DeFi hits $2 billion in total value locked; Compound snatches MakerDAO's top spot

Quick Take

  • The total value locked in various DeFi protocols has crossed the $2 billion mark
  • The growth appears to be a result of “yield farming” craze
  • Compound is now the top DeFi protocol, snatching that position from rival MakerDAO

The decentralized finance (DeFi) market continues to grow fast.

It has now hit the $2 billion mark in total value locked (TVL) for the first time ever, according to DeFi Pulse. TVL is the total amount that has been committed or "locked-in" by users of various DeFi protocols.

The $2 billion milestone got achieved quicker. Just about five months ago, TVL was about $1 billion. While in July 2018, that figure was only around $190 million, and approximately $638 million in July 2019.

Source: DeFi Pulse

'Yield farming' craze

The surge in the DeFi market appears to be a result of "yield farming" craze, or because people are trying to secure the highest possible yield from various DeFi products and protocols.

This likely explains why Compound has the highest TVL, which recently launched its native governance token COMP. Users who lend or borrow COMP on Compound's platform can generate a yield, similar to how investors can earn a yield from a savings account. However, interest rates on Compound can fetch users a high yield, depending on the price of COMP and the strategies employed.

Notably, MakerDAO was the leading DeFi protocol for well over a year, and now that top spot has been gained by rival Compound. The TVL of Compound is at $650.5 million as compared to Maker's around $593 million, according to DeFi Pulse.

Synthetix, Balancer, and Aave follow Compound and MakerDAO in that particular order. WBTC — Ethereum-based token pegged to bitcoin —also forms part of the top 10 protocols, since its demand has been surging as of late.  


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Source: DeFi Pulse

TVL: An ideal metric?

But, is TVL an ideal metric to look at DeFi activity? As The Block Research's Matteo Leibowitz noted earlier this year, TVL fails to account for vertical-specific parameters, such as decentralized exchange (DEX) volumes. Thus, it does not reflect the accurate picture.

To that end, Leibowitz developed The Block's Open Finance Index (OFI), which aggregates vertical-specific metrics, including outstanding debt for lending, transaction volume for payments, and DEX volumes.

It is worth noting that DEX volumes surpassed the $1 billion mark last month. The Block's OFI has also grown sharply — over ten times — within the last month.

Source: The Block Research, Dune Analytics 

DeFi market capitalization, as tracked by DeFiMarketCap, has also risen sharply in recent weeks. It is currently at over $7 billion. DeFiMarketCap looks at the value of tokens representing various DeFi protocols instead of the value of tokens locked within those protocols.

© 2023 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

About Author

Yogita Khatri is a senior reporter at The Block, covering all things crypto. As one of the earliest team members, Yogita has played a pivotal role in breaking numerous stories, exclusives and scoops. With nearly 3,000 articles under her belt, Yogita holds the records as The Block's most-published and most-read author of all time. Prior to joining The Block, Yogita worked at crypto publication CoinDesk and The Economic Times, where she wrote on personal finance. To contact her, email: [email protected]. For her latest work, follow her on X @Yogita_Khatri5.