In this article, I share my insights from analyzing the current top 200 DeFi crypto projects.
This is not an academic study. Nonetheless, the findings are of added value for crypto investors.
I used public data by https://defillama.com/ to conduct this analysis. In my analysis, I included the top 200 DeFis by total value locked (TVL) at the end of October 2022.
Total Value Locked
The following chart shows the distribution of total value locked by platform.
14 platforms had a TVL of greater than $1 Billion. 65 platforms had a TVL between $100 Million and $1 Billion. The remaining 121 platforms had a TVL of less than $100 Million with the least amount being $23 Million.
The distribution of TVLs follows the Pareto distribution. The top 40 (20%) DeFis in this list account for 80% of all TVLs.
When it comes to DeFi, the Ethereum blockchain is the clear leader. 96 of the projects examined offer their services either exclusively or also on Ethereum. BSC, Polygon and Avalanche follow at some distance behind.
5 platforms utilized more than 10 different blockchains. 36 used between 2 and 10. The remaining 159 used just 1 blockchain.
DeFi Use Cases
The chart below illustrates the most common use cases of the platforms examined. Decentralized exchanges, liquid staking, yield farming, and lending are among the most common features of each platform.
Please note that these use cases are the main features of the respective platforms as categorized by DefiLlama.
In which of the above use cases is the most money involved? The following chart explains this. Accordingly, collateralized debt position, liquid staking, dexes, and lending are associated with the highest TVLs.
The DeFi Market
In the next step I compared three platforms (Maker DAO, Balancer, AAVE) with high TVL. The columns illustrate the monthly percentage changes in the TVL and price of the platform tokens. The line shows monthly percentage changes in Bitcoin price.
What is striking is that each platform has similar market movements.
This is likely because a majority of the funds deposited in various DeFi products are cryptocurrencies. Since the individual currencies are highly correlated with the movements of Bitcoin, it is not surprising that the individual platforms appear to be moving in unison.
This analysis shows that the services most frequently offered by DeFi platforms (decentralized exchanges, liquid staking, yield farming, and lending) are also associated with the highest total value locked on average.
While some projects only run on one or two public blockchains, some exist on 15 or 20 chains. However, our analysis shows that the number of blockchains a project runs on has NO correlation with how successful the project is.
It is difficult to draw conclusions as to whether certain use cases are on the rise. In general, the performance of the entire DeFi market is very heavily influenced by the price of Bitcoin.
In addition, there are also signs that the TVL seems to be a good indicator of the success and quality of a DeFi platform. Platforms with a higher TVL seem to do better in their price performance. Meaning that on average they are a better investment over longer periods of time, as they increase in price or lose less value than DeFis with lower TVLs.