The Total Value Locked in DeFi Reaches $52 Billion
The decentralized finance (DeFi) sector has experienced a resurgence, with the total value locked (TVL) across DeFi protocols reaching a new yearly high of $52 billion. This level hasn’t been seen since the days before FTX collapsed in November 2022.
Despite the turbulent history that has plagued the sector, including the downfall of FTX and other firms like Terra, Three Arrows Capital, and Celsius, both centralized and decentralized finance protocols have shown signs of recovery.
DeFi has seen significant growth in recent months, with TVL jumping from around $38 billion to its yearly high of $52 billion. This represents a 36% increase in dollar terms.
It’s important to note that the TVL metric is influenced by asset price volatility. The recent uptrend can be attributed to the rising market values of major cryptocurrencies like Bitcoin and Ethereum, as well as increasing inflows from investors.
DeFi Improvements
In addition to market recovery, specific improvements and upgrades within certain DeFi protocols have contributed to the recent TVL jump.
In 2023, there was a significant rise in real-world assets (RWAs) within DeFi, particularly at MakerDAO. The integration of approximately $2.5 billion in RWA collateral, primarily U.S. treasury bills, supported the Dai stablecoin and reduced dependence on centralized stablecoins like USDC. MakerDAO’s value locked has surged to over $8 billion, accompanied by an increase in annualized revenue.
Maker also introduced Spark, a lending protocol that gained significant inflows. Users can deposit their DAI stablecoins using the DAI Savings Rate (DSR) and exchange them for sDAI to earn interest while maintaining liquidity.
Other improvements include the emergence of liquid staking protocols like Lido Finance, which allows users to earn rewards without locking up their Ethereum with validators. Lido remains the largest DeFi protocol by TVL, with over $21 billion in deposits. Additionally, Uniswap launched its v3 protocol, offering enhanced capital efficiency for on-chain traders.
Hot Take: The DeFi Sector Bounces Back and Shows Promise
The resurgence of the DeFi sector is a positive development, indicating its resilience and potential for growth. Despite past challenges and uncertainties, the TVL reaching a new yearly high demonstrates renewed confidence from investors and users.
Improvements within specific DeFi protocols, such as MakerDAO’s integration of real-world assets and the introduction of lending platforms like Spark, have contributed to the sector’s recovery. Additionally, the launch of Uniswap’s v3 protocol and the popularity of liquid staking protocols like Lido Finance showcase the continuous innovation within DeFi.
As major cryptocurrencies continue to gain market value and more investors enter the space, it is likely that the TVL in DeFi will continue to grow. This upward trend bodes well for the future of decentralized finance.
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