DeFi
Does DeFi need new innovations after three years of TVL stagnation?
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There is visible growth in some of the most important sectors of the crypto ecosystem, but decentralized finance (DeFi) appears to be lagging behind. Noting this anomaly, Patrick Hansen, Circle’s senior policy director for Europe, recommended that the sector needs a complete overhaul.
DeFi hiccups in the spotlight
According to Hansen’s observation, DeFi Total Value Locked (TVL) has remained at the same level as more than three years ago. According to Hansen, this metric is still less than half of what it is if the Liquid Staking capital lock is excluded.
According to data from DeFiLlama, DeFi TVL is currently valued at $142.347 billion, down from over $220 billion as of December 2021. This massive drop comes despite a growing number of dApps on Ethereum (ETH) and other protocols with deep connections to smart contract finance applications.
For an industry that is moving outward, Patrick Hansen suggests there should be a major difference in locked TVL. Although the policy expert noted that TVL is an imperfect metric for judging overall market performance, he noted that DeFi overall needs a new wave of innovation and applications.
Why regulation can hinder innovation
The focus of traders in the market has notably shifted in recent years to Ethereum refresh protocols. This is the major aspect of the DeFi ecosystem that has seen a significant rise, with Lido DAO and EigenLayer leading the way in this regard.
The intention to innovate, however, could face major market pressure in the future. This is based on the rigorous regulatory climate in the United States, the main liquidity market for DeFi.
Uniswap, the leading protocol pioneer in the world of decentralized exchanges (DEX), has received a Well Notice of the United States Securities and Exchange Commission (SEC).
Despite Hansen’s calls for new innovations, these regulatory bottlenecks could have an impact and dampen optimism.
About the Author
Godfrey Benjamin
Godfrey Benjamin is an experienced crypto journalist whose main goal is to educate everyone around him about the prospects of Web 3.0. His love for crypto was born when, as a former banker, he discovered the clear advantages of decentralized money over traditional payments. With his extensive experience covering various aspects of Web3, Godfrey’s articles have been featured on Blockchain.news, Cryptonews, and Coingape, among others.