DeFi Tokens Tumble but Adoption Continues Increasing: ConsenSys Research

A recently published report on the decentralized finance (DeFi) ecosystem has revealed that despite the fall in related token prices, adoption continues to increase.

In its January “DeFi Market Commentary,” Ethereum software solutions provider ConsenSys has delved into the latest analysis of the decentralized finance ecosystem.

First the bad news; as expected, most DeFi-related tokens have taken a hit in the market-wide decline that has been going on over the past ten weeks or so.

Since reaching an all-time high of $174 billion mid-November, the top-100 DeFi tokens by market cap had fallen by 40% to $105 billion by the end of January. This decline mirrors that of the entire crypto market which has fallen by the same percentage since its peak in terms of market cap. The ConsenSys report noted:

“The downward spiral continued as the macro narrative to tackle inflation using interest rate hikes made all investments, not just crypto, less attractive,”

It added that Ethereum and compatible chains proved themselves to be superior to other networks which suffered “significant downside.” As an example, the report cited Solana and its multiple network outages and performance degradation over the past few months.

Adoption continues rising

On the bright side, the number of DeFi wallets has grown to an all-time high of 4.3 million unique addresses in January. “This data point serves as a worthy pulse on the overall health of the DeFi ecosystem,” the report noted.

Ethereum continues to be the dominant network for DeFi applications and collateral commanding 60% of the entire total value locked according to the research.

It added that monthly revenue generated by popular DeFi protocols has declined back to summer levels of last year, however, “overall, the cumulative revenue has grown to be over $3.9 billion since June of 2020.”

ConsenSys concluded that despite the downturn in markets and DeFi metrics, the increasing activity and interest in the fledgling financial sector is a healthy indicator of the growth to come.

“Countless number of institutional DeFi milestones in 2021, demonstrates an “up only” journey of institutional interest in 2022.”

DeFi TVL outlook

Total value locked varies depending on which data platform is doing the measuring. DappRadar is currently reporting a TVL figure of $109 billion, which is down 20% so far this year.

Meanwhile, DeFiLlama claims that TVL is a much higher $196 billion, but also reports a similar decline of 20% since the beginning of January.

This figure will have declined due to the fall in the prices of the underlying assets, not necessarily because collateral has been pulled out of DeFi protocols.