Aave and Lido become the highest TVL protocols, and Solana ranks second among public chains

Author: A Fox in Web3, Crypto KOL

Decentralized Finance (DeFi), often compared to traditional finance (TradFi), has become a large and exponentially growing field in Web3. The goal of DeFi is highly consistent with the phrase "banking the unbanked" often heard in the crypto space.

The promise of providing global financial services without banks is a lofty goal, and much of the appeal of Web3 stems from this. This article aims to review the development of DeF over the past year from a current perspective.

Overview

Total locked value (TVL) reached $94.6 billion: A huge amount of funds are locked in all DeFi protocols. But considering that the current market value of the entire crypto field is about $2.8 trillion, it still accounts for only about 3.3%, so there is still a lot of room for growth. Since last year, TVL has grown by about 1.5 times to about $65.4 billion, but as a share of the crypto space, it has remained fairly stable, as it previously accounted for 3.5%.

DeFiLlama's chart starts in June 2018, less than 7 years ago, which fully demonstrates that DeFi is still in its infancy. However, in November 2021, DeFi TVL reached an all-time peak of $176 billion. Expect TVL to reach this peak again.

Aave and Lido TVL reached $35.6 billion: Currently, more than 37% of DeFi TVL is staked ETH in Aave and Lido. This shows that both Aave and Lido are dominant. Lido was in the lead last year, but then Aave took the lead. In addition, most DeFi happens on Ethereum, which is still the most important blockchain.

Stablecoins Market Cap Reaches $236B: Stablecoins represent over 8.3% of the $2.8T crypto market, more than double DeFi. Stablecoins continue to outpace DeFi TVL, indicating true product-market fit.

The data in DeFiLlama is so rich it can be overwhelming. Let’s take a closer look at some of the categories and analyze the highlights.

Head blockchain

Currently, Ethereum is still the main player in DeFi, accounting for 52% of TVL, but it is down from 58.3% last year. Solana has become the second largest competitor with 8% TVL, but it is still more than 6 times smaller than Ethereum.

Solana and BSC replaced Tron as the second and third largest public chains, respectively, pushing Tron from second to fourth place. All three have far more active addresses than Ethereum, with Solana having over 4.3 million addresses, while Ethereum has only 442,000.

Ethereum has the most DeFi protocols, currently more than 1,320, up from more than 960 last year.

The Bitcoin network has 58 documented DeFi protocols, up from 12 last year. Considering that Bitcoin is not designed for smart contracts, it still accounts for more than 4% of all DeFi TVL, about $3.8 billion.

Heading protocols

There is no doubt that among several EVM chains such as Ethereum, Sonic, Avalanche and Arbitrum, Aave is the head lending protocol, but Morpho dominates on Base.

Most blockchains have their own lending and stablecoin projects. Restaking is also growing as many major blockchains have their own protocols, with the largest player being Eigen Layer, but Pell Network having the widest coverage.

Stargate is the main cross-chain protocol across multiple chains in TVL.

The protocol on Ethereum dominates among similar protocols with the huge transaction volume of Ethereum DeFi.

Protocol Category

Lending, cross-chain bridges, and liquidity pledges have the highest TVL, and the gap between them is relatively small, ranging from US$42 billion to US$37 billion. Last year, liquidity pledge was far ahead, but the gap has narrowed, and lending and cross-chain bridges have caught up.

Aave accounts for 44% of all lending, while Lido accounts for 43% of all liquidity pledged, and these two protocols are the two with the highest TVL in the entire DeFi space to date.

DEXs have much less TVL, about $18 billion, with the top protocols being Uniswap, Curve, and PancakeSwap, which each run on more than 9 EVM chains. Even with a lower TVL, this is the most profitable segment, with transaction fees reaching $5.9 million in the past 24 hours. With such a money-making effect, it is no surprise that DEXs have more than 1,600 protocols in total.

The cross-chain bridge category is mainly dominated by wrapped Bitcoin equivalents such as WBTC and Binance Bitcoin.

Foundation and Treasury

The size of the treasury held by the Ethereum Foundation is slightly more than half of the level a year ago, and has dropped significantly. Meanwhile, Mantle has a large treasury, but it is mainly denominated in its own tokens.

Some Ethereum-related projects also dominate with total treasury amounts, such as Aave, ENS, Lido and Sky. However, most of them also hold their own tokens.

If you don't count your own tokens, the rankings are even more mixed. But few vaults are primarily stablecoins, so they are primarily affected by market volatility.

Yield

Most players deposit their funds in Lido to earn returns, probably because most people are confident in ETH as a long-term value storage tool, and Lido also dominates in liquidity staking. Other ETH-based liquidity staking protocols also dominate, such as ether.fi.

JitoSOL's staking SOL yields 7.75%, surpassing all other top yield products. Marinade and Jupiter's SOL annual interest rates are even higher, at about 9%.

Sky Lending is the No. 1 low-risk stablecoin option by TVL, with its SUSDS stablecoin holding over $2.5 billion and a yield of 4.5%.

DeFiLlama tracks more than 15,000 liquidity pools in 468 protocols on 104 blockchains.

Fees

Tether and Circle's respective stablecoins are the largest fee-generating businesses in the crypto space to date. Tether alone has generated more than $5.8 billion in revenue in the past year.

Over the past year, Gas on Ethereum is still one of the largest ways to spend fees, and its total fees are not far behind Circle, at $1.3 billion and $1.6 billion, respectively. However, Ethereum’s fees are falling fast, and in the past 30 days, it has not even made the top 15. However, Ethereum-based protocols Lido and Uniswap are still earning high fees.

Solana’s fee ecosystem has grown the fastest over the past year, with Jito, Raydium, and Pump.fun all earning huge fees. This is likely mainly due to the sharp growth of memecoin on Solana.

Since last year, Bitcoin’s fees have fallen by about half, and as many other competitors in the fee market have risen, Bitcoin’s ranking has fallen from second to 14th.

Stablecoin

The total market value of stablecoins has almost doubled, from $136 billion last year to $235 billion at present. However, USDT and USDC still dominate, accounting for 62% and 26% respectively, and together account for 88% of the entire market.

The biggest gainer was Ethena’s USDe, which has become the third largest stablecoin with 2% of the market despite not being launched a year ago.

Sky issued the USDS token, breaking DAI’s dominance. However, after combining the market capitalizations of DAI and USDS, Sky has a 3.5% market share and remains the third largest market player.

USDT, USDC, DAI/USDS and USDe together account for about 93% of the stablecoin market, with a market capitalization of more than $220 billion.

BlackRock’s BUIDL fund represents a new entrant, indicating that TradFi also wants a piece of this market.

Funding

The DeFi field has raised more than $113 billion in financing, with a total of 6,129 rounds of financing. The amount of financing reached its peak in late 2021 and early 2022, but is currently growing rapidly, exceeding $3.5 billion last month alone.

FTX and Celsius are among the most funded projects in the DeFi space, raising $900 million and $750 million respectively, and are also among the biggest failures in the space. EOS is in a similar situation, with nearly no deliverables from its $4 billion funding round.

Hacker Attack

The DeFi field has suffered more than $11.2 billion in hacker attacks, of which 25% came from cross-chain bridges and the rest from other DeFi companies and protocols.

In February this year, ByBit suffered a hacker attack, which was the largest single hacker attack in the history of encryption, with losses exceeding $1.4 billion. The second largest hack occurred in 2022, targeting the Ronin network, resulting in a loss of $624 million.

The North Korean group Lazarus was responsible for both hacks, becoming the largest hacker group in the crypto space.

Most of the large-scale hacks occurred in the Ethereum ecosystem, probably because most of the liquidity of DeFi is concentrated in the Ethereum ecosystem.

Summary

Overall, DeFi transaction volume is still mainly dominated by Ethereum and its EVM ecosystem (with numerous L2s), from which DeFi has risen.

Solana has achieved significant growth in the past year and is catching up, while Bitcoin has unexpectedly begun to develop its own DeFi ecosystem, although it is not designed to be a smart contract platform. The TRON ecosystem seems to have fallen behind other ecosystems, but TRON remains an important hub for stablecoin activity.