DeFi Nears One Billion Dollars

The amount of assets locked in decentralized finance (DeFi) has grown by more than 10x since last year, from $50 million to now $700 million, an all time high.

That’s from dapps tracked by Defipulse, a site that lists just 21 such projects, with MakerDAO’s DAI continuing to dominate as some $336 million worth of eth is currently locked there.

In second position there has been a considerable change. Synthetix has doubled to nearly $200 million.

Synthetix is a curious project because it’s not eth or bitcoin that is locked in there, it’s the Synthetix Network Token (SNX).

How this SNX is created is not clear, but you stake it by locking it into the platform. Thus the above stated $183 million is basically SNX’s total market cap:

The project wasn’t very forthcoming when we reached out to them, so we were not able to learn much about it, but this staked SNX basically acts as backing for futures like markets of assets like bitcoin and eth, of course, but also trx, gold, and in the future stocks.

So it’s a bit like CME’s bitcoin futures, except there is no expiry date here. The similarity is that no actual bitcoin changes hands, instead presumably it’s only this SNX that moves.

Like CME doesn’t quite have a market, but tracks bitcoin’s price on Coinbase and the like, here too an oracle is used to determine the asset price.

How that works at a code level isn’t clear. Their whitepaper is pretty much unreadable and doesn’t quite explain the conceptual design in an understandable way, with it somewhat peculiar that the total market cap is also pretty much the total value locked too.

The other ones are more familiar. Compound growing somewhat at $101 million. The Lightning Network has seen a 1,000% increase because itplunged briefly for unclear reasons, and of course there’s quite a few decentralized exchanges or brokers.

Dexes have seen a considerable increase in their usage too, with volumes now standing at circa $60 million a day:

That can be a headache for law enforcement because some of thehacked Upbit eth were apparently sent to Huobi.

That has considerable risks because Huobi could just lock the funds. If instead the eth were sent as collateral on Maker or Compund and were exchanged for DAI or any other token which then can be exchanged on a dex or centralized exchanges for whatever asset, tracking what happened could be difficult if at all possible.

As they’re running on the blockchain, you probably can, but clearly neither hackers nor law enforcement has quite developed those skills yet if we go by the above example.

So for now it’s just traders and speculators gambling, selling, buying, margin recking or cachinging, in addition to snx innovators who may inspire SEC to put this in Jay Claytons’ office: keep up if you can old man.

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