opinion

The Scoop: DeFi surges as the new face of crypto lending while CeFi stagnates

by Frank Chaparro

DeFi • December 13, 2024, 2:46PM EST

Published 1 minute earlier on

The Block

Quick Take

At The Block’s Emergence conference, the CEOs of Abra and Arch, both active in crypto lending, shared insights into the current landscape.
This column is adapted from The Scoop newsletter.

This column was co-written by Frank Chaparro, director of special projects at The Block, and Laura Vidiella of MNNC Group. The views expressed in this column are their own and do not reflect the opinions of their employers.

The crypto lending market has undergone a seismic shift since its peak frenzy in 2021. Back then, undercollateralized loans and questionable collateral were commonplace, propping up prices in a precarious house of cards. But those days are gone. With major centralized lenders like Genesis out of the picture, what remains is a reshaped, more cautious lending ecosystem.

At The Block’s Emergence conference, the CEOs of Abra and Arch, both active in crypto lending, shared insights into the current landscape. Their message was clear: while centralized finance (CeFi) lending has dwindled, decentralized finance (DeFi) lending is surging.

DeFi’s Comeback Story

Ethereum’s DeFi lending ecosystem has seen remarkable growth in recent weeks. Total value locked (TVL) in lending protocols has reached new highs, driven by protocols like Aave v3 and Spark v1.

Aave v3: Leading the resurgence, Aave v3 expanded its TVL from $16.5 billion to $27 billion between Nov. 5 and Dec. 5. Its success stems from features like cross-chain functionality and improved capital efficiency, making it the dominant player in DeFi lending.

Spark v1: This protocol also saw substantial growth, with its TVL nearly doubling from $4.5 billion to $8 billion in the same period.

This surge in lending activity aligns with broader strength in DeFi tokens. The GMCI DeFi Index, which tracks key DeFi assets, jumped from $73 to $155 throughout November.

CeFi Lending’s Uncertain Future

Meanwhile, the CeFi lending market remains a shadow of its former self. With Genesis gone, the appetite for undercollateralized loans has evaporated, replaced by a more conservative, risk-aware approach. While this shift might seem like a headwind for the market, it’s actually a long-term tailwind: asset prices are no longer inflated by risky loans.

Looking Ahead

The lending market’s evolution underscores a broader trend in crypto: the industry is moving away from the reckless speculation of the past toward a more resilient and transparent financial ecosystem. DeFi’s recent growth highlights its potential to fill the void left by CeFi’s decline, signaling a new era for crypto lending where caution and innovation coexist.

The Block’s Frank Chaparro serves up the latest headlines, charts, trends, and views on crypto and DeFi from around The Block, Twitter, and The Scoop pod. Subscribe to The Scoop newsletter, which hits inboxes on Tuesday and Friday mornings.

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About Author

Frank Chaparro is Host of The Scoop podcast and Director of Special Projects. He also writes a biweekly newsletter. Chaparro started his career at Business Insider, where he specialized in the intersection of digital assets and Wall Street, market structure, and financial technology. Soon after joining Business Insider out of Fordham University, Chaparro was interviewing top finance and tech executives, including billionaire Mark Cuban, “Flash Boys” star Brad Katsuyama, Cboe Global Markets CEO Ed Tilly, and New York Stock Exchange President Tom Farley. In 2018, he become a sought after reporter in the crypto world, interviewing luminaries such as Tyler Winklevoss, the cofounder of Gemini, Jeremy Allaire, the CEO of Circle, and Fundstrat head Tom Lee. For inquiries or tips, email [email protected].