Ethereum Fundamentals: DeFi Total Value Locked Passes $4 Billion

Nick Chong

Last Updated: August 3, 2020 3:00 am

2 mins read

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After a near-unstoppable uptrend, Ethereum’s rally was stopped dead in its tracks just 20 hours ago. In the span of just around ten minutes, the price of the leading cryptocurrency plunged from $415 to a low of $325 on most spot exchanges.

Chart of ETH's price action over the past few days from TradingView.com

This move purportedly triggered over $100 million worth of liquidations over Ethereum’s margin markets.

Despite this extreme volatility across the cryptocurrency market, Ethereum’s killer use case, decentralized finance (DeFi), continued to gain steam.

DeFi Locked Value Surmounts $4 Billion Milestone

Over the past few months, the term “DeFi” has risen to prominence in the cryptocurrency space.

This is due to the increasing appeal of migrating financial services onto a decentralized platform, which gives more the opportunity to make yield.

DeFi has seen such growth that per DeFi Pulse, a data service tracking this segment of the cryptocurrency market, there is $4.21 billion worth of value locked in blockchain-based finance applications.

Chart of the amount of value locked over the past three months (90 days) from DeFi Pulse.

This is up from the $1 billion worth of coins locked in DeFi just ninety days ago, and around $500 million worth of cryptocurrencies locked in DeFi at the start of the year.

Much of this growth has been triggered by the following five protocols: Maker, Compound, Aave, Synthetix, and Curve Finance. All five protocols are based on Ethereum and have seen significant fundamental developments since the start of the year.

Andrew Kang, a DeFi analyst and the founder of Mechanism Capital, sees even more upside for the DeFi space despite its already exponential growth.

He published a Twitter thread on July 1st that outlined his belief and outlook from his “inside perspective.”

Kang explained that the usage of DeFi has “traditionally been concentrated with hardcore users and/or ETH whales,” and only now is DeFi seeing adoption by retail.

He added that development in this segment of the cryptocurrency industry is hitting an “inflection point” with more on-chain liquidity, better development tools, successful case studies, education, and much more.

With recent DeFi token price run-ups, people have been crying "bubble!".

So is it too late to invest or not?

Here are my thoughts on where we are in the state of the DeFi market from an "inside perspective" pic.twitter.com/cDAhpc9tVN

— Andrew Kang (@Rewkang) July 1, 2020

One of Many Ethereum Bull Catalysts

DeFi’s growth is one of many Ethereum bull catalysts.

Others include the imminent arrival of ETH2 — the all-encompassing upgrade set to implement proof of stake over the proof of work system that currently is in operation; the introduction of Ethereum Improvement Protocol 1559; and other scaling solutions.