DeFi Total Value Locked Reaches $12.5B All-Time High Despite Cooling Hype

Key Takeaways

  • The total value locked in DeFi reached a new high of $12.5 billion on Oct. 24.
  • While lending platforms like Compound, Aave, and Maker still occupy the top five positions, other smaller protocols are gaining ground.
  • DeFi token prices are consolidating after a drastic fall since September, but this could be bullish as Bitcoin prices heat up.

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Despite cooling DeFi hype, the total value locked in these financial protocols continues to make new all-time highs.

State of Top DeFi Projects

The dominant DeFi projects in the space are Uniswap, Maker, and WBTC. The decentralized finance ecosystem is much different from the bull market which ended in September.

Top DeFi protocols by total value locked on DeFi Pulse
Top DeFi projects by total value locked. Source: DeFi Pulse

Lending platforms and yield aggregators like Compound, Aave, yEarn Finance, and Curve topped the list at the beginning of the DeFi boom. The shift can be correlated to artificially high returns on these platforms.

The annual returns on yEarn is a robust indicator of DeFi liquidity provider returns in the niche. Annual stablecoin returns on yEarn are in the range of 6-7%. Curve and yEarn Finance pools are yielding around 10-14%. The returns for Ethereum and Bitcoin-based pools are about 1%.

SIMETRI gains of 484%

These yields are in line with traditional centralized lenders and borrowers. Crypto.com offers as much as 14% yield on stablecoins, while Celsius provides as much as 15% APY. Bitcoin and Ethereum yield around 3-8%.

Accounting for Risk in Decentralized Finance

There is one notable difference. The DeFi ecosystem comes with much greater risk. Even with on-par interest rates, when accounting for risk the decentralized finance ecosystem is underperforming in terms of yield, especially on Bitcoin and Ethereum.

One such risk is centralization and capture by a small number of users. On Curve, for example, three Ethereum addresses provide 48% of the total liquidity on the protocol.

In the sixth position on DeFi Pulse, Harvest Finance, with $1…

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