Key Summary of DeFi 2019

  • +137.23% annual increase in Total Value Locked (USD)
  • 1 in every 37.12 ETH is now locked in Ethereum DeFi Protocols, up from 1 in every 56.17 ETH locked from the year prior.
  • 2.69% of the total liquid ETH supply is locked in DeFi protocols, up from 1.76% the year prior
  • In August, TVL decoupled from Ether’s price movements, signalling a natural demand for Ethereum’s money protocols
  • +977.37% year-over-year increase in Dai locked within DeFi
  • Despite a +198.5% increase in BTC locked in the first half of the year, BTC locked stagnated in growth for the remainder of the year
  • The Dai Savings Rate (DSR) settles in at 4.00% APY
  • Derivatives were the fastest-growing DeFi sector at +4,827% annualized growth
  • Uniswap’s liquidity has surged by +5,709% since January 2019

DeFi Annual Market Performance

It goes without saying that 2019 was the year of Decentralized Finance (DeFi). Despite the stagnant year for Ether in terms of price, dozens of new protocols launched providing permissionless financial services. In 2019 alone, we saw total value locked (TVL) increase from $274.6M USD to $651.6M USD, an annualized increase of +137.23%. Comparing this to Ether’s annual percentage change of -8.34%, DeFi drastically outperformed its underlying market.

In the latter half of 2019, we saw this trend really take place after Ether peaked at a price of ~$330 in July. Despite the significant downtrend in price of ETH since then, DeFi’s TVL decoupled its reliance to the asset and began accumulating value within its money protocols. As depicted below, value locked on Ethereum severely outpaced the value lost from price-performance throughout the second half of the year, signaling a solidifying narrative within the Ethereum community: permissionless finance and composable money protocols may be the primary value-driving use case for Ethereum. 

Adding to the narrative of permissionless finance, Ether acts as trustless economic bandwidth for fueling these financial applications. As such, one of the major use cases for Ether is for trustless collateral for financial assets, such as minting DAI in the MakerDAO system.

Looking at the numbers from the beginning of 2019, less than 2,000,000 ETH was locked in DeFi protocols, largely to act as trustless collateral MakerDAO’s Dai. Fast forward to the beginning of 2020 and nearly 3,000,000 ETH are locked in DeFi protocols, resulting in a Y/Y increase of +52.93%. 

With those numbers in mind, 2.69% of the total liquid supply is locked in DeFi applications, up from 1.76% the year prior. Stated another way, 1 in every 37.12 ETH is being used to fuel decentralized financial applications, compared to 1 in every 56.78 ETH at the start of the year.

In essentially every fundamental metric, DeFi has captured significantly more value over the course of 2019 despite the stagnant price movements. Ultimately, this signals a growing interest for Ethereum’s permissionless money protocols.

Dai Locked 

One of the more interesting aspects within total value locked this year was the increase in Dai locked across different applications. For most of the year, a large majority of Dai locked in DeFi was in third-party lending applications, like Compound or Dharma. However, since the launch of Multi-Collateral Dai (MCD) and the Dai Savings Rate (DSR) in November, Dai locked in DeFi has seen a substantial uptick. Taking a step back, at the start of the year only 2.852M Dai was locked in DeFi protocols where it increased to nearly 31.145M DAI by the end of 2019, or a 977.37% increase year-over-year.

According to Dai Stats, 41.36% of circulating Dai is now stored in the Dai Savings Rate, earning a 4.00% APY. Comparing this to traditional finance, the DSR can essentially be seen as the risk-free rate within DeFi where third-party lending protocols will slowly see rates change to match the risk-free rate plus the associated smart contract risk for depositing DAI into their lending application.

Image via DaiStats

Looking forward, it will be interesting to see whether or not this holds true and how interest rates are affected over the next 12 months given the introduction of the DSR in mid-November.

BTC Locked in DeFi 

In the earlier half of the year, the DeFi community saw some interest for BTC as a collateral type. By introducing BTC into DeFi, the potential economic bandwidth for Ethereum’s money protocols would drastically increase, allowing DeFi to expand the value it provides. Between January 2019 and July 2019, Bitcoin locked in DeFi increased from 504.40 BTC to a peak of 1,505 BTC, a 198.56% increase within 7 months. However, the second half was not nearly as exciting as BTC locked in DeFi actually decreased -4.40% between July and December.

Despite the explosive growth in the first half of the year, Bitcoin locked in DeFi stagnated in the second half of the year – almost directly after the release of the tBTC whitepaper in August.

The amount of Bitcoin locked in DeFi largely relies on wBTC, a semi-trustless asset as it relies on a consortium of DeFi projects to complete the migrations and custody the asset. The introduction of tBTC brings an entirely trustless mechanism for migrating Bitcoin over to Ethereum and the DeFi ecosystem at large, however, main-net release dates for tBTC are still unknown.

Looking forward, it will be exciting to see how tBTC entrenches itself within the DeFi ecosystem along with how much economic bandwidth it will provide to power Ethereum’s permissionless finance.

Sector Performance

On a sector by sector basis, derivatives and assets led the DeFi industry in growth over the course of the year, exploding by 4,827% and 1,749% growth respectively. The lending market kept its lead in terms of value locked, boasting half a billion dollars by year’s end and representing over 51% of total value locked within the DeFi ecosystem at large. Decentralized Exchanges also saw moderate growth this year relative to the rest of the field, largely led by Uniswap and Kyber Network.


The DeFi lending market is by far the most in terms of projects competing for market share. As it stands today, there are currently 8 major lending applications, with the inclusion of InstaDapp as an asset management tool for lending. Nuo Network took the lead in terms of growth within the lending sector, followed by bZx and InstaDApp with 66,900%, 29,990% and 28,685% growth in total value locked (USD).

All three of these lending applications got their start in early-to-mid 2019 and therefore were able to capitalize on the explosive growth within DeFi in the second half of the year. With that said, MakerDAO maintained its lead within the lending space as it comprises of over 75% of the lending sector’s total value locked. Expanding on this further, nearly 2.4M ETH out of the 2.81M total ETH locked (85%) is being used as economic bandwidth to collateralize MakerDAO and the DAI stablecoin.

Graph via DeFi Pulse

According to the fat protocol thesis in combination with the role of DAI within DeFi, we should expect that MakerDAO will continue to dominate the lending market given it’s the underlying protocol for a permissionless and trustless stablecoin and all other lending protocols typically use Dai as the basis for their lending markets.


The derivatives sector was by far the fastest-growing sector within the DeFi ecosystem. The growth was largely led by Synthetix amassing $170M in total value locked in addition to Nexus Mutual bootstrapping its capital pool for decentralized insurance.

On the flip side, Augur saw a substantial decrease in 2019, losing nearly 80% of its value locked over the course of the year. While prediction markets are an interesting concept, it doesn’t seem that the DeFi community has an appetite for its current offerings – potentially due to an unintuitive UX, lack of capital in the network to bootstrap prediction markets with enough liquidity, or the insecure nature of prediction claims. Regardless, with the launch of Augur v2 in the coming months, we should see some improvements across the board in many aspects of the protocol that should hopefully drive some interest to prediction markets at large.

The other two derivatives projects, Synthetix and Nexus Mutual, have both taken an iterative approach to their token economics and the protocol at large. Earlier this year in March, Synthetix added native inflation to the protocol to incentivize more stakers to the network and in turn, increase the economic bandwidth for issuing synthetic assets.

Since then, Synthetix has seen nothing but success as the protocol exploded to #2 in DeFi Pulse’s total value locked. Following the inclusion of native inflation, the Synthetix community took it a step further by smoothing the issuance reductions to every week rather than once a year as well as implementing a terminal inflation rate to reward SNX stakers in perpetuity.

Graph via DeFi Pulse

One of the more interesting projects to emerge in 2019 was Nexus Mutual – a decentralized insurance protocol leveraging a bonding curve to cover smart contracts. The core value proposition for smart contract insurance is simple: the more value locked in DeFi smart contracts, the more valuable it is to insure the underlying capital. While smart contract insurance is still in its early days, the potential implications for a decentralized, trustless insurance protocol is rather immense. After implementing a dynamic minimum capital requirement in early November, the insurance pool has seen a surge in capacity along with crossing $1M in active cover amounts as we went into the new year.

For any keen investors looking to capitalize on the proliferation of DeFi, the protocol’s native token, NXM, essentially represents a pro-rata claim on the capital pool. As such, Nexus Mutual creates an intuitive mechanism for capturing value in DeFi’s total value locked as the more capital locked in the protocol, the more valuable the token is worth.

2020 should be an interesting year for Nexus Mutual as they have a handful of future protocol improvements in the pipeline. Most notably the rework for staking rewards along with integrating the DSR into the capital pool. By lending out idle capital in the pool in combination with the dynamic MCR, it creates a positive feedback mechanism for constantly increasing the cover capacity for the protocol at large while bringing additional value to NXM token holders.


While Decentralized Exchanges saw the lowest amount of sector growth within the DeFi ecosystem, increasing total value locked by a mere 334%, the emergence of Uniswap and Kyber as permissionless liquidity protocols for DeFi applications was one of the more exciting things to happen this year. Uniswap led the sector as it surged to prominence with an annualized increase in TVL of 5,709%.

Moreover, Uniswap’s near 6,000% increase in total value locked also means a near 6,000% increase in liquidity in the protocol. More and more DeFi applications are relying on both Uniswap and Kyber to provide liquidity in order to abstract any unnecessary friction for users when interacting with their applications.

Graph via Uniswap Twitter

Kyber Network also saw an increasing amount of integrations over the course of the year, signaling a growing importance for its liquidity protocol. It is important to note that for Kyber’s liquidity protocol, Total Value Locked (TVL) is not the most accurate measure for growth. Kyber’s reserve managers can provide liquidity to multiple tokens from the same ETH pool, compared to Uniswap where each token pair requires its own individual ETH pool. Therefore, it requires substantially less value locked to provide the same amount of liquidity with Kyber than Uniswap or Bancor.

On that note, we’ve seen a massive surge in integrations within Kyber as well as volume. According to the most recent Kyber Ecosystem Report, the top 10 Kyber integrations aggregate around $36 million in monthly volume, a comparative measure to Uniswap’s ~$30M in total liquidity.

Graphic via Kyber Ecosystem Report

Looking forward, both Kyber and Uniswap have some interesting improvements in the pipeline. Uniswap is working on v2 of the protocol that should bring some substantial improvements to the DEX, however, details are fairly sparse as there’s not much information circulating the industry. On the flip side, Kyber recently announced a token rework that should be implemented in early 2020 along with governance transition towards a DAO.


The asset space is the smallest in terms of total value locked, comprising of just three protocols aggregating a total of <1% of DeFi’s TVL. WBTC and Set Protocol make up the large majority of the value locked where Melon, a decentralized asset management protocol, continues to struggle to garner any significant value locked in USD terms despite the 1,089% annualized growth.

After launching in May, Set Protocol experienced the highest growth rate over the course of the year as the team continuously released more and more Set tokens on a near-weekly basis. In addition, the team released a new dashboard where prospective users can look at historical performance Token Sets, providing greater transparency on the performance of these automated investment tokens. The most liquid Set Token, the ETH 20 DAY MA Crossover saw a +52.7% increase in value through its automated trading strategy. The best performing Set token though was the BTC Minimum Volatility Set which automatically rebalances into BTC if the price ever drops by 10%.

As we outlined above in the BTC TVL section, WBTC experienced explosive growth within the first half of the year but then stagnated after July. It is tough to theorize whether or not this was due to the release of the tBTC whitepaper in August or if it’s really just the notion that there lacks and appetite for BTC as economic bandwidth for DeFi protocols. In the coming months, we’ll continue to keep an eye on the growth of WBTC and how the DeFi space at large is affected with the main-net launch of tBTC in 2020.

Interest Rates

Graph via DeFi Pulse

Overall, interest rates declined significantly over the course of 2019. Prospective lenders at the beginning of the year could’ve earned up to 15-20% APY on dYdX in the beginning of the year, where Compound was offering between 10-15% at its peak in August. Fast forward a few months later, and the introduction of the DSR along with an increase in investor confidence when lending through trustless smart contracts have drawn interest rates closer to traditional finance numbers (but still rather high). Now, prospective lenders can earn anywhere between 2-4% APY on major assets, largely Dai and USDC.

In the long-term, we *should* see interest rates from third-party applications rise as they begin to factor in a risk-premium relative to the DSR. As such, the DSR should act as the risk-free rate for DAI loans as the smart contract and the overarching MCD system becomes battle-hardened over the course of the year.

Top Stories in 2019 

With so many new progressions taking place over the course of the past year, we want to take the following sections to very quickly highlight some of the bigger stories reported here on DeFi Rate. It’s important to note that this section only covers progressions since July, when DeFi Rate was founded. Beyond these stories, you can find the rest of our articles here.








Landscape Changes

To further illustrate the growth of DeFi projects in the past year, let’s take a side by side comparison of visual representations from Oct 2018 to today.



Graphic by

Sleeper Pick: PoolTogether

With the advent of the Dai Savings Rate, any Dai holder can lock their assets for a passive income in the form of annualized interest. One project, Pool Together, took this idea even further to launch the first no-loss lottery.

In essence, users pool Dai to earn savings through the DSR. All of the interest is aggregated and given to one lucky winner every week. Best of all, there is no downside as users can withdraw their portion of the Dai pool at any time.

In the next few months, Pool Together will be launching new stablecoin pools and Pods – a mechanism to allow users to share lottery tickets to increase their chances of winning a prize.

Paired with new wallet integrations, we expect PoolTogether to see strong growth in the coming months as more users recognize the benefits of participating in a lossless lottery.

Looking Forward: 2020

The Rebirth of DAOs

Perhaps one of the largest trends outside of DeFi was the re-emergence of Distributed Autonomous Organizations – better known as DAOs. With the advent of Moloch DAO – a community dedicated to funding Ethereum development – many groups looked to fork the Moloch model to further incentivize community participation.

Within DeFi, we saw both Kyber Network and Synthetix announce interest in migrating towards a DAO model to further democratize protocol governance. Similarly, service providers such as Staked Capital launched Staked DAO, a new way for users to share the upside of the company’s growth and Parity launched the OpenEthereum DAO for the maintenance of the Parity Ethereum codebase.

In summary, we largely expect 2020 to be a big year for DAOs at large. With the advent of for-profit DAOs like MetaCartel Ventures, it’s likely that the DeFi ecosystem will continue to points towards DAOs as a preferred way for stakeholder participation.

Synthetix Adding ETH as Collateral

In September 2019, the founder of Synthetix opened up discussions with the community about adding ETH as a collateral type for issuing synthetic assets While this is anything but solidified, the idea opens the door for the massive potential within Synthetix.

As it stands today, the sole collateral type for Synthetix is the native token, SNX, where 86% of the circulating tokens are currently being used to collateralize synthetic assets. With that in mind, it is unrealistic to expect any more SNX to be staked as the remainder of the supply is likely a combination of passive holders and the team’s treasury. As such, it’s likely that the protocol is at capacity as there’s little economic bandwidth left to collateralize and mint new assets. Therefore, Synthetix must rely on a price increase in SNX to expand the protocol’s bandwidth for minting new synthetic tokens. However, if ETH is an accepted collateral type within the protocol, Synthetix’s economic bandwidth would increase by over 70x, allowing for an entirely new range of assets to be created, likely at a lower collateralization ratio too.

This could be a vital move for Synthetix at large, however, there are plenty of open loops to be ironed out before this goes live including the minimum collateralization ratio, debt ceilings and most importantly, solidifying how value accrual to the SNX token works with a new collateral type.

Closing Summary for DeFi Growth in 2019 

Simply put, 2019 was the year for DeFi.

Whether you look at metrics surrounding TVL or sheerly the number of new products launched within the ecosystem, there’s no denying that Ethereum’s main focus was surrounding the proliferation of DeFi.

With the ever-growing narrative of composability, we largely expect DeFi products to continue to mesh with one another in 2020. Moving forward, we expect teams to make it easier and more intuitive for non-technical users to take advantage of the opportunities DeFi products provide.

If you or your project are building in the DeFi space and are looking for coverage, please don’t hesitate to reach out. We’re always looking to find new projects to write about!

In the meantime, be sure to follow us on Twitter for all things DeFi.