This week we're having a look into Defi as this part of the crypto market seems to want to grow up and look to compete with TradFi...but it's got some hurdles to overcome.
If we go back to December 2021 there was just over $260bn in Defi TVL.
Today we have just over $76bn. We've lost $185bn in the last ten months - a 70% drop. And in that time we've had some big names fall and some characters that are still on the run and wanted in over 100 countries. No need to name names there.
If we go back two years Ethereum had 94% of all Defi TVL. Fast forward to today and it's just under 60%.
The Top 10 blockchains competing in the space have much more of a spread in terms of TVL. Tron is in 3rd place. Its TVL over the last year looks like what the technical analysis traders would call a Bart Simpson pattern - very up and down. But interestingly the largest protocol within Tron, JustLend, has doubled its TVL from $2bn to $4bn in the last five months bucking the overall trend.
In at number 6 is Optimism. Optimism is an L2 blockchain built by Ethereum developers, for Ethereum developers. Its pitch is you can build Ethereum dapps on there that function at 10x the speed. It looked like it was gaining some momentum over the past two months as it had decent increases in the number of active addresses, network growth, and stablecoins being used. All good signs. However, those metrics have all taken a bit of a hit over the last couple of days. This may well be due to a vulnerability that was found in a bridge between Optimism and BitBTC. This vulnerability was not in Optimism’s code, but rather in a custom bridge provided by BitBTC.
After four hacks recently, October is now the biggest month in the biggest year ever for hacking activity. So far this month, $718 million has been stolen from Defi protocols across 11 different hacks. At this rate, 2022 will likely surpass 2021 as the biggest year for hacking on record. So far, hackers have grossed over $3 billion across 125 hacks. Back in 2019, most hacks targeted centralized exchanges, and prioritizing security went a long way. Now a vast majority of targets are Defi protocols. Cross-chain bridges remain a major target for hackers, with 3 bridges breached this month and nearly $600 million stolen, accounting for 82% of losses this month and 64% of losses all year.
To leave you with some good news, development activity seems unaffected. The Ethereum SDKS, software development kits, which developers use to build with are now getting 1.5m downloads per week. That has steadily increased year on year and is now 10x what it was four years ago. We might be in a bear market but the builders continue to march on.
