Total value locked (TVL) on DeFi plunges 70% to 2022 low of $66B

LAGOS (CoinChapter.com) — The recent decline in the value of digital assets in the cryptocurrency market has extended to the decentralized finance (DeFi) space as the total value locked (TVL) has plummeted to a record low.

In detail, the total value of assets locked in DeFi has dropped by almost 70% to a yearly low of $66 billion from $160 billion in mid-April. Data from DefiLlama disclosed that so far in 2022, over $110 billion in locked value was lost, and about $20 billion has been forfeited in the last 30 days.

Data from DappRadar’s crypto adoption report indicated that Ethereum had lost 33% of its TVL since last year. Similarly, Binance Smart Chain (BSC) and Polygon have also lost 70% and 67% of their respective TVL. Additionally, some outliers like Harmony lost 76% of its TVL due to the Harmony bridge hack.

Currently, stablecoin-focused platform MakerDAO remains the largest DeFi protocol by total value locked. However, MakerDAO, which dominates the space by over 8%, slumped by over 15% in the past week. Moreover, MakerDAO TVL stands at $8.7 billion at the time of publication.

Staking service Lido (LDO) also recorded a sharp decline of about 10% in the last seven days. Lido, currently the second-largest DeFi protocol by total value locked, was around $7.5 billion at press time.

Aave protocol TVL slumped by 20% in the last seven days and currently stands at $7 billion. Similar drops were recorded by Uniswap, Curve, and Convex Finance. Notably, PancakeSwap TVL declined significantly, registering around a $2 billion loss since January.

Decentralized Finance Sector Still Experienced Growth

Meanwhile, using TVL as a broad metric isn’t completely factual as some areas of the DeFi sector witnessed growth.

Notably, Solana TVL surged more than 300% last year, while Fantom’s increased by 455%. Similarly, despite being 80% down from its all-time high value, Avalanche is up around 1300% from last year.

Furthermore, layer-2 scaling solutions have registered significant growth, and venture capital inflows in the ecosystem have also increased. Polygon has experienced increased network addresses and transaction volume despite the recent market downtrend.

Moreover, Polygon recently launched zkEVM (zero-knowledge Ethereum Virtual Machine), which is said to be the “first” Ethereum-compatible scaling solution that uses the cryptographic method called zero-knowledge proofs.

Additionally, venture capital inflows also indicate the strength of the DeFi industry. Notably, Multicoin Capital recently launched a $430 million fund, and another blockchain platform, Variant, announced the successful $450 million capital increase to fund, among others, financial empowerment through DeFi.

DeFi Needs’ Killer App’ For To Boost Adoption

Meanwhile, Boris Alergant, Ripple Lab’s head of DeFi markets, has posited that the sector needs a “killer app” for consumers to boost adoption and draw in a mainstream audience.

“So I think institutional adoption is where it’s going, and the institutions are what is going to enable […] that killer app for consumers to really bring crypto and DeFi to the next level.”

Alergant said.

Alergant added that the DeFi sector would soon work hand in hand with the CeFi sector to provide customer financial services.