The data shows that the bear market has also hit Ethereum decentralized finance (DeFi) hard, as the total value locked in the sector has declined by 76%.
Total value locked in Ethereum DeFi now only around $23.1 billion
Decentralized finance (or DeFi, as it is more commonly known) includes all types of financial services that are performed on the blockchain. Like other entities on the blockchain, DeFi is public and does not involve any centralized party to get things done (since the transactions are peer-to-peer).
“Total Value Locked” (TVL) is a metric that measures the total amount of capital that users have currently deposited into DeFi protocols. The chart below shows how the DeFi TVL created 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, the Ethereum DeFi TVL was over $95 billion at the beginning of this year. However, capital has flown out of the sector as the bear market has deepened, just like in the rest of the crypto market. Now, the metric is worth just $23 billion, which means that ETH DeFi has seen a reduction of around 76% over the year, according to the year-end report from Arcane Investigation.
However, Ethereum DeFi’s dominance (the percentage share of total DeFi TVL across all blockchains) has seen an increase of more than 2% this year. From the chart, it is evident that this rise coincided with the collapse of Terra LUNA, suggesting that the dominance gain was due to capital flowing out of Terra DeFi applications.
The report notes that while the year has been a bad one for DeFi, the sector has “endured chaotic and turbulent times in the crypto credit markets and offered much-needed transparency and reliability in contrast to centralized crypto lenders over the past year.” .
However, it is also true that DeFi has faced its own chaos this year as well. In 2022, there were many DeFi-related hacks and bridging totaling $3 billion, as the chart below shows.
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 would gain momentum next year, as no token currently provides significant value for investors (other than acting as a governance token), so rights of income for holders could be something that helps. revitalize the use of DeFi in the coming year.
ETH price
As of this writing, Ethereum is trading around $1,200, down 2% over the past week.
ETH has seen some decline recently | Source: ETHUSD on TradingView
Featured Image by Shubham Dhage on Unsplash.com, Charts from TradingView.com, Arcane Research
