The total locked-in value (TVL) in decentralized financial (DeFi) applications has exceeded $ 1 billion, which has sparked a carnival in the Ethereum community. However, not everyone congratulates this milestone, and some people think that the actual value of the DeFi protocol lock-in is much lower. At the same time, competition from centralized lenders shows that if DeFi is to maintain its value proposition, it must innovate.
DeFi's big day
On February 6, DeFi supporters waited for weeks to arrive, and the assets locked in the DeFi agreement exceeded $ 1 billion. As of press time, this number has declined slightly and is currently $ 994 million.
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Data from Defipulse.com shows that Maker's market share has reached 60.5%. The impact of this stablecoin network secured by cryptocurrencies on DeFi is similar to the impact of Bitcoin on the cryptocurrency market.
Many decentralized lending, derivatives, and trading protocols get liquidity from Maker's Sai and Da stablecoins, which in turn get liquidity from Ethereum.
Defipulse congratulated this achievement in a short blog post, saying "$ 1 billion is an important milestone to be celebrated. It illustrates our progress in achieving community decentralized finance and the vision of the world's future. "
A year ago, DeFi had a market value of less than $ 280 million. Today, borrowing alone accounts for $ 766.5 million.
(DeFi agreement locks in assets to $ 1 billion)
Centralized lenders look at it
Just as centralized exchanges have commercialized staking and seized the market for dedicated masternodes and staking services, password borrowing has similar risks.
Borrowing is at the core of decentralized finance, accounting for 5 of the top 10 DApps (Maker, Compound, Instadapp, Dydx, and Bzx). However, centralised financial (CeFi) lenders are also targeting this lucrative vertical.
This week, Binance launched its thirteenth loan product, offering interest rates of USDT 6%, BUSD 8%, and ERD 15%. There are also CeFi providers such as Cred and Squilla Loans. Their business model does not require users to have any knowledge of decentralized financial protocols and has a better user experience.
For example, in Squilla, borrowers and lenders only need to enter the amount they need and the term of the loan to get real-time quotes. Decentralized financial applications are improving, but they will struggle to match the user experience and rates provided by centralized crypto companies.
The $ 1 billion locked in by DeFi is the first milestone in the eyes of many, or will observers see this moment as its pinnacle, a high point before value flows into centralized competitors? When it comes to the $ 1 billion figure, not everyone believes it is reasonable …
Leaving aside a billion dollar valuation
"Defipulse monitors the underlying smart contracts of each protocol on the Ethereum blockchain. Every hour, we will extract the total balance of Ethereum and ERC20 tokens to update the chart. The lock value is to multiply these balances by their USD Price. "
Defipulse said so.
This is a method to simulate the calculation of the market value of cryptocurrencies. However, such calculation methods have been controversial, and the same applies to DeFi.
"How many of the 'billion dollars' that are 'locked in' are: 1) composed of ICO tokens (not instantly redeemable) 2) not messed up by Consensys or the Ethereum Foundation / Ethereum Founder?"
Crypto legal commentator Preston Byrne said:
"DeFi hasn't locked in $ 1 billion in assets. At least $ 300 million is Ethereum that early investors didn't want to sell … this is' Jeff Bezos (Amazon founder) worth $ 100 billion 'and' Jeff Bezos owns $ 100 billion The difference between 'cash'. DeFi has not locked in $ 1 billion, it's just assets that early holders were reluctant to sell and whose value is appreciating in the early stages of the bull market. "
But there are also objections, and Ethereum supporter Nathaniel Whittemore called the feat "a great milestone."