Since the collapse of FTX in November 2022, the total value locked (TVL) in decentralized finance (DeFi) protocols has surged to a new high of $52 billion. This resurgence is noteworthy considering the sector’s tumultuous past marked by the downfall of other major firms like Terra, Three Arrows Capital, and Celsius, which cast a shadow over both centralized and decentralized financial protocols, creating widespread uncertainty.
Both centralized and decentralized sectors have shown signs of recovery in recent months. Specifically, DeFi’s TVL has seen a 36% increase in dollar terms since the start of 2023, jumping from around $38 billion to a yearly high of $52 billion. However, the TVL metric is not immune to the volatility of token prices, which can significantly impact its value.
The recent uptrend can be partly attributed to the rising market values of major cryptocurrencies like Bitcoin and Ethereum, along with a consistent influx of investments from market participants. The market recovery, along with specific improvements and upgrades in certain DeFi protocols, has contributed to the increase in TVL. In 2023, there was a significant integration of real-world assets (RWAs) within DeFi, notably the inclusion of nearly $2.5 billion in RWA collateral, primarily U.S. Treasury bonds, to support the Dai stablecoin by MakerDAO.
As a result, MakerDAO’s reliance on centralized stablecoins like USDC has decreased. MakerDAO’s TVL has surpassed $8 billion, buoyed by an increase in annual revenue. Furthermore, Maker introduced a lending protocol called Spark in the second half of the year, which attracted significant inflows. The platform allows users to deposit their DAI stablecoins using the DAI Savings Rate (DSR) and exchange them for sDAI, enabling them to earn interest while maintaining liquidity.
Similarly, liquid staking protocols like Lido Finance have garnered attention, allowing users to earn rewards without locking their Ethereum with validators. Lido continues to be the largest DeFi protocol by TVL, with over $21 billion in deposits. Additionally, Uniswap launched its v3 protocol in mid-2023, offering enhanced capital efficiency for on-chain investors.