The total value locked (TVL) in decentralized smart contracts which averaged $2.5 billion on July 15, 2020, has increased by 89% in six months to the current TVL of $23.2 billion, according to data from leading on-chain DeFi metrics site DeFiPulse.
Decentralized Finance (DeFi) is a fast-growing sector of the crypto market and represents about 2% of the total $1.04 trillion market cap. DeFiPulse provides data across different types of decentralized applications including lending dApps, derivative services dApps, payment dApps, assets dApps, and decentralized exchanges (DEXES).
At the top position, Ethereum-based Maker has $4.26 billion in TVL, followed by Aave, Uniswap, Compound, Synthetix, and Curve Finance with TVLs of $2.99 billion, $2.78 billion, 2.73 billion, 2.33 billion, and 1.98 billion, respectively.
In the last three months, Maker, Aave, and Compound alone were responsible for adding $6.32 billion in TVL to the DeFi sector. As the leading dApps development platform, Ethereum is the mother of all decentralized applications at the moment, even with growing competition from other blockchain ecosystems like Cardano, EOS, Polkadot, and Tron.
DeFi Sector Will Grow Exponentially
DeFi is disrupting traditional finance and forcing governments and traditional financial institutions to take notice of how people are moving liquidity in and out of peer-to-peer financial platforms.
DeFi applications are at an early stage of development as is evident on the high level of technical know-how that’s required to participate safely and navigate different dApp environments. However, the high level of innovativeness and practicality of existing and upcoming DeFi dApps has played a big role in both the advancement of crypto regulations and investor-interest in the crypto market.
Most notably, Stablecoins, which are the most popular digital assets in many DeFi dApps can now be held in federal savings associations and national banks after they received a green light from the US Comptroller of Currency (OCC).
According to DeFiPulse, the high rate of growth in the DeFi Sector is capable of growing by a further 9% to $25 billion by the end of the week.
ETH-based dApps vs ETH 2.0
The majority of the best performing DeFi DApps are based on Ethereum which is in the middle of a huge transition from Proof-of-Work to Proof-of-Stake consensus protocol, among other upgrades.
The transition will affect all the ETH-based DApps and eventually, their performance will be based on the success of the full implementation of Ethereum upgrades which will occur in phases.
Such dApps have a choice to continue operating on ETH 1.0 but they will have to migrate to Ethereum 2.0 in the end, due to issues such as scalability and governance mechanisms. Synthetix, the most popular derivatives liquidity protocol in DeFi has already published its optimistic migration plan to ETH 2.0.Â
