The decentralized finance (DeFi) industry is facing major challenges this year, with its total value locked (TVL) in a freefall and hacks in an uptrend. Most DeFi tokens have also plunged.
Most DeFi Protocols Have Shed Billions in Assets
Data shows that the TVL locked in the DeFi industry dropped to $69 billion from last year's high of $150 billion, a 55% retreat. This retreat has affected most platforms in the industry.
Aave (CRYPTO: AAVE), the biggest lending protocol in the industry, has seen its assets drop to $11 billion from a high of $43 billion in September last year. Compound Finance's TVL has dropped to $1 billion from a peak of $12 billion in 2021. The same has happened across other DeFi protocols like Uniswap (CRYPTO: UNI), Morpho, and JustLend.
Worse, data shows that the number of hacks has jumped sharply in the last 12 months. Total hacks in this period stood at over $1.44 billion, bringing the total hacks on record to over $16.5 billion.
The most significant hack happened in April when hackers drained rsETH tokens worth between $290 million and $293 million. This hack was so severe that it put Aave at risk of imploding. Aave was saved by DeFi United, which included contributions by companies and individuals like Mantle, Aave DAO, Lido DAO, Ether Finance, Consensys, and Justin Sun.
The other notable hacks include protocols like New Market Trading ($2.3 million), Mure ($11.7 million), and ThorChain DEX. These hacks have pushed more people to lose interest in the industry.
Top tokens in the DeFi industry have plunged, underperforming the broader industry. For example, Uniswap's UNI token has crashed to $2.4, its lowest leverl since 2021. AAVE token has slumped in the last ten consecutive months and is now at its lowest point since October 2021. PancakeSwap fell to $1.2 from the all-time high of $47.
Some DeFi Platforms Are Thriving
Still, not all DeFi networks are struggling. For example, Hyperliquid has become one of the most important players in the finance industry. Its perpetual futures platform is handling transactions worth over $180 billion a month. Its monthly volume has crossed that of popular platforms in the crypto industry like Coinbase and Kraken. Hyperliquid has made over $900 million in fees in the last 12 months.
Similarly, Sky, the creator of Dai stablecoin, has been relatively stable. TokenTerminal data shows that it has made over $360 million in the last 12 months. Other top DeFi protocols that are making huge sums of money are Pump Fun and Ethena.
Therefore, there is a likelihood that the DeFi industry is not dead. Instead, it is going through a cycle as investors focus on the AI investments. Nonetheless, there is a possibility that some major protocols will not thrive as they used to as competition rises.
Image: Shutterstock
Login to comment