DeFi Growth Branches Beyond Ethereum

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In Brief
  • Bitcoin and stablecoins have dominated Q4 DeFi growth.

  • Ethereum TVL has declined as yield farms close.

  • ETH 2.0 staking still increasing — topping 2M ETH.

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Decentralized finance growth has exploded in the last two quarters of 2020 but it has not all been driven by Ethereum according to recent research.



Wrapped versions of Bitcoin and stablecoins have been a huge driver of total value locked across DeFi protocols this year. There are currently 140,000 bitcoins tokenized on Ethereum — though not all are being used in DeFi.

Ethereum TVL is 7.3 million ETH according to DeFi Pulse. This number has fallen by 23% from a record high of 9.5 million ETH locked in late October.



ETH TVL Chart – DeFi Pulse

What Does it Mean for Ethereum?

Messari researcher Ryan Watkins recently observed this surge in wrapped Bitcoin and a fall in ETH as a percentage of TVL in the fourth quarter.

The charts indicate that Bitcoin is now about to reach parity with Ethereum in terms of DeFi TVL.

“Still considering most of the BTC on Ethereum came after CRV and UNI launches not crazy to assume most of it is productive.”

Currently, there are not many major Ethereum-centric yield farms which could also explain the decline. When Yearn Finance launched its yETH vault and Uniswap opened four ETH-based liquidity pools, Ethereum TVL surged to record levels.

The yETH vault and Uniswap’s liquidity pools have since been closed and there is little else to incentivize ETH holders in the world of DeFi at the moment.

ETH 2.0 a Big DeFi Driver

The plunge in ETH locked in DeFi also correlates with the launch of Beacon Chain so it would be safe to assume that the majority of that has been staked.

Currently, there are over 2.1 million ETH staked in the deposit contract and this figure continues to steadily grow. It represents 1.85% of the total supply and almost 30% of what is currently locked in DeFi.

As staking becomes easier for average users, this may become a better passive earning opportunity than gas-intensive yield farming.

Institutions are also likely to be getting in on the action, buying up ETH to lock up for the next year or two for guaranteed returns.

Disclaimer

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Martin has been writing on cyber security and infotech for two decades. He has previous trading experience and has been actively covering the blockchain and crypto industry since 2017.

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