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DeFi passes billion-dollar milestone

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The value of funds locked in DeFi apps has quadrupled from $276 million 12 months ago to over one billion dollars, according to website DeFi Pulse.

MakerDAO holds 61% of the funds with $609M, followed by Synthetix with $131M, and Compound with $127M. On the lower end of the scale is the Bitcoin Lightning Network with $8.5M.

With the exception of Synthetix, which provides 'synthetic' tokenized versions of real-world assets, all of the highest-grossing DeFi projects are lending protocols that use blockchain to remove the middleman from traditional financial services.

Billion-dollar lending boom

In a blog post, DeFi Pulse said that passing the billion-dollar milestone was an 'early birthday present' for the website, which launched last February.

But not everyone is celebrating DeFi's success. Crypto lawyer Preston Byrne says many of the funds are held in lending contracts by people avoiding taxes, and that their value is appreciating because we are "in the middle of a nascent bull market."

Even measured in Ether instead of dollars, however, the value of the total funds have drastically increased over the last year, suggesting that DeFi is benefitting from more than just an uptick in crypto prices.

The real driver behind the increase of funds is likely to be demand for crypto lending services. This is so strong that DeFi has even outpaced the development of popular legacy peer-to-peer services like LendingClub, which took five years to pass the $1 billion mark in loan demand.

But although DeFi has strong momentum, it is still overshadowed by competition from centralized finance (CeFi) platforms. Genesis Capital for example; a single platform offering institutional crypto lending services, reported $545M active loans in December 2019—over half of the entire value locked in DeFi.

Legacy peer-to-peer platform LendingClub meanwhile, facilitated over $16 billion in loans in 2019.

Even so, the rise of DeFi has been one of the key narratives driving the crypto markets and we expect the Defi trend to continue to grow strongly throughout 2020.



Kieran Smith, Khareem Sudlow