Decentralized Finance Faces Decreased Traction Amid Growth in Some Sectors
By: Eva Baxter
Data from DeFillama shows a 30% year-on-year decline in the total value of assets locked (TVL) in decentralized finance (DeFi) projects to its lowest point for this year at $36.95 billion. The sector, which initially saw promising growth with a peak value of over $52 billion in April, has been underperforming for six consecutive months. However, some sectors have defied this trend, most notably liquid staking projects and DeFi projects on the Tron network.
Liquid staking projects have shown significant resilience amid a turbulent DeFi market, offering near 300% returns from their 2022 lows to nearly $20 billion in TVL. Lido has been identified as a dominant player within this niche, controlling over half the market share, outpacing competing platforms like Binance, Coinbase, and Kraken.
Similarly, DeFi projects based on the Tron network have experienced substantial growth, contributing to an all-time high of 18.23% of the overall TVL, a considerable rise from the 6.5% recorded at the beginning of the year. The stUSDT project on Tron is believed to have contributed significantly to this growth, nearing a TVL of $2 billion in just four months since its launch.
However, despite these promising sectors, the DeFi industry faces a significant challenge with the decline in active monthly users by around 2.5 million throughout the year, as reported by Altindex. The user base witnessed a peak of 3.8 million in May but has reduced to 1.15 million by October. This decrease signifies a 66% drop from November 2021 when the all-time high of 7.51 million users was recorded.
In other news, the European Securities and Markets Authority (ESMA) suggests that DeFi does not yet pose a meaningful risk to financial stability due to its relatively small size and limited interaction with traditional financial markets. However, it acknowledges the need to monitor the landscape, especially considering the unsuspected growth in sectors like liquid staking and Tron-based DeFi projects.
