Ethereum Users Now Have More Than $10 Billion at Play in DeFi

The decentralized finance sector within the cryptocurrency industry has been on fire in 2020, and today, DeFi has broken through another major threshold.

DeFi users have now locked more than $10 billion in digital assets, including cryptocurrencies such as Ethereum and dollar-pegged stablecoins, into DeFi applications, according to data aggregator DeFi Pulse. This figure stood at just above $1 billion a mere three months ago.

Nearly all of that $10 billion total is in Ethereum, and more than half comes from just three protocols, as the biggest names in DeFi begin to capture outsized market share and attention while batting away copycat projects in a rapidly expanding marketplace.

Metrics site DeFi Pulse gathers data from different DeFi protocols through blockchain analysis to determine the value of all assets deposited by users, known as total value locked (TVL). The metric is widely used as a way to measure the current popularity of DeFi products in the market among users. 

DeFi protocols allow users to deposit digital assets into automatic financial applications, with all but a few running on the Ethereum blockchain. The DeFi protocols, powered by automated code known as smart contracts, allow users to take loans or earn interest using their assets as collateral as they would at a bank. 

DeFi users can typically receive better interest rates than they would at traditional financial institutions thanks to lower overhead costs enabled by operating on an automated decentralized network.

Uniswap, a token swap platform that automatically processes token trades without an order book, previously held the top spot for total value locked. This was largely thanks to a surge of interest following the release of the exchange’s UNI governance token last week. The new token allows its holders to vote on the future development and direction of the Uniswap platform. But Uniswap no longer holds that stop spot in the rankings.

Maker is another very popular service among DeFi users. It allows crypto enthusiasts to lock up digital assets such as Ethereum, Bitcoin, and other tokens for use as loan collateral paid in dollar-pegged DAI stablecoins. It has now narrowly edged out Uniswap in total value locked—$1.9 billion to Uniswap’s $1.89 billion.

The third-most popular DeFi product out there right now is Aave, with approximately $1.4 billion in total value locked. Aave is a DeFi service offering both crypto-backed loans and interest earning deposits, as well as pioneering functionality like unsecured loans using delegated collateral from other users, known as credit delegation loans.

With so many billions now flowing, it’s easy to lose sight of the fact that $10 billion in TVL represents 400% growth in DeFi since the beginning of July. It’s the sort of ultra-fast growth only possible in the world of cryptocurrencies—and one that, at this rate, might seem like a small and distant memory soon enough.