A new generation of DeFi projects – Terra, Fantom – has had an intense run in the last 30 days. The old guard, let’s call them blue chips DeFi 1.0, not so much.
New generation rises
We’re talking about Uniswap, Aave, MakerDAO, Compound and other members of this DeFi Summer generation. They command over $50 billion in Total Locked Value (TVL) and by that measure are as formidable as ever.
But when it comes to token performance, well, new generation are leaving them behind: Uniswap has seen a 6% increase over the past 30 days compared to a 38.7% jump for Terra’s LUNA token.
The fact is, most blue-chip DeFi 1.0 assets are down more than 80% against USD and ETH since the first half of 2021 and are no longer in the top 50 cryptocurrencies despite the TVLs of many protocols peaking. in the fourth quarter of 2021. Here is a summary of what is happening:
The decentralized money market was a major catalyst for Compound after it launched liquidity mining incentives for borrowers and lenders with its COMP governance token in June 2020.
Compound was not the first DeFi protocol to launch liquidity mining on ETH, with Synthetix rewarding 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 them to accept on the risks of temporary loss associated with providing liquidity to a decentralized exchange, its yield farming incentives quickly led to a flurry of activity on the platform. .
Compoound emerged as TVL’s main protocol for much of DeFi Summer, dethroning longtime industry leader MakerDAO in the process. The protocol also inspired institutions to explore DeFi after partnering with Fireblocks, custodian of institutional digital assets.
Although Compound is the seventh largest protocol on ETH, its token is down more than 87% against the dollar compared to its all-time high in May 2021.
COMP fared even worse against Ether, down 96% since June 2020.
The release of the v2 iteration of Uniswap in May 2020 helped spark the DeFi explosion, allowing permissionless token exchanges without being mediated by a centralized exchange.
Although Uniswap v1 was released in November 2018, the protocol required all trades to be executed using ETH as an intermediate base pair, incurring additional fees and slippage for users.
Uniswap launched its token to users after facing attacks by liquidity vampires from rival DEXs such as Yam Finance and SushiSwap, which offered significant incentives in the form of governance tokens to liquidity providers that migrated their capital from Uniswap. DEX would pioneer concentrated liquidity with the release of its iteration v3 in May 2021.