DeFi total value locked hits new all-time-high as Ethereum's dominance drops

GB Market Commentary 03/12/2021

by Marcus Sotiriou

The total value locked in DeFi has hit a new all-time-high of above $250 billion! However (as shown by the chart above) Ethereum’s DeFi dominance has decreased significantly in the second half of this year. We have seen capital flow to other Layer 1 chains outside of Ethereum; Luna, Solana and Avalanche in particular. This is mainly down to the high gas fees of Ethereum, as a decentralised exchange swap ranges from costing $50 to $500, whilst a similar transaction on Solana, for example, costs under $1. I think this trend will continue as other chains develop their own network effects further. Ethereum 2.0, due to launch next year, has the potential to pause this trend though, as it aims to lower Ethereum’s high gas fees – whether the Ethereum team are successful remains to be seen.

In other news, Meta (previously known as Facebook) have relaxed its policy for cryptocurrency advertisements. This will make it easier for companies to run crypto ads on Meta’s platform. Meta said, “We’re doing this because the cryptocurrency landscape has continued to mature and stabilize in recent years and has seen more government regulations that are setting clearer rules for their industry.” This announcement comes one day after Meta’s executive David Marcus, who leads Facebook’s crypto efforts, said he is leaving the company at the end of the year. Marcus is responsible for managing Meta’s crypto wallet and the digital currency diem (formerly libra). This recognition of crypto as a maturing asset class from one of the most successful tech firms is a promising step for crypto enthusiasts.