The increase in DeFi’s TVL may be connected to the renewed interest in the play-to-earn GameFi sector.
DeFi’s Value On The Rise
As DeFi continues to blossom, one of its key indicators has reached a new milestone. DeFi’s total value locked (TVL) across all networks now exceeds the $200 million mark.
According to crypto market tracker, DeFiLlama, DeFi’s TVL began to spike from June 2021, touching $224 billion at the time of writing.
The charts indicate that Ethereum blockchain houses more than half of DeFi’s TVL. The top 5 blockchain networks in terms of DeFi TVL are:
- Ethereum: $153.2billion
- Binance:$19.6 billion
- Solana: $11.75 billion
- Terra: $8.94 billion
- Avalanche: $6.62 billion
It is pretty obvious that the Ethereum blockchain is momentarily leading the rest. However, Ethereum’s dominance is gradually being encroached upon. Other networks are devising schemes with a target to grow their DeFi market share:
- Binance Smart Chain
Ethereum’s biggest competitor – Binance Smart Chain, recently launched a $1 billion growth fund. The funds will be used to facilitate Binance Smart Chain’s talent development, trading, building, and industrial incubation programs. Through a series of initiatives Binance’s target is to add 1 billion additional DeFi users to BSC. Apart from institutional investors, it is the number of users that translate to TVL. Binance’s vision is encoded in the words of its CEO, Changpeng Zhao (CZ):
“With the new contribution of $1B, it (BSC) can disrupt traditional finance and accelerate global mass adoption of digital assets to become the first-ever blockchain ecosystem with one billion users”, CZ stated.
Should Binance meet its target, the impact on BSC’s DeFi TVL will not be insignificant.
The TVL of the Avalanche blockchain stood at about $178 million at the end of July 2021. Less than 3 months later, its TVL has grown by more than 3,300% to $6 billion!
Avalanche, in August, launched a $100 million liquidity support fund to grow its DeFi base. The protocol hopes that the fund will incentivise DeFi developers to build on its chain.
Interest in Solana DeFi protocols began to peak around the time the chain’s native SOL token started its bullish trend. From a little over $1 billion worth of DeFi assets on its chain in early August, Solana’s DeFi TVL to date sits above $12 billion. That’s an increase of almost 1,200%.
According to Decrypt, a September 14 network outage that happened on the Solana blockchain was caused by a surge in DeFi activity. The network has since recovered, and more DeFi protocols are ready to launch on Solana which will raise its TVL profile further.
Terra is another network with a similar TVL growth pattern as other chains mentioned above.
Putting it all Together
A few critics argue that TVL is not a sure indicator of a platform’s organic growth. They say that if the price of a chain such as Ethereum surges, for example, the TVL of its ecosystem will also increase regardless of if there’s any other growth factor present.
However, the criticism may not apply in this particular context. Coins such as Solana and AVAX have been bullish in recent months no doubt. But the increase in their values has not been up to the multiples that would give rise to the respective 3,300% and 1,200% increase in TVL.
What appears plausible indeed is that the increase in the TVL of these platforms is due to an increase in user-engagement. DeFi seems to be getting the attention of more people. And it seems to be the logical conclusion when we cast a side glance at the momentum of the play-to-earn GameFi sector that kicked in around the same period.
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