The total value bound in DeFi protocols has reached an all-time high across all chains.
Although NFTs have attracted the most attention this week – thanks to high volumes and spectacular sales of Art Blocks and Bored Apes – decentralized financial protocols have quietly attracted larger amounts of capital.
The Total Value (TVL) locked in DeFi logs across all blockchains hit an all-time high of $ 157 billion this week. This is shown by data from DeFi Llama.
DeFi refers to blockchain-based applications that enable a range of financial transactions – from lending and borrowing to derivatives trading and asset swaps. Although DeFi began on the Ethereum blockchain, it has since expanded to other blockchains with smart contracts. The biggest among them: the Binance Smart Chain and Solana.
When traders, investors, or speculators use a DeFi lending platform like Aave or Compound, they are depositing crypto assets they own for others to borrow. In return, they receive crypto rewards that correspond to a share of the interest. The assets “released” form the Total Value Locked (TVL) – a controversial metric that some say is excessive because it counts the same assets multiple times.
Ethereum remains the leader
In all of the networks covered by DeFi Llama, Ethereum remains the leading blockchain in terms of TVL with $ 114 billion tied in the various protocols. On August 22nd, it hit a record $ 117 billion.
It’s worth noting that this is a dollar number. However, DeFi protocols do not trade in fiat, but create cryptocentric economies. DeFi Llama calculates that 36 million ETH (worth 114 billion dollars) are floating around in Ethereum-based protocols. This means: The increase in the DeFi value of Ethereum is at least partially related to the increasing value of ETH. It’s over $ 3,200 after spending most of the summer under $ 3,000.
The same goes for Binance Chain with $ 19.3 billion in TVL. A third of that comes from the decentralized exchange PancakeSwap – a place where you can find and list all kinds of smaller coins and tokens. BNB’s value is up 65% in the last month, helping the dollar’s value hit its highest level since May, during the final days of the bull run.
Similarly, Solana TVL hit an all-time high, breaking the $ 2.5 billion mark three times this week. Its top log, with 35% of the action, is the Raydium decentralized exchange.
Terra Blockchain, a payment platform for stablecoins, has passed the $ 6 billion TVL mark for the first time. The increase was supported by a 250 percent price increase for the governance token LUNA. Governance tokens allow their holders to vote on changes to the protocol – from interest rates to marketing budgets.
Polygon is 50% below the highs
The Avalanche network now also has a rising token. However, its jump from TVL 163 million to $ 1.84 billion is due to a $ 180 million liquidity program launched last week. Such programs create incentives for users to secure their cryptocurrencies in order to receive bigger rewards than usual. It apparently works.
As these networks accelerate, the second scaling solution, Polygon, falls behind. While it still accounts for $ 5 billion in TVL, that’s less than 50% of the high it hit in June. In the past few months, it has lost half of the ETH invested in the network. Polygon, built on top of Ethereum, aims to take the pressure off the network. It is known for its slow network speeds and exorbitant transaction fees during periods of high usage.
A disturbing sign of polygons is the recent numbers. They show that DeFi traders are increasingly willing to do their business outside of Ethereum – provided the price is right.
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Last updated on August 26, 2021
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