DeFi Industry eyes $7B in Total Value Locked

TVL may not be the gold standard for classifying and ranking DeFi protocols, it's still an easy and good point to always consider

By · Aug 25, 2020 . 6min read


The DeFi season we are experiencing picked up sometime around September last year, and the trend continued into 2020 only to be interrupted with the massive global market sell-offs that happened of the infamous coronavirus market crash. However, as the market revved up, DeFi industry has not stopped growing with Total Value Locked hitting all-time highs almost every week for individual projects which have ended up cascading into the overall growth of the industry.

For starters, as of January 2nd this year, DeFi industry’s TVL was just $667 million. Today, the growth can be described as geometric as about $6.9 billion is locked across several DeFi protocol smart contracts. Comparing this phenomenal growth year-to-date, the industry has increased by over 938% in terms of TVL.

Defi Total Value Locked

There are significant drivers in the DeFi industry today. They are Aave which recently displaced Maker as the protocol with the highest Total Value Locked. Maker, which is also another DeFi super protocol was the first to hit the $1 billion mark in TVL.

Apparently, there are others like Curve, a DEX aggregator. Curve also ranks in the league of DeFi protocols with Total Value Locked in billion. Another one which has been highly instrumental in the fast-paced character of the industry lately is yEarn protocol. It’s also known as Yield. Finance and helped to push yield farming off the cliff. This was after Compound popularized it with COMP token distribution.

But wait. Although measuring TVL is good metrics for DeFi protocols, one can easily dismiss it as vanity metrics.

Other important metrics for DeFi protocols asides Total Value Locked

DeFi protocols by design function differently. Protocols like Compound, Aave and MakerDAO are predominantly lending protocols. Hence, DeFi TVL is reasonable metrics to consider. Uniswap, Balancer or dYdX may be concerned with trading volume.

That said, data from Token Terminal shows how protocols stack against themselves in terms of revenue. It also considers the price to sales ratio (P/S), Volume to Market cap ratio and even Gross Merchandise Value (GMV).

Annualized revenue per protocol
DeFi Protocol by annualized revenue

Clearly, from the graph above, DEX aggregator, Uniswap produces admirable figures. The contrast is more apparent when you compare it to $184 million in TVL with Curve’s $1 billion. Also, Compound which presently ranks fifth on DeFi Pulse for TVL rakes in as much as $50 million revenue annually.

To conclude, DeFi growth for 2020 hasn’t slowed down, and while TVL may not be the gold standard for classifying and ranking DeFi protocols, it’s still an easy and reasonable point to always consider.

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