Will 2022 Be The Year When DeFi TVL Surpasses $500 Billion?

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Decentralized finance continues to attract much attention and liquidity in the cryptocurrency world. More people want to explore passive revenue streams by leveraging existing assets. With over $249 billion in DeFi Total Value Locked, hitting $500 billion before 2022 is over remains a plausible target. 

DeFi Growth Remains Spectacular

It has been an exciting year for the decentralized finance industry. Numerous blockchains now compete for TVL to find more users and liquidity. More importantly, top protocols now offer multi-chain capabilities to make life easier for novice and advanced users alike. The future will be cross-chain based, and any project not going with the flow risks being left behind. 

Even though crypto markets have been somewhat bearish in late 2021 and most of early 2022, the DeFi growth remains spectacular. An increase of over 317% in one year confirms the commitment by users to bring liquidity to the table. Of course, most do so for monetary gain, but that is what makes DeFi so appealing. Using existing crypto assets to earn rewards, farm yield, or gain interest is a powerful tool to make alternative finance the go-to option. 

The ongoing growth of decentralized finance is a curious development. Despite glaring shortcomings in Layer-1 networks, they still represent most of the Total Value Locked today. However, competition has heated up across alternative chains with better throughput, lower fees, and Layer-2 scaling solutions. As a result, dethroning Ethereum will be virtually impossible, although the rise of Terra, Avalanche, Tron, Solana, and others remains very impressive. 

It will be interesting to see if the DeFi TVL can record a new all-time high. That metric peaked in November 2021 at over $305 billion before dropping to $257 billion and even $196 billion in the following months. Momentum has begun to reverse, primarily thanks to bullish crypto markets. Sustaining growth remains the primary objective, although there are no straight paths in crypto. 

Chains To Look Out For

While Ethereum remains the undisputed king of DeFi TVL, the ecosystem faces stiff competition. BNB Chain has dropped in ranking, although the ecosystem seems to mount a strong comeback these past few weeks. It still encompasses over $19 billion in Total Value Locked, which is more than several networks combined. However, there are other contenders worth keeping tabs on.

  • Terra: Even though Terra seemingly came out of the blue for DeFi TVl, it now represents nearly $36 billion in Total Value Locked. Growth has slowed down this week, but the monthly momentum – +34.38% – indicates future growth is possible.
  • Avalanche: Until Ethereum scales, networks like Avalanche will remain popular among DeFi users due to low fees. Surpassing $12 billion in TVL is significant, although it remains to be seen if going past $15 billion is feasible.
  • Solana: A high throughput and low fees make a potent cocktail for decentralized finance purposes. Solana hovers near the $10 billion mark for TVL, making it a contender for the top three.
  • Fantom: Perhaps the dark horse in this race. Andre Cronje turned his back on DeFi and the Fantom ecosystem, leaving behind many pieces to be picked up. There is still over $8.8 billion in TVL to find a new home.  
  • Cronos: The Cronos ecosystem has exploded in the DeFi TVl rankings and represents over $4.5 billion in assets today. Weekly growth of over 66% is significant and confirms the demand for alternative solutions to the aforementioned ecosystems. 

Will New Protocols Make An Impact?

The decentralized finance TVL rankings have proven interesting to keep an eye on. It appeared as if Lido would take the crown for a while, although things have changed yet again. Curve remains the top DeFi protocol on the market, ahead of Lido by over $4 billion. The usual suspects, MakerDAO, Anchor, and AAVE, all retain their top five spots.

The big question is whether new decentralized finance offerings will come to market and compete for a top spot. In the top 10, we see Convex Finance, Hex, Uniswap, Compound, and Pancakeswap. Getting into the top 10 currently requires a TVL of over $6.92 billion, which isn’t impossible to achieve. 

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