The DeFi sector suffered a major setback in 2022, with Total Value Locked (TVL) in DeFi protocols plummeting by 76.5% from $163.6 billion to $38.57 billion. However, good news has emerged in 2023, with TVL increasing modestly to $45.41 billion, signaling a potential recovery for the industry. In this article, we’ll explore the key developments in the DeFi sector and what they mean for the future.
How has DeFi TVL performed in 2023?
Despite the massive drop in TVL in 2022, there are signs of a potential recovery in 2023. Since January 1, 2023, TVL in DeFi protocols has increased by 19%, from $38.11 billion to $45.41 billion. The top protocols leading the way include Lido, MakerDao, Aave, Curve Finance, and Uniswap.
What is the role of Decentralized Exchanges (DEXs) in DeFi’s recovery?
Decentralized exchanges (DEXs) have a growing dominance in the DeFi market, with trading volume more than doubling that of centralized exchanges (CEXs) in 2023, according to ARK Investment data. This is a significant development, as CEXs have traditionally dominated the market. However, the gap between DEXs and CEXs is still narrowing.
What are the revenue and user projections for DeFi?
Despite a challenging year in 2022, projections for revenue and user numbers in the DeFi sector remain optimistic. Revenues from DeFi are expected to triple to $16.9 billion by the end of 2023 and grow steadily after that. The number of DeFi users is also projected to recover from 2022 levels and reach 9.33 million by 2027. As Web3 spreads and user experience improves, mass adoption could be on the horizon.
What is the evolution of DeFi liquidity?
DeFi liquidity has evolved significantly since 2020, spreading to multiple networks beyond Ethereum. While Ethereum still leads with 58.29% of blockchain value locked, chains like BSC, Avalanche, Polygon, and Fantom have offered cheaper alternatives. Layer 2 solutions and ZK rollups are also emerging as the next phase in scaling DeFi, which could further expand the sector’s reach and potential for growth.
