NFT Markets Thrive as DeFi Protocols Suffer
Various decentralized finance (DeFi) apps and their communities are vying for protection from a wave of sell-offs in the wake of cryptocurrency’s record-breaking crash, sometimes taking unprecedented action.
DeFi falters in winter
Despite the crypto market lending issue sparking a dark period last week, the DeFi ecosystem saw a number of new developments. Celsius, another cryptocurrency lender with significant interests in DeFi technologies, has filed for bankruptcy. In the second quarter, the market as a whole hit new lows.
The BNB channel has unveiled a new decentralized application platform (DApp) equipped with an alarm. Insolvent cryptocurrency lender Celsius has been investigated by the Vermont state regulator.
In early June, tokenholders of Solend, a Solana blockchain lending application, temporarily took over a large user account that was facing the possibility of a major liquidation. This drastic action for DeFi appears to be a first. Later last month, a second vote overturned the decision.
This all happened after MakerDAO, a cryptocurrency community-run software that supports the DAI stablecoin and operates Aave, one of the first decentralized autonomous organizations, suspended the token’s ability to be deposited and created on the DeFi crypto lending platform. .
The collapse of Terra and its TerraUSD Classic (USTC) stablecoin in May was a major factor in the entire DeFi market cap falling from $142 million to $36 million in Q2, according to a report published by data aggregator DeFi. CoinGecko cryptocurrencies on Wednesday. .
BTC/USD is trading above $20,000. Source: Trade View
Despite a 74.6% drop in market capitalization in Q2, user activity remained broadly flat, according to CoinGecko. It noted that the number of daily active users had only decreased by 34.5%, from 50,000 to 30,000 in the second quarter of 2022.
In addition, the report notes that the flambée des exploits de protocole au cours du quarter, which affected companies such as Inverse Finance et Rari, who ont vu des pirages totaling respectively 1.2 million dollars and 11 million dollars, contributed down. The report said:
“These attacks have had a negative impact on token prices as investors lose faith in these hacked protocols.”
Due to their tendency to network, DeFi applications, which allow users to trade, borrow and lend to each other without the need for intermediaries like banks, are struggling. Users frequently use tokens as collateral when they borrow coins from one app and deposit them into another for higher rewards.
Related Reading | DeFi protocols most at risk of exploitation during the bear market, here’s why
NFT markets prosper, but DeFi with floating income
According to data from Token Terminal, non-fungible token (NFT) markets like LooksRare and OpenSea are the top platforms that continue to generate revenue.
Top dapps based on cumulative protocol revenue over the last 180 days. Source: Token Terminal
Most of the surviving protocols with the highest profits are decentralized finance platforms, showing that although DeFi is dormant, it is still in the game. These select protocols include MetaMask, Decentral Games, Axie Infinity, and Ethereum.Service.
Decentralized applications (DApps) and protocols that share fees with token holders and liquidity providers are also positive.
Historical view of crypto/web3 projects generating fee income for their token holders.
21 Protocol Revenue Market Share Leaders:
Q2: Pancake Swap
P3: Axie Infinite
P4: Ethereum pic.twitter.com/zNRFnss7c4
— Token Terminal (@tokenterminal) January 29, 2022
Protocols that provide token holders with passive income streams are more likely to survive until the next bull market begins, as the bear market continues to drive prices higher and weed out unproductive and poorly managed platforms.
Related Reading | DeFi Loses $678M to Hackers in Q2 2022, New Report Reveals
Featured Image from Getty Images, Charts from TradingView.com and Token Terminal
- Click to share on Twitter (Opens in a new window)
- Click to share on Facebook (Opens in a new window)
- Click to share on LinkedIn (Opens in a new window)
- Click to share on WhatsApp (Opens in a new window)