From yield farming on Curve with tokenized bitcoin to making flashloan trades via Uniswap, the breakout of cryptonative DeFi earning opportunities in 2020 has attracted an unprecedented influx of capital in short order. Now, this increasing influx has helped DeFi achieve its latest milestone: $7 billion in total value locked (TVL).
The DeFi Surge
DeFi projects collectively crossed the $7 billion TVL mark on Wednesday, August 26th, according to analytics website DeFi Pulse.
TVL can be understood as a cryptonative stand-in for how “assets under management,” or AUM, is used in traditional markets. It’s a metric the Ethereum ecosystem has rallied around as a growth tracker for the DeFi sector.
Of course, a rising TVL is validating and suggests users are increasingly finding dApps in the space to be useful and reliable.
For context, DeFi’s TVL only reached the $1 billion milestone for the first time back in February 2020. Then things really started picking up steam.
Time Between #DeFi Milestones
$1 billion locked: 917 days
$2 billion: 146 days
$3 billion: 20 days
$4 billion: 4 days
$5 billion: 12 days
$6 billion: 4 days
$7 billion: 10 days
— Spencer Noon (@spencernoon) August 26, 2020
Ethereum DeFi’s current TVL of $7.13 billion (not $7.25 billion as the image below suggests, since we’re excluding the $12 million worth of BTC currently locked in Bitcoin’s Lightning Network) makes future milestones of $10 billion and beyond seem all but inevitable. Why?
This space has only just begun to pop off. When you combine influxes of mainstream newcomers and institutions with non-Ethereum crypto users that are beginning to come around to DeFi, things start to heat up and assets keep flowing into and through these protocols.
There’s a New DeFi Leader in Town
Before August 2020, lending protocol and Dai stablecoin issuer MakerDAO had only been temporarily overtaken once before as DeFi’s top dApp per TVL, and that acute flip unsurprisingly happened around when DeFi heavyweight Compound Finance kicked of COMP yield farming earlier this year.
Another flip just took place this week, though, with lending protocol surging to the top of DeFi Pulse‘s TVL chart as the sector’s latest top dog. The protocol was still maintaining its grip on the #1 spot at the time of this post’s writing, boasting a $1.5 billion TVL compared to Maker’s $1.43 billion TVL. Aave first crossed the $1 billion TVL mark on August 15th.
Thus what was once known as the “Maker Dominance Rate” is for now the “Aave Dominance Rate,” which stands at 20%, i.e. Aave’s TVL is presently 20% of all of DeFi’s collective TVL.
It remains to be seen how long Aave can stay in first in DeFi, but it’s also no surprise the project has advanced as impressively as it has. The Aave team has rolled out a slew of major features and innovations lately, like Aave V2, the novel Aavenomics tokenomics system, Credit Delegation, and the Aavegotchi NFT game.
Notably, Aave first crossed the $1 billion TVL mark on August 15th, so the value of the assets the protocol’s managing has grown by 50% to $1.5 billion in the span of less than two weeks. And if the Aave project’s recent progress is any indication, that growth might not be slowing down any time soon.
Aave blooming in 2020 has been been an impressive thread to watch, but with the way things have gone this year, it’s entirely possible that other projects temporarily vault into DeFi’s #1 spot in the near future.
At present, the biggest contenders to do so include the following projects:
All of these projects have unique value propositions, have generally promising roadmaps, and have TVLs that put them in striking distance of climbing past Maker and Aave to become DeFi’s reigning champ, at least for a time. The ecosystem is constantly evolving, of course.