The horse race in the burgeoning decentralized finance market continues with Uniswap surpassing MakerDao for the number-one spot in total value locked (TVL) — though the exact conditions by which this occurred point to a temporary boost.
Uniswap’s TVL, which represents the total amount of crypto locked into a given DeFi lending or exchange protocol, now stands at $1.6 billion, according to DeFi Pulse. MarkerDAO’s, meanwhile, stands at $1.5 billion.
Indeed, Maker only just surpassed lending protocol Aave after it surpassed Marker on August 25, representing the speed at which market participants are moving between these different protocols as the search for yield intensifies.
Uniswap’s growth has been fueled by the launch of a forked protocol SushiSwap, with $1.2 billion in deposits coming from SushiSwap. In order to engage with the SushiSwap protocol, users must first deposit tokens supported by the protocol onto Uniswap where they will get so-called LP tokens they can use on SushiSwap. The reasoning for this design is to effectively draw liquidity from Uniswap.
But the planned trajectory of SushiSwap means that Uniswap’s sky-high TLV is almost assured to be temporary. As outlined in this August 27 blog post, the liquidity tokens currently staking on Uniswap will migrate to dedicated SushiSwap contracts — that is, onto a standalone decentralized exchange.
Simply put, it’s an end to what is effectively a form of protocol vampirism and, as a result, the TLV will drop accordingly.
Broadly speaking, the yield farming craze in recent weeks has shot up the TVL of almost all DeFi protocols, to stand at over $9.11 billion currently.
In February, that amount was only $1 billion. As The Block Research previously reported, TVL is not an ideal metric to look at DeFi activity. The Block’s Open Finance Index, which takes into consideration vertical-specific parameters such as decentralized exchange volumes, provides a better picture.
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