Article source: Felix
Author: A Fox in Web3, Crypto KOL
Compiled by: Felix, PANews (This article has been edited)
Decentralized Finance (DeFi) is often compared with Traditional Finance (TradFi), and it has become a vast and exponentially growing field in Web3. The goal of DeFi aligns closely with the often-heard phrase in the crypto space of 'providing banking services for the unbanked.'
The promise of providing global financial services without banks is a noble goal, and much of the allure of Web3 stems from this. This article aims to reflect on the development of DeFi over the past year from the current perspective.
Overview
Total Value Locked (TVL) reached $94.6 billion: the amount of locked funds across all DeFi protocols is enormous. However, considering the total market cap of the entire crypto sector is about $2.8 trillion, it only accounts for about 3.3%, indicating significant room for growth. Since last year, TVL has grown by approximately 1.5 times, to about $65.4 billion, but as a share of the crypto sector, it has remained quite stable, previously at 3.5%.
DeFiLlama's charts started in June 2018, less than 7 years ago, indicating that DeFi is still in its infancy. However, in November 2021, DeFi TVL reached an all-time high of $176 billion. We hope to see TVL reach this peak again.
Aave and Lido's TVL reached $35.6 billion: currently, over 37% of DeFi TVL is from the staked ETH in Aave and Lido. This indicates that both Aave and Lido dominate. Last year, Lido was in the lead, but later Aave took the lead. Additionally, most DeFi occurs on Ethereum, which remains the most important blockchain.
The market cap of stablecoins reached $236 billion: stablecoins hold over 8.3% of the $2.8 trillion crypto market, more than double that of DeFi. The growth rate of stablecoins continues to exceed that of DeFi TVL, indicating that they have truly achieved product-market fit.
The data in DeFiLlama is very rich, even overwhelming. Below, we delve into some of the categories and analyze the key points.
Leading Blockchains
Currently, Ethereum remains the main player in DeFi, accounting for 52% of TVL, but down from 58.3% last year. Solana, with 8% of TVL, is the second-largest competitor but is still more than six times smaller than Ethereum.
Solana and BSC have respectively overtaken Tron to become the second and third largest public chains, pushing Tron from second to fourth place. The number of active addresses on all three far exceeds that of Ethereum, with Solana having over 4.3 million addresses, while Ethereum has only 442,000.
Ethereum has the most DeFi protocols, currently over 1,320, up from over 960 last year.
The Bitcoin network has 58 recorded DeFi protocols, up from 12 last year. Considering Bitcoin is not designed for smart contracts, it still accounts for over 4% of all DeFi TVL, approximately $3.8 billion.
Leading Protocols
Undoubtedly, Aave is the leading lending protocol among several EVM chains like Ethereum, Sonic, Avalanche, and Arbitrum, but Morpho dominates on Base.
Most blockchains have their own lending and stablecoin projects. With many mainstream blockchains possessing their own protocols, re-staking is also developing, with the largest participants being Eigen Layer, but Pell Network has the widest coverage.
Stargate is the main cross-chain protocol in TVL across multiple chains.
Protocols on Ethereum dominate among similar protocols due to the vast trading volume of Ethereum DeFi.
Protocol Categories
Lending, cross-chain bridges, and liquid staking have the highest TVL, with relatively small gaps among them, ranging from $42 billion to $37 billion. Last year, liquid staking was far ahead, but the gap has narrowed, with lending and cross-chain bridges catching up.
Aave accounts for 44% of all lending, while Lido accounts for 43% of all liquid staking, making these two protocols the highest in TVL across the entire DeFi space.
The TVL of DEX is much lower, around $18 billion, where the leading protocols are Uniswap, Curve, and PancakeSwap, each operating on more than 9 EVM chains. Even with a lower TVL, this is the most profitable segment, with transaction fees reaching $5.9 million in the past 24 hours. Such profitability is not surprising, considering there are over 1,600 DEX protocols.
The cross-chain bridge category is mainly dominated by wrapped Bitcoin equivalents like WBTC and Binance Bitcoin.
Foundation and Treasury
The treasury held by the Ethereum Foundation is slightly above half of what it was a year ago, and it has seen a significant decline. Meanwhile, Mantle has a large treasury but is primarily valued in its own tokens.
Some Ethereum-related projects also dominate in total treasury, such as Aave, ENS, Lido, and Sky. However, they mostly hold their own tokens.
When excluding self-issued tokens, the rankings become more uneven. However, few treasuries are primarily based on stablecoins, so they are mostly affected by market fluctuations.
Yield
Most players deposit funds into Lido for yield, possibly because most people are confident in ETH as a long-term value storage tool, and Lido also dominates in liquid staking. Other ETH-based liquid staking protocols also dominate, such as ether.fi.
JitoSOL's staked SOL yield reaches 7.75%, surpassing all other leading yield products. Marinade and Jupiter's SOL annual interest rates are even higher, around 9%.
Sky Lending is the leading low-risk stablecoin choice in terms of TVL, with its SUSDS stablecoin holding over $2.5 billion and a yield of 4.5%.
DeFiLlama tracks over 15,000 liquidity pools across 468 protocols on 104 blockchains.
Fees
Tether and Circle's respective stablecoins are currently the largest fee-generating businesses in the crypto space. Tether alone generated over $5.8 billion in revenue last year.
Over the past year, gas fees on Ethereum remain one of the largest expenditure methods, with total fees not far off from Circle's, at $1.3 billion and $1.6 billion, respectively. However, Ethereum's fees are rapidly declining, not even making it into the top 15 in the past 30 days. Nevertheless, Ethereum-based protocols Lido and Uniswap are still earning high fees.
Solana's fee ecosystem has grown the fastest over the past year, with Jito, Raydium, and Pump.fun earning substantial fees. This is likely mainly due to the significant growth of memecoins on Solana.
Since last year, Bitcoin's transaction fees have decreased by about half, and with the rise of many other competitors in the fee market, Bitcoin's ranking has dropped from second to fourteenth.
Stablecoins
The total market cap of stablecoins has nearly doubled, rising from $136 billion last year to the current $235 billion. However, USDT and USDC still dominate, accounting for 62% and 26%, respectively, together making up 88% of the entire market.
The one with the largest growth share is Ethena's USDe, which, despite not being launched a year ago, has now become the third-largest stablecoin, holding 2% of the market share.
Sky issued the USDS token, breaking DAI's dominance. However, after merging the market caps of DAI and USDS, Sky holds a 3.5% market share, still the third-largest market participant.
USDT, USDC, DAI/USDS, and USDe together account for about 93% of the stablecoin market, with a market cap exceeding $220 billion.
BlackRock's BUIDL fund represents new entrants, indicating that TradFi also wants a piece of this market.
Funding
The DeFi sector has raised over $113 billion in funding, totaling 6,129 funding rounds. Funding peaked from the end of 2021 to early 2022 but has rapidly grown since then, exceeding $3.5 billion just last month.
FTX and Celsius are among the largest projects in the DeFi sector by funding, raising $900 million and $750 million, respectively, and are also among the biggest failures in the sector. EOS is similar, with its $4 billion funding almost failing to deliver.
Hacker Attacks
The DeFi sector has suffered over $11.2 billion in hacker attacks, with 25% coming from cross-chain bridges and the remainder from other DeFi companies and protocols.
In February of this year, ByBit suffered a hack, which was the largest single hack in crypto history, resulting in losses exceeding $1.4 billion. The second-largest hack occurred in 2022, targeting the Ronin Network, leading to a loss of $624 million.
The North Korean organization Lazarus is responsible for these two hack attacks, becoming the largest hacking organization in the crypto space.
Most large-scale hacks occur within the Ethereum ecosystem, likely because most of the liquidity in DeFi is concentrated in the Ethereum ecosystem.
Summary
Overall, the trading volume of DeFi is still mainly dominated by Ethereum and its EVM ecosystem (which has numerous L2s), from which DeFi has risen.
Solana has seen significant growth over the past year and is catching up, while Bitcoin has unexpectedly begun developing its own DeFi ecosystem, even though it is not designed to be a smart contract platform. The Tron ecosystem seems to have lagged behind other ecosystems, but Tron remains an important hub for stablecoin activity.
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