Data shows the bear market has also hit Ethereum’s decentralized finance (DeFi) hard, as the total value locked in the sector fell by 76%.
Total Value Locked In Ethereum DeFi Currently Only About $23.1 Billion
Decentralized Finance (or DeFi as it is most commonly known) includes all types of financial services implemented on the blockchain. Like other entities on the blockchain, DeFi is public and does not involve a centralized party to complete (since transactions are peer-to-peer).
“Total value locked” (TVL) is a metric that measures the total amount of capital currently invested by users in the DeFi protocol. The chart below shows how the TVL of DeFi built on the Ethereum blockchain has changed over the course of 2022:
Looks like the value of the metric has seen a significant drawdown | Source: Arcane Research's 2022 - Year in Review
As the chart above shows, Ethereum DeFi TVL was over $95 billion at the beginning of this year. However, capital has exited the sector as the bear market has deepened, as in other crypto markets. Currently, the metric has a value of only $23 billion, which means that ETH DeFi has decreased by about 76% during the year, according to the year-end report from Arcane Research.
Ethereum DeFi dominance (percentage share of total DeFi TVL across all blockchains) itself, however, has actually seen an increase of more than 2% this year. From the graph, it appears that this rise coincided with the collapse of Terra LUNA, indicating that the dominance gained due to the outflow of capital from the Terra DeFi application.
The report notes that while this year has not been good for DeFi, the sector has “withstood the chaotic and turbulent times in the crypto credit market and provided much-needed transparency and reliability in contrast to the centralized crypto lenders of last year.”
However, it is also true that DeFi has faced its own chaos this year as well. By 2022, there will be many DeFi hacks and bridges worth a total of $3 billion, as shown in the chart below.
Ronin's hack seems to have been the largest this year | Source: Arcane Research's 2022 - Year in Review
The report believes that proper revenue sharing among DeFi token holders will gain momentum in the coming year, because currently, no token provides meaningful value to investors (besides acting as a government token), and revenue rights for holders can so that’s one thing that helps. revitalize the use of DeFi in the coming year.
The lowest value of ETH
At the time of writing, Ethereum is trading around $1,200, down 2% over the past week.
ETH has seen some decline recently | Source: ETHUSD on TradingView
Featured images from Shubham Dhage at Unsplash.com, charts from TradingView.com, Arcane Research