The total value locked across DeFi protocols has surged to levels last seen before the FTX collapse.
The total value locked in decentralized finance protocols has reached a yearly high of $52 billion. This is a level not seen since just days before FTX collapsed in November 2022.
The turbulent history that has cast a shadow over the sector following the fall of FTX and other companies such as Terra, Three Arrows Capital and Chelsea, and the fact that the events surrounding these players have created widespread uncertainty about both centralized and decentralized financial protocols. When considered, this resurgence is notable.
Both sectors have shown signs of recovery in recent months. For DeFi in particular, since the start of 2023, TVL has jumped from around $38 billion to an annual high of $52 billion, representing a 36% increase in dollar terms.
However, the TVL indicator is not immune from fluctuations in asset prices, which can significantly affect its value. The recent rise can be partially attributed to the rising market value of major cryptocurrencies such as Bitcoin and Ethereum and increased investor inflow.
DeFi Improvements
In addition to the market recovery, certain improvements and upgrades within specific DeFi protocols have also contributed to the recent TVL jump.
2023 will see a significant increase in the Real World Assets (RWA) niche within DeFi. This is especially true at MakerDAO, which has consolidated approximately $2.5 billion in RWA collateral, primarily U.S. Treasury bonds, to support its Dai stablecoin. In this way, dependence on centralized stablecoins such as USDC is also reduced. MakerDAO’s fixed value has surged to over $8 billion with annual revenue growth.
Maker also introduced a lending protocol called Spark, which saw significant inflows later this year. The platform allows users to deposit DAI stablecoins using the DAI Savings Rate (DSR) and exchange them for sDAI, allowing them to earn interest while maintaining liquidity.
Likewise, liquid staking protocols like Lido Finance are gaining popularity, allowing users to earn rewards without locking their ether to validators. Lido remains TVL’s largest DeFi protocol, with over $21 billion in deposits. Additionally, Uniswap will launch its v3 protocol in mid-2023, providing improved capital efficiency for on-chain traders.
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