Nov 24, 2020

5 min read

2020 DeFi Industry Research Report

Summary and Outlook

Q3 has led us to a world where different projects were working together, driving the concept of “money legos” to achieve its potential.

The Rise of DeFi in Q3

In the wave of the rise of DeFi, total value locked (TVL) has increased by 500%, thanks to the popularization of yield farming. Price for DeFi assets soared while the congestion on Ethereum pushed the transaction fee to all-time high. The issuance and distribution of governance tokens through liquidity mining reward the participants not only economic incentives but also the ruling power, and more voices have been heard from the community.

Automated Market Maker (AMM) took the lead and drove the total trading volume of Decentralized Exchange (DEX) to $47 billion. Uniswap has shown a dominant place with QoQ growth in trading volume reached 2000%, presenting competitive trading activeness compared to some top centralized exchanges.

DAI remained as the most needed stablecoin in the DeFi space, and with a growth of over 500%, its issuance volume has surpassed BUSD and PAX. yearn.finance rose to fame and YFI became the most expensive cryptocurrency in just two weeks.

Forks and experimental projects named after food quickly drew much attention, attracting abundant liquidity while becoming highly controversial.

The transfer of Bitcoin to Ethereum continued, and the demand for WBTC stayed high with a total issuance volume surpassed 100 thousand. The derivatives market saw more diversification and contributed to forming the entire cryptocurrency financial ecosystem.

The Downturn in Oct

As the bubble accumulated, DeFi experienced a downturn since mid- September.

October has seen the stagnation of TVL increase, the drop in DEX trading volume, and the fall of the price of DeFi assets.

Institutions accelerated the investment and expanded the layout in mainstream digital assets such as Bitcoin and Ethereum. Problems in the DeFi space including unsatisfying user experience and high transaction fees remained unsolved, making it difficult to realize a wider adoption when compared to the centralized competitors.

DeFi from June to October seemed to experience a life cycle where the rise was followed by a fall. However, the end of the cycle is not the end of DeFi, and with the summer craze and all the “noises” going away, the whole industry is ready to start a healthy consolidation in the long run.

Outlook

The upcoming Ethereum 2.0 will no doubt have a significant impact on DeFi. The enrichment of derivatives products, the diversification of underlying assets, and the introduction of the real world assets will further expand the DeFi space. Centralized finance will be continually seeking ways to integrate with DeFi component, and the development of cross-chain methods will bring discussions and imaginations on cross-chain DeFi ecosystem.

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