The total amount of funds locked in Decentralised Finance (DeFi) protocols hit past the $7 billion mark on Aug. 26, its highest figure yet. According to data gathered by DeFi Pulse, this is almost double the amount held one month to date with the total value growing by 271% in less than 2 months. If the sector maintains its current explosive growth over the coming months, the total amount could rise to over $27 billion by Dec 2020.
Aave Dominates the DeFi market
The DeFi market is however skewed with only a few projects holding a huge share of the total locked capital. About 90% of these funds are held by only half a dozen projects. Of those 6, only 3 of them hold over $1 billion each. Aave is currently the leading DeFi project accounting for over $1.5 billion worth of locked funds. It is closely followed by fellow Ethereum-based lending platform, Maker with $1.4 billion. Curve Finance takes the third position holding $1.13 billion. Synthetix, yearn.finance, and Compound complete the list of dominant protocols with $839.2 million, $816.1 million, and $787.6 million respectively.
Aave dominates the sector accounting for 21.16% of the total capital locked up in DeFi. Its recent emergence comes after the project got an Electronic Money Institution license from the United Kingdom Financial Conduct Authority. This has served as a sign of the project’s legitimacy fueling its explosive growth and popularity within the sector. Aave’s rise has seen it dislodge Maker which has dominated the space for long. Moreover, it’s official recognition by the UK financial regulators has given a much needed confidence boost to the DeFi sector among investors.
Crypto leaders issue warning against DeFi sector
Crypto industry leaders have taken exception to the dramatic rise of the DeFi sector akin to the 2017 ICO bubble. Some have issued warnings over the excess bullishness in the DeFi space. Compound founder, Robert Leshner posted a tweet calling for the self-regulation of the sector citing the dramatic investment of $500 million in spaghetti.money projects less than 36 hours after is launch.
— Robert Leshner (@rleshner) August 18, 2020
This echoes sentiments issued earlier by Ethereum co-founder, Vitalik Buterin who cautioned people against participating in ‘the latest hot defi thing’ via this tweet
Reminder: you do NOT have to participate in "the latest hot defi thing" to be in ethereum. In fact, unless you *really* understand what's going on, it's likely best to sit out or participate only with very small amounts.
There are many other kinds of ETH dapps, explore them!
— vitalik.eth (@VitalikButerin) August 14, 2020
Given recent developments, it is therefore best to heed this advice. Investors lost over $750,000 worth of crypto through the Yam Finance project while DForce investors were lucky to get refunds following a multi-million-dollar hack back in April.
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