A new generation of DeFi projects — Terra, Fantom — have had a blistering run in the last 30 days. The old guard, let’s call them DeFi 1.0 blue chips, not so much.
We’re talking Uniswap, Aave, MakerDAO, Compound, and other members of that DeFi Summer generation. They command more than $50B in total value locked (TVL) and by that measure, they are as formidable as ever. But when it comes to token performance, well, the new entrants are leaving them in the dust: Uniswap has recorded a 6% increase in the last 30 days compared to a 38.7% jump by Terra’s LUNA token.
The fact is, most DeFi 1.0 blue-chip assets have plummeted by more than 80% against both USD and ETH since the first half of 2021 and no longer rank among the top 50 cryptocurrencies, despite many protocols’ TVLs peaking in Q4 2021. Here’s a rundown of what’s happening:
Decentralized money market Compound was a major catalyst for DeFi Summer after it launched liquidity mining incentives for borrowers and lenders with its governance token COMP in June 2020.
Compound was not the first DeFi protocol to launch liquidity mining on Ethereum, with Synthetix having rewarded sETH/ETH liquidity providers on Unsiwap v1 with its SNX token in 2019. However, with Compound rewarding its community simply for using the protocol and not requiring they take on the risks of impermanent loss associated with providing liquidity to a decentralized exchange, its yield farming incentives quickly led to a flurry of activity on the platform.
Compound emerged as the top protocol by TVL for much of DeFi Summer, dethroning the sector’s long-time leader, MakerDAO, in the process. The protocol also inspired institutions to explore DeFi after partnering with institutional digital asset custodian Fireblocks.
Although Compound is the seventh-largest protocol on Ethereum, its token is down more than 87% against the dollar compared to its all-time high in May 2021.
COMP has fared even worse against Ether, crashing by 96% since June 2020.
The launch of Uniswap’s v2 iteration in May 2020 was helped ignite the explosion of DeFi by enabling permissionless token swaps without being mediated by a centralized exchange.
While Uniswap v1 had launched in November of 2018, the protocol required all trades to be executed using ETH as an intermediate base pair, incurring additional fees and slippage for users.
Uniswap airdropped its token to users after facing liquidity vampire attacks from rival DEXes such as Yam Finance and SushiSwap, which offered significant incentives in the form of governance tokens to liquidity providers who migrated their capital away from Uniswap. The DEX would then go on to pioneer concentrated liquidity with the launch of its v3 iteration in May 2021.
Uniswap is now the ninth-largest DeFi protocol with a TVL of $7.53B, while the exchange processed more than $1.5B in volume across its v2 and v3 deployments in the last 24 hours.
Even so, the price of Uniswap has fallen dramatically since its early 2021 all-time highs.
Currently trading for $9.21 or 0.00337 ETH, the price of UNI has crashed 79.3% in fiat terms since its May 2021 high, and 83% against ETH since posting a record high in March 2021.
The success of Yearn Finance, a pioneering yield aggregation protocol, catapulted its founder, Andre Cronje, to fame. COMP’s success inspired Yearn to launch its governance token YFI in July 2020. Cronje urged users to earn the token by providing liquidity to one of the protocols in the Yearn ecosystem, rather than purchase it on exchanges.
Yearn and Cronje have been mired in several controversies. And the protocol is Ethereum’s tenth largest and ranks 14th overall for the sector. Yet YFI has declined 76.7% against USD since its May 2021 high. The token has fared even worse against Ether, shedding 93% since trading for a whopping 111.9 ETH September 2020.
Synthetix Network Token
Synthetix was a darling of the early DeFi sector, with SNX holders enjoying eye-watering gains as the token rallied from just a few cents to more than $28 at its peak in early February 2021.
Synthetix continues to power many innovative DeFi protocols, with recently launched derivatives trading protocols including Lyra and Kwenta being powered by Synthetix. Yet Synethetix has suffered a brutal 13 months, hemorrhaging 70% of its TVL since peaking at $3B last February. Synthetix is now just the 40th-largest protocol with $874.5M locked.
The SNX token has fared even worse, crashing 86.8% against USD since peaking last February. It is also down 92% since topping out against Ether in September 2020.
MakerDAO, Ethereum’s first protocol enabling users to mint a decentralized stablecoin against ETH collateral, is the second-largest DeFi protocol by TVL with $15.5B locked.
Despite launching way back in December 2017, the success of its stablecoin, DAI, has allowed MakerDAO to remain a leading DeFi protocol. Its TVL peaked at roughly $20B in December and MakerDAO continues to closely vie with Curve for the distinction of Ethereum’s largest protocol.
Yet the MKR token has dipped 69% since topping out in May 2021 compared to the dollar. MKR also peaked against Ether way back in March 2019 and has steadily fallen by nearly 87% since. MKR has bounced by just 22% since posting an all-time low against ETH in November.
Aave launched in January 2017, then called ETHLend, before rebranding to Aave in September of 2018. The protocol would go on to pioneer flash loans and overtook Compound as the top decentralized money market by TVL last year.
It currently ranks as the fifth-largest DeFi protocol by cross-chain TVL with $12B locked. Its recent Polygon and Avalanche deployments were a major catalyst for adoption on the networks, currently ranking as the largest protocol on both. Its platform for institutional investors, Aave Arc, has drawn a lot of attention from family offices and private banks.
Despite peaking with a TVL of roughly $19.5B in October, Aave is down 80.4% against USD since its May 2021 high, and has cratered by 84.8% relative to ETH since its peak in Feb 2021.
Curve, a decentralized exchange for low-slippage stablecoin swaps, emerged as the leading DeFi protocol by TVL in 2021, peaking at more than $24.1B in January.
Its growth was propelled by deployments on low-cost Layer 1s and Layer 2 scaling networks, in addition to the surging growth enjoyed by Convex Finance, a protocol bolstering the yields of Curve’s liquidity providers and CRV holders, in the second half of 2021. Convex is currently the fourth-largest DeFi protocol.
Curve’s growth also drove significant gains for CRV holders as the token gained 380% to $6.51 from $1.36 in July. Yet much of the gains were quickly erased, with CRV losing 63% of its value in the past two months.
When compared to ETH, CRV is also down nearly 39% in 12 months. It has also shed 92% since bouncing two weeks after launching in September 2020 — roughly two weeks after it began trading on exchanges.
DeFi Pulse Index
Decentralized finance collective, Index Coop, launched its DeFi Pulse Index (DPI) token in September 2020.
The index token is designed to offer market cap-weighted exposure to the top tokens from the DeFi sector. It currently tracks the governance tokens of Uniswap, MakerDAO, Aave, Loopring, Synthetix, Yearn Finance, SushiSwap, Compound, Ren, Rari Capital, Kyber Network, Balancer, BadgerDAO, and Harvest Finance.
DPI surged by 900% in roughly six months, peaking at $633 in May 2021 after trading for just $62 in November 2020. However, the index token has since cratered alongside DeFi 1.0 assets.
DPI last traded hands for $156, a 75% drawdown from its record highs. It is also down 79% against ETH since rallying in March 2021.