Decentralized funding hit a new milestone over the weekend when Total Value Locked (TVL) in DeFi broke $ 6 billion for the first time.
Additionally, DeFi's growth rate reflects the explosion of interest that has been seen over the past few months.
A Twitter user, @cryptounfolded, documented the number of days it took each billion dollar milestone to reach.
The jump from $ 5 billion to $ 6 billion came in less than three days. This is in marked contrast to DeFi's launch in August 2017, when it took two and a half years to go from zero to $ 1 billion.
Time between DeFi milestones:
$ 0-1 billion: 917 days
$ 2 billion: 146 days
$ 3 billion: 20 days
$ 4 billion: 4 days
$ 5 billion: 12 days
$ 6 billion: 2.2 days
via @tayvano_ pic.twitter.com/YbodcOL8ly
– Unfolded (@cryptounfolded) August 17, 2020
Investors expect DeFi to put traditional financing out of favor
The growth of the DeFi economy this year has amazed many experts.
Clem Chambers, CEO of the investment website advfn.com, attributes this to an increasing loss of confidence in traditional financial markets. This is due to the uncertainty about the ongoing pandemic.
"The world must 'risk' to recover, and the winner of these races will undoubtedly use the fastest and most dramatic technologies to break free from the quicksand of the economic depression."
The table above shows a hockey stick pattern of the value locked in DeFi as of March, which supports Chambers's claim.
During this period, the Dow Jones Industrial Average suffered its most significant decline in history on March 9th. Two more record losses followed on March 12 and 16.
As a correlated asset, Bitcoin was not immune. On March 12, it plummeted 45%, which also brought the rest of the crypto markets to a standstill.
Since then, stocks and crypto have both rebounded, largely thanks to unprecedented monetary pressures from central banks.
However, Chambers notes that the flaws in traditional finance have been exposed. So maybe DeFi and not Bitcoin is Crypto's ticket to the mainstream.
Questions arise about the accuracy of the total value locked as an indicator
Despite the value locked in DeFi hitting an all-time high, some say TVL is flawed as a metric.
Encode Club founder Damir Bandalo claims that items within TVL are counted twice, in many cases even more.
With that in mind, Bandalo estimates the value set in DeFi is much lower at around $ 3.5 billion, almost half of what defipulse.com claims.
There is a lot of talk these days about total value locked in DeFI.
However, they all count for the same money many times.
So I did my own calculation to find out how much is actually locked in the top 15 DeFi protocols.
Answer: $ 3.5bil. (compared to $ 6.7bil at @defipulse)
cc @ devops199fan
1 / n
– Damir Bandalo (@damirbandalo) August 16, 2020
To illustrate his point, Bandalo gave a typical scenario that would give a triple count of the value locked in DeFi:
"Let's assume you deposit the ETH at @ MakerDAO and mint DAI. Take this DAI and head over to @ CurveFinance and put it in your curve. Your $ can actually be counted 5 times. First when your ETH goes into Maker. Then when the DAI turns. "
Also, for a fairer calculation, Bandalo is calling for DeFi tokens to be removed from the TVL number. Its argument comes from DeFi tokens, which are closer to the value than the value that is locked.