2020 has been a success story for the decentralized finance [DeFi] ecosystem. DeFi has been around for a couple of years but it gained massive traction in the second and third quarters of this year and the overwhelming rise was reminiscent of the previous ICO boom.
Adding yet another feather to its cap, the total value locked [TVL] in DeFi surged to a whopping $12.58 billion on the 25th of October. This surge coincided with the latest bullish price action of the cryptocurrencies which triggered optimism in the space. Uniswap with a TVL of $2.68 billion and dominated the charts by 21.65%. The popular DEX was followed by Maker with $2.13 billion, WBTC with $1.44 billion, Aave $1.13 billion, and Compound with $1.08 billion in TVL respectively.
Ethereum [ETH] locked in DeFi also spiked as the altcoin surged above the $400-level more than a month later. According to DeFi Pulse, the figure was recorded to be at 9.008 million Ether at the time of writing. BTC and WBTC locked in also noted a mild surge to 171.2K.
What has further legitimized the DeFi space is the foray of some of the big names in the crypto industry. The investment giant, Pantera Capital recently disclosed that its Digital Asset Fund intended to invest more heavily into DeFi assets than the rest of the market.
But could DeFi lose steam?
Talking about the potential capabilities of DeFi instruments, Chris Burniske from venture capital firm Placeholder had recently noted,
“If you think DeFi will have a smaller impact on ETH than ICOs, you aren’t paying attention. The ICO boom showcased Ethereum’s ability to perform one financial service: early-stage capital formation. DeFi will showcase Ethereum’s ability to perform all financial services.”
Bitcoin has started to show signs of strength over other cryptocurrencies as its dominance rose to 61%. On the other hand, Ethereum has seen its popularity grow throughout 2020 due to the rise of DeFi. Having said that, skepticism still exists in terms of outlook and long-term sustainability of DeFi. In addition, trading volumes on Ethereum-based decentralized exchanges have taken a plunge this month and was down by 44% in the past 30 days.
But it is not all bad. The declining trading volume could mean that the market is coming back to rational levels. The soaring TVL indicated a positive sentiment in the DeFi space and the latest stats could potentially indicate a healthy market.