The crypto market’s aggregate total value locked (TVL), measures the amount of money deposited in smart contract smart contracts. This figure fell from $160 billion in April to $70 billion today, the lowest level since March 2021. This 66% contraction is alarming, but a lot of data shows that the sector of decentralized finance (DeFi), is resilient.
TVL is a broad measure that lacks detail. This is why TVL is problematic. The metric does not include details such as the number of DeFi transactions and the growth of layer-2 scaling solutions, venture capital inflows, etc.
DappRadar’s July 29 Crypto Adoption Report shows that DeFi 2Q transactions closed down by 15% in comparison to the previous quarter. This is a much lower figure than the TVL drop and is supported by a 12% decrease in active wallets during the same period.
Layer-2 is the best way to sustain DeFi growth
Cointelegraph was told by Iakov Levin (CEO and founder of Midas Investments), that:
“I am convinced that the current bear markets are not the end of the DeFi market. There is a lot of competition between decentralized exchanges using layer-2 Ethereum scaling platform Optimism. Velodrome has already reached over $130 million in TVL.
Optimism uses layer-2 to bundle transaction verifications off-chain. This reduces the transaction cost for decentralized applications.
Optimism network TVL, USD million. Source: Defi Llama
Venture capital inflows also support the resilience of DeFi thesis. Multicoin Capital, a crypto-centric company, launched a fund of $430 million on July 12. The investment management firm was established in 2017 and focuses on the development of Web3 infrastructure, DeFi apps and autonomous business models.
Variant announced on July 28 a $450 million capital raise to help fund, among other things, financial empowerment through DeFi. This strategy includes financialization and productivity for NFTs, stablecoins lending optimizers, DEX aggregaters and products that bridge the legacy system with DeFi.
Levin believes that scaling solutions will enable decentralized finance applications reach the next level. This is a belief that Levin has expressed through these large-scale fund raises. It was almost impossible for applications to gain traction because the average transaction fee on Ethereum during that period was over $25. Midas Investments CEO Levin said:
“Ultimately, layer-2 is a factor that could help revive the sector’s growth. This will be due to the positive and zk Rollups solutions implementation. Layer-2 will improve the user experience by offering lower transaction fees and fast semi-confirmations. It will also allow users to quickly onboard new users.
Metamask Swap & 1inch Network stand out
According to DappRadar data, the number of active addresses that use DeFi applications has remained relatively stable for the past 30 days.
The top DeFi applications by active addresses for 30-days. Source: DappRadar
Data showed an average drop of 2% in active addresses. However, four top fiv applications saw growth. Additionally, MetaMask and 1inch Network, DEX aggregators, posted significant user gains, thus confirming concerns about a “DeFi winter.”
The decentralized finance industry is growing in terms of active addresses, venture capital investments, and innovative solutions that offer cheaper and quicker processing speeds than the peak in late 2021.
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