The value of assets locked in just 21 decentralized finance (defi) dapps has increased above one billion dollars for the first time ever.
That’s a doubling in just a few weeks and a five fold increase since last year as this very new space starts gaining traction.
What is now known as defi began at the very end of 2017 with the launch of MakerDAO’s dai, the smart contract based tokenized dollar pegged to USD through ethereum collateral.
Now two years later, dai by itself holds some $600 million mainly eth but also tokens like BAT. Making this one of, if not the, most valuable smart contract.
Synthetix is a somewhat confusing project where the token itself is counted as locked, with it allowing you to trade different assets in a futures like manner where you don’t actually hold the asset, or indeed interact with it in any way, save that whether you gain or lose is determined by the price of the asset on spot exchanges which are connected through a somewhat centralized oracle, but there are plans to decentralize it potentially through Chainlink or the like.
Compound doesn’t seem to be moving much with it at the same level as October, although it fell to $80 million in January to now back at around all time high.
Uniswap seems to be growing decently, while the Lightning Network and WBTC are kind of stuck. The latter being tokenized bitcoin, which is also facing some competition but is not included in the above curated list of defi projects.
The only new and rising project here since we last looked is bZx. That has 4x margins and seems to be attracting some usage.
It would be interesting to know how much of this locked value is being handled by bots and how much of it is manually interacting as you can easily move through all these dapps to find any inefficiencies.
That’s because they’re all open source running on ethereum’s public blockchain, so a bot would find itself in its own native land.
Meaning instead of trading or leveraging there can be arbitrage or the dapp can provide a key functionality for some other dapp.
One example is the no loss lottery which takes any dai deposited there and sends it to Compound to earn interest, with that interest then being the jackpot.
You could potentially develop that where a portion of it is sent to Melon for example to invest, or is given to some algo bot to trade, with the aim of increasing the jackpot while also increasing a bit the risk.
This ability to permissionlessly interact between different dapps is a key differentiator between dapps and apps.
It is also a key differentiator between defi and centralized finance (cefi) like banking where regulators have for years tried to get them to open the data in what they call open finance, but arguably without very much success.
That’s because data is knowledge, and knowledge is power, and power corrupts. If however the data is open and accessible to everyone as on defi – although arguably accessible to bots mainly rather than everyone – then there wouldn’t be differentiated knowledge or secret knowledge, thus there wouldn’t be any asymmetric power, and thus perhaps there would be less corruption in finance.