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Is DeFi Dead as TVL and DeFi tokens plummet? Don’t Count on It

Is DeFi Dead as TVL and DeFi tokens plummet? Don’t Count on It

Last updated 11th Aug 2022
Disclosure
  • The total value locked in DeFi has plummeted from $250 billion to $75 billion.
  • Most DeFi tokens have shed over 80% of their value.

The Decentralized Finance (DeFi) industry has come under intense pressure in the past few months. According to DeFi Llama, the total value locked (TVL) in DeFi has slumped from more than $250 billion to over $76 billion. As a result, there have been numerous concerns about whether DeFi is dead.

Is DeFi dead?

To the uninitiated, DeFi is a wide industry that is attempting to disrupt the financial industry. It is achieving this by shifting power to the people who form part of the governance.

DeFi’s goal is to disrupt the biggest parts of the financial industry. For example, DeFi protocols like Maker and Compound enable people to borrow in a completely decentralized manner.

Similarly, platforms like Uniswap, Curve Finance, and PancakeSwap facilitate buying and selling of cryptocurrencies in a completely public process. There are other decentralized finance platforms that make it possible to stake and provide liquidity.

Learn more on how to buy Compound.

All DeFi platforms have a governance token that one can buy from any exchange. By buying these tokens, you can then take part in its governance. For example, you can vote on whether to move the platform from a smart contract platform like Ethereum to Cardano.

There have been concerns about DeFi for years. For one, the industry has lax regulations, which makes it ripe for fraud and scams. Similarly, many experts believe that DeFi is highly complicated for ordinary people. Also, some claims in the industry have been too sweet to be true, such as Anchor Protocol’s 20% return.

In the past few months, the TVL in DeFi has crashed from over $250 billion to $76 billion. All chains, including Ethereum, BNB, Tron, and Avalanche have seen their TVL crash.

Similarly, DeFi tokens liken like AAVE, MKR, ANC, and UNI have all crashed.

DeFi is not dead

So, is DeFi dead? In my view, it is too early to declare DeFi as being dead. What is happening is that the DeFi is following the path that all innovations follow to their maturity.

As you recall, the same cycle happened in the early 2000s when everyone was building a company with a .com suffix. The situation led to the dot com bubble, which cost investors billions of dollars.

Most recently, the situation has happened in the electric vehicle (EV) industry. Following the success of Tesla, the number of EV companies surged. Many of them are now either struggling or have already gone out of business.

Therefore, I believe that DeFi is not dead but many protocols like Wonderland and Abracadabra will not survive. Those that will survive are the ones with a user-friendly interface and those with excellent security features.

Crispus Nyaga

Crispus Nyaga

Crispus is a financial analyst with over 9 years in the industry. He covers cryptocurrencies, forex, equities, and commodities for some of the leading brands. He is also a passionate trader who operates his family account. Crispus lives in Nairobi with his wife and son.