For any DeFi power user out there, you surely remember when Total Value Locked crossed $1B just 4 months back.
🚀 Total Value Locked 🚀
🚀 $1,000,000,000 🚀
— DeFi Rate (@DefiRate) February 7, 2020
Total Value Locked (TVL) – a metric popularized by DeFi Pulse – has quickly become the defacto standard for measuring DeFi’s success in the wider Ethereum ecosystem. Defined as the amount of capital staked (or locked) within a given protocol, we’re now seeing projects compete for their slot on the coveted leaderboard.
As we’re primed to cross that mark again, we wanted to take this time to highlight some of the major differences we’ve seen in a matter of just 120 days.
DeFi Governance Spurs TVL
Perhaps the most obvious answer here is the rapid trend of DeFi governance tokens hitting the market. Leveraging the SAFG model, we’ve seen Compound, Balancer, UMA, Curve and pTokens all announce some form of a native token which is earned through protocol usage.
If you aren't launching a governance token, are you even living? pic.twitter.com/cp5YZSSFXb
— eric.eth (@econoar) June 3, 2020
To this end, we’ve seen TVL on protocols with governance funnels experience rapid liquid growth – best highlighted by Balancer and their Liquidity Mining program. As of June 1st, anyone who contributes capital to the rising asset management liquidity protocol will earn a pro-rata portion of the weekly BAL allocation. This has lead to a strong surge in the number of unique LPs, best exemplified by this Dune Analytic query from Matteo Leibowitz.
While Balancer’s Liquidity Mining may have been the first SAFG distribution to go live, we’ve been deeply involved with Compound and their governance token – COMP. Last week, Compound shared details about the COMP distribution model in which users will receive governance tokens for providing capital and interacting with the sector-leading lending protocol. Despite the fact that COMP distribution is not set to start until sometime in July, we’ve seen Compound’s TVL spike as well. Given the poor lending rates available right now, it’s tough to imagine this is a coincidence.
Bitcoin Enters DeFi
Next up is the growing wave of Bitcoin making it’s way to Ethereum and subsequently entering the DeFi ecosystem. Best highlighted by WBTC and it’s addition to Maker, we saw the first Bitcoin wrapper surge to the second-most collateralized asset behind ETH for minting DAI. What’s interesting about this development is despite a 0% Dai Savings Rate since Black Thursday, Dai’s supply is soaring – set to break ATH’s in the coming weeks.
Outside of WBTC we’ve seen the launch of the RenVM – a highly anticipated bridge for users to port Bitcoin to Ethereum in a permissionless fashion. Since it’s launch last week we’ve seen just over 50BTC migrated as renBTC – nearly half a million dollars at the time of writing. With pTokens adding ~$200k worth of new pBTC to the DeFi ecosystem, this trend is only just beginning for the industry-leading $180B asset. And, despite the rocky start, we largely expect tBTC to make some big waves in this conversation when it’s fully back up to speed.
Lastly, dYdX launched their Bitcoin Perpetual Futures – giving users a way to trade BTC-USDC with up to 10x leverage natively on Ethereum. While this may not directly correlate to Bitcoin being locked as collateral, there’s no doubt the permissionless margin trading platform can attribute its TVL growth to new users looking to tap into the enticing opportunity that is high-leverage Bitcoin futures.
Building on the composable nature of the DeFi ecosystem, new trends like Aave’s Uniswap Money Market signal that DeFi capital is becoming more portable – with users being able to earn tokens, fees, and incentives in an ever-growing suite of passive income opportunities.
Thanks to the launch of Uniswap V2, making a liquidity pool has never been easier – and we’re seeing many projects capitalize on just that. Best highlighted by UMA and their first synthetic asset –ETHBTC – Unsiwap serves as the perfect backbone for a DAI-based trading pair which was previously unaccessible on V1.
To this end, we suspect DeFi TVL to continue to be driven by exciting new financial primitives and would even go so far as saying a 0% DSR might have been the best thing that could have happened to DeFi. With focus shifting away from easy-to-access lending APR into the hands of hard-fought yield farming, things have never looked brighter.
To stay up with all of these trends and more, follow us on Twitter! We’ll be sure to keep you in the loop on all things DeFi as always.
Until then, here’s to $10B TVL up next!
We’re on to $10B pic.twitter.com/BvSbxVYxxR
— DeFi Rate (@DefiRate) February 7, 2020
Cooper is the Editor of DeFi Rate and an active contributor to leading DeFi media outlets like The Defiant, DeFi Pulse, and Bankless. He works with early-stage teams through Fire Eyes DAO to incubate governance models and grassroots community development. He is an ambassador to Set Protocol and an author of a weekly publication called Token Tuesdays. To stay up with Cooper, follow him on Twitter.