Decentralized Finance TVL is down by 66%, but growth in DEX aggregators, active addresses, and ongoing fundraising shows that “DeFi winter” is not yet upon us.
The aggregate TVL measures the number of user funds deposited in a decentralized finance (DeFi) protocol. The figure has reportedly declined from $160million in mid-April to $70 million, which is believed to be its lowest since March 2021.
Although this 66% decline is quite alarming, multiple metrics still report that the decentralized finance sector is resilient and still holding up. However, these metrics are not to be fully trusted because they lack accuracy in stating the important details such as the number of DeFi transactions, growth of layer-2 scaling solutions, and venture capital inflows in the ecosystem.
DappRadar’s crypto report on July 29 shows that DeFi Q2 transaction count closed down by 15% as against the previous quarter. This number is less alarming than the chronic TVL decline and is confirmed by the 12% drop in the number of unique active wallets in the same period.
Layer-2 might be the only way out for sustained DeFi growth. The use of Layer-2 will solve the transaction speed and scaling difficulties faced by most cryptocurrency networks.
Speaking with Cointelegraph, CEO and founder of Midas Investments, stated, “I am firmly convinced that the current bear market is not the 'end' of the DeFi industry. For instance, there is a growing competition amongst decentralized exchanges on layer-2 Ethereum scaling platform Optimism, as Velodrome reached more than $130 million in TVL.”
