DeFi surpasses $7B in locked funds, but just six projects hold 90% of capital

August 26, 2020   Ethereum

Despite DeFi’s meteoric growth, only half a dozen projects represent more than 90% of the capital locked in the sector. The total value of capital locked in decentralized finance (DeFi) protocols has increased 271% in less than two months to surpass $7 billion for the first time, according to DeFi Pulse. If the current rate of growth continues, DeFi will be worth more than $27 billion by the end of 2020.

Aave currently comprises the largest DeFi project with $1.51 billion locked, followed by MakerDAO with $1.42 billion, Curve Finance with ss$1.15 billion, Yearn.finance with $845 million, Synthetic with $801 billion, and Compound representing $797 million.

Aave recently emerged as the top DeFi project after receiving an Electronic Money Institution license from the U.K Financial Conduct Authority, signaling the increasing legitimacy of the sector.

However, while DeFi’s aggressive growth trajectory has been fuelled by the recent rise of lending protocols that have disrupted Maker’s long-standing dominance over the space, just six protocols represent more than 90% of locked capital in the sector according to DeFi Pulse.

While numerous projects have quickly captured the imagination of the crypto community amid the 2020 DeFi bubble, few have been able to establish themselves and long-term leaders within the sector. 

The recent dramatic rise and fall of Yam Finance offers a precautionary tale illuminating the potential severity of contract risk — with more than $750,000 worth of crypto being lost alongside the protocol’s collapse. DForce also suffered a multi-million dollar hack in April, however, the stolen funds were returned by the hacker and given back to investors.

Industry leaders have warned of over-exuberant bullishness in the DeFi sector, with Compound founder Robert Leshner recently tweeting:

Earlier this month, Ethereum co-creator Vitalik Buterin also wrote, “you do not have to participate in ‘the latest hot defi thing’ to be in Ethereum. In fact, unless you really understand what’s going on, it’s likely best to sit out or participate only with very small amounts.”

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