric is probably the single most important factor to determine the overall health of DeFi.

The TVL essentially tracks how much money people are willing to deposit into protocols like Aave, Compound, and Uniswap. When you deposit your funds in those protocols, you trust that the code is audited, and nothing bad is going to happen with your funds.

That’s why TVL tracks how much trust people have in DeFi - and as you can see, the trust in DeFi is almost at an ATH. $55 billion are locked in major Ethereum based protocols.

People trust DeFi with $55 billion - it’s insane to think about, especially when you consider that most protocols aren’t even one year old!

Another crucial metric is ETH locked in DeFi, which tracks the amount of ETH deposited into DeFi protocols. This metric is slightly different because it doesn’t depend on the USD price of deposited funds: When ETH goes up in value, the TVL (USD) automatically rises as well -  that’s why TVL (USD) doesn’t show the whole picture.

But, as you might have guessed… ETH locked in DeFi is also continuously increasing!

As of today, 10.8 million ETH are deposited in smart contracts - 9% of all existing ETH!

Now that we know that Ethereum-based DeFi is still flourishing, let’s take a look at the KPIs of all the major protocols. And what’s a better place to start than...Uniswap?

Uniswap is a Beast

Uniswap has been killing it since it first started in November 2018; However, it wasn’t until mid 2020 that it really took off! Since then, we don’t even compare Uniswap with other DEXs anymore… the real competitors are now the likes of Coinbase and Kraken.

Source: Uniswap Info (https://info.uniswap.org/home)

As you can see, Uniswap’s trading volume is almost at an all time high! DeFi summer 2020 seems to be a small and insignificant dent. 

Uniswap currently processes $1.3 billion in 24 hour trading volume - an unthinkable amount of money just a few months ago!

To compare, Coinbase currently processes around $4.9 billion and Kraken around $2.8 billion.

Uniswap is coming for them!

What’s Aave Doing?

Aave is another major DeFi protocol, and we should definitely consider it here. As discussed above, the main metric to keep in mind is the amount of ETH locked inside Aave.

Overall, Aave is doing just fine! When we zoom out, Aave has experienced a tremendous bull trend in ETH locked! Even though we see a little dip after the recent market pull back, investors are still putting a lot of trust in Aave.

This metric only tracks Aave’s performance on Ethereum. Recently, Aave also launched on Polygon with the following deposit options:

  • MATIC

  • USDC

  • USDT

  • DAI

  • WETH

  • AAVE

  • WBTC

Let’s see how Aave is doing there:

As I’m not aware of any good metric that tracks the growth of Aave’s Polygon version, this is their TVL in USD!

Almost $1 billion are deposited into Aave on Polygon - an impressive number considering the fact this protocol is not even a month old!

Aave’s growth on Polygon could also be a major reason why their TVL on Ethereum has been lagging in the last few weeks.

Just as Uniswap: Aave is doing amazingly well!

MakerDAO

Now, let’s take a look at the biggest protocol on Ethereum: MakerDAO. Maker lets you mint decentralized stablecoins, which are called Dai! Dai is always pegged to one USD. Users lock in collateral (ETH, BAT, USDC, and a lot more) in the Maker smart contract and borrow Dai. When their collateral shrinks in value so that Dai is not sufficiently backed, their collateral gets liquidated.

Maker is DeFi’s own FED -  that’s why it’s so important!

As you can see, Maker is by far the best performing DeFi protocol in the last few months. Almost $10 billion are locked inside their smart contracts!

The demand for trustless stablecoins is growing! 

As of today, 3.6 billion Dai have been minted - and the minting doesn’t seem to stop any time soon!

Maker is by far the fastest growing DeFi protocol. Why? Because it’s the backbone of Decentralized Finance!

Literally every single protocol builds on Maker in some way. You can trade Dai on Uniswap, deposit Dai on Compound or Aave, and participate in Pooltogether’s lottery using Dai.

Maker is the biggest - and probably most valuable - protocol on Ethereum. You can’t ignore the numbers.

Conclusion

While all the hype around cheaper Ethereum alternatives makes us forget about what’s happening on Ethereum itself, we cannot ignore the fact that the Ethereum ecosystem is still flourishing!

  • Uniswap processes as much trading volume as never before

  • Aave almost hit $1 billion in TVL on their Polygon implementation

  • Maker almost hit $10 billion in TVL; Dai will hit 4 billion in circulating supply soon

Ethereum still has the biggest and most used DeFi ecosystem to show! Other chains are catching up though and the narrative is shifting! But don’t forget about Ethereum just now. You can’t ignore the facts!


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DISCLAIMER: All information presented above is meant for informational purposes only and should not be treated as financial, legal, or tax advice. This article's content solely reflects the opinion of the writer, who is not a financial advisor.

Do your own research before you purchase cryptocurrencies. Any cryptocurrency can go down in value. Holding cryptocurrencies is risky.


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