DeFi Total Value Locked Has Exploded This Year, Up 10x Since January

October 16, 2021, 11:15 AM AEST - 1 month ago

The DeFi (decentralised finance) sector has been one of the hottest topics in the crypto community this year, mainly because of its fast-paced growth in a relatively short time. The TVL (Total Value Locked) across DeFi protocols is now at US$218 billion – a rise of over 850 percent from US$21.4 billion on January 1.

Ethereum Blockchain Takes the Lead with 69% Dominance in DeFi Market

DeFi TLV has exploded 10 times higher since the beginning of the year, surpassing the US$200 billion mark. According to data from DefiLlama, Ethereum is the blockchain that currently leads the market, with a TVL of US$151.15 billion.

Meanwhile, Curve – an exchange liquidity pool on Ethereum – is by far the largest TVL protocol with a dominance of 7.84 percent (7-day change) across various blockchains, including Avalanche, Polygon and Binance Smart Chain.

Source: DefiLlama

What’s Behind the Exponential Growth?

DeFi’s exponential growth can be attributed to numerous features and innovations within the sector. But there are two main drivers of the industry: the rise of blockchain video games with Play-2-Earn (P2E) mechanisms, and non-fungible tokens (NFTs).

P2E games have attracted numerous users across the globe, especially since the pandemic struck down economies worldwide and forced people to look for alternative means to make ends meet. Such was the case with Axie Infinity, a Pokemon-inspired, blockchain-based video game that allows users to play and earn SLP, the game’s native currency that can be traded for fiat money.

Axie hit a milestone by surpassing US$2 billion in trading volume by September, making it the first DApp to reach such a figure. There are other video-game DApps on other blockchains besides Ethereum, integrating P2E mechanisms and NFTs trading. Some of them are set to blow up in popularity in the future and take a slice of Ethereum’s dominance. One such example is Star Atlas, a metaverse real-time grand strategy game currently developing on the Solana blockchain.

NFTs Boosting the DeFi Market

NFTs are undoubtedly one of the hottest trends in the DeFi market, dragging artists, musicians and content creators across the globe to a digital ecosystem full of opportunities. Q3 saw a massive explosion for NFTs with a US$10 billion trading volume in August and September alone, inflating ETH’s price 20 percent amid a thriving NFT market.

DeFi is also taking off in Australia, which ranked 12th out of 154 nations to embrace and adopt DeFi and its numerous innovative DApps, most of them built on the Ethereum blockchain.

Some analysts even believe that NFTs and blockchain games will be future key foundations of the industry. Others like WallStreetBets (WSB) plan to “take over” traditional financial markets. As Crypto News Australia reported last month, the popular subreddit WSB has launched a DeFi protocol that allows trading of synthetic stocks backed by blockchain technology.

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