A record high of $6 billion worth of crypto is now locked in decentralized finance (DeFi) smart contracts, according to data analytics site DeFi Pulse.
The new milestone edges Friday’s high of $5 billion, and comes as dozens of Ethereum-based financial products are drawing millions of dollars of investment amid market surges — and collapses.
DeFi mainstays Maker, Curve, Aave and Curve Finance lead the pack, with some $4.2 billion locked in between them.
DeFi products produce dividends on locked-in funds in the form of volatile tokens and high interest, and take place on decentralized services like Uniswap that operate algorithmically and are difficult to regulate.
“Locking in” funds on a DeFi protocol is rather like depositing them in a bank, albeit in such a way that the user maintains “custody” of them, and can withdraw them at any time.
Flagship product Maker, for instance, allows users to deposit their Eth holdings in exchange for an equivalent tranche of the stablecoin “Dai,” which maintains the value of the locked-in eth even if the market collapses.
Many DeFi products yield tokens, which users can “farm” and quickly sell as the price appreciates. While DeFi advocates herald their products as a new frontier in “open banking,” critics have described the latest series of extraordinary rallies in DeFi valuations as a “bubble.”