— Pete Rizzo (@pete_rizzo_) January 23, 2020
While the graph features popular DeFi tokens like MKR and KNC, it also omitted some of the biggest tokens within the space today. Instead, the graph included smaller, more obscure tokens like GNO and MLN, showing a misrepresentation in the growth of DeFi over the past year. While these tokens may have a bright future ahead, today they account for less than 0.10% of the $790M in total value locked.
With that, we’ve decided to take it upon ourselves to update the graph to a version that is more reflective of the growth in DeFi and includes more prominent DeFi-based crypto assets within the sector. Ultimately, we hope that this serves as a better indicator of the performance of DeFi tokens throughout the course of 2019.
Our basket of DeFi assets includes:
All of these tokens serve an important role within DeFi and have all garnered a fair amount of traction within their respective niches. Ether is the primary asset supplying economic bandwidth to other money protocols, and should be considered one of the core backbones of the DeFi ecosystem.
Maker establishes the protocol for permissionless, stable value on Ethereum with Dai serving as the industry standard stablecoin for DeFi integrations. Synthetix has quickly become a sector leading money protocol for synthetic assets and other derivatives as it holds the #2 spot in TVL via DeFi Pulse.
In addition, Kyber Network and 0x are two of the main liquidity protocols for DeFi, providing behind the scenes liquidity to multiple applications through DEXs (unfortunately had to omit Uniswap due to lack of native token). Lastly, ChainLink acts as a core piece of infrastructure given it’s one of the leading projects for decentralized oracles – a vital aspect for secure price feeds within DeFi applications.
With all of that in mind, below is the individual performance of the aforementioned tokens from January 1st, 2019 to January 1st, 2020.
Synthetix led the charge with a massive +3,117% gain with ChainLink also performing well, earning +525.31% over the course of 2019. Ether and MakerDAO saw relatively negligible changes, with -4.50% and -5.08% losses respectively. The two DeFi liquidity protocols, KNC and ZRX, saw rather different years in terms of performance as KNC increased +20.41% while ZRX lost -38.59% of its value throughout the year.
Across the board, DeFi tokens performed fairly well. It is important to note that this graph does not include the recent run-up in prices as Ether, Kyber, and others have seen notable gains since the beginning of the year. Regardless, by taking an equal weight on a basket of these tokens (which is what Pete Rizzo did originally), we can see that DeFi tokens actually performed significantly better than Bitcoin in 2019.
This is not a fair representation of the growth in DeFi. You're missing some of the biggest tokens in the space.
— Lucas (@0x_Lucas) January 24, 2020
Bitcoin saw a respectable +86.44% increase compared to the equal-weight DeFi basket gain of +550.58%. While the performance is significantly higher than the original graph led on to be, an equal weight basket may be overly simplified. As such, I’ve decided to take this a step further and put together a weighted portfolio of the assets above based on total value locked and their importance within the DeFi ecosystem.
- ETH: 50%
- MKR: 20%
- SNX: 10%
- LINK: 10%
- KNC: 5%
- ZRX: 5%
With the above weights, DeFi tokens still significantly outperformed BTC despite the two assets with the highest weights performing negatively over the course of the year. The weighted DeFi basket saw a +328% increase compared to Bitcoin’s +86% increase.
Despite BTC having a respectable year in terms of price performance, it’s still unmatched compared to the proliferation of DeFi. While total value locked was the most talked about metric in 2019, the price performance of the underlying tokenized money protocols also experienced strong growth throughout the year.
The question now becomes: Who will lead DeFi and which tokens will rise to prominence in 2020?
Analyst at Bankless – one of the leading resources for open finance. Lucas is an active contributor to the DeFi ecosystem with appearances in other notable DeFi outlets including The Defiant and Our Network. He has years of experience working with dozens blockchain and token startups where he focused on token economics, marketing, and growth.