DeFi Is Growing at a Consistent Pace Despite the Unattractiveness of the Ethereum Network

Godfrey  |  Feb 17, 2021

The term decentralized finance (DeFi) has become a common term in crypto space today, signifying a group of projects with unique financial product alternatives. DeFi has seen increased acceptance in the past year and the growth that was sparked since then has been taken to a new level this year.

There are a few metrics to determine by how much the growing niche of DeFi is plunging today, and of all, the total value locked in all of the platforms is the most basic. Decentralized Finance platforms offer a wide array of services to wrestle relevance away from today’s traditional financial institutions. 

These services range from but not limited to lending as seen in Maker, Aave, and Compound amongst others, derivatives as seen in Synthetix, and Decentralized Exchanges as modeled in Curve Finance, Uniswap, and SushiSwap, respectively. As measured by the DeFi data aggregator, DeFi Pulse, the total value locked (TVL) in USD on all decentralized finance platforms has topped $40.26 billion, up from $15.509 billion at the start of the year.

To understand how space has accumulated this much valuation, a look at individual growth is pertinent.

DeFi Growth as Heralded by Its Lead Projects

The growth seen in the DeFi world is championed by Maker with over 16% dominance of the space per TVL. Also, Aave, Compound, Curve Finance, and Uniswap make up the top contributors to the growth of the ecosystem with more than $4 billion locked in each of the projects.

The locked value denotes the total amount of funds that are deposited in each project’s smart contracts, and those values are always changing. It gives a snapshot of how well embraced each project is. The influence of other projects is not negligible also as many of them have great fundamentals that are positioning them for faster growth.

The majority of the DeFi projects have a community governance token, which is also seeing increased growth, placing the DeFi ecosystem in the spotlight in contributing to the skyrocketing market capitalization of the global cryptocurrency industry. 

The DeFi ecosystem has a total of 51.458k Bitcoin (BTC) locked and 7.7 million ETH. Both grew from 32.1k BTC and 7.2 million ETH at the beginning of January, respectively.

DeFi Growth Is Despite the Flaws of the Ethereum Network

The growth of the DeFi ecosystem is despite the current flaws of the Ethereum network embodied in the lack of the required scalability and heightened transaction fees. With the average fees as high as $10 in February, according to BitInfoCharts, the likelihood of building non-attractiveness for the network users is high.

Nonetheless, this factor has not slowed down the growing number of DeFi investors, as the prospect of the entire network, through the launch of the beacon chain is promising. The Beacon Chain is the first stage in the proposed migration of the Ethereum Network from utilizing the Proof-of-Work (PoW) algorithm to the Proof-of-Stake (PoS) model, a system known as Ethereum 2.0. The PoS will attempt to solve much of Ethereum’s challenges with a sharding technology.

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