Andre Cronje, the co-founder of Fantom Foundation and the ex-creator of Yield Finance, a DeFi protocol, disagrees with people who say DeFi is dead and the period of high yields is gone.
DeFi Is Not Dead
In a Medium post on February 1, Andre agrees that the crypto bear market of the past year impacted activity and forced users to preserve assets, swinging to stablecoins. Even with this, at spot rates, he argues, on-chain metrics and yield readings from various DeFi protocols, including in Yield Finance, point to a possibly undervalued DeFi market.
He compares the current yields of various coins and stablecoins, including USDT, USDC, and DAI, an algorithmic stablecoin issued by MakerDAO, with those of early 2020 as offered by Yield Finance.
Daily APR https://t.co/BAcrlUTqrQ$DAI 8.75% dominated by @bzxHQ. Static since they introduced 9% fixed rate, they own it.@USDC ~4% @compoundfinance and @dydxprotocol fighting over dominance.$USDT comfy at 20.75% at @AaveAave (insane)@CurveFinance $DAI strong at 9.11% pic.twitter.com/dtadzP8Wx2
— yearn (@iearnfinance) February 5, 2020
Then, DeFi was gaining traction, and the total value locked (TVL) had crossed the $1 billion mark. At present, DeFi TVL exceeds $47 billion and, at one point, stood at over $170 billion at the peak of the last rally. By late November 2021, BTC was trading at over $69,000.
Early 2020 marked the early stages of a protracted bull market that lasted two years to the end of 2021.
Presently, the ETH, USDT, DAI, and USDC real yields are relatively higher than in 2020. Andre notes that this is amid an inactive market following the losses of last year. Generally, real yields offered by DeFi protocols are from the lending market and trading fees.
At the moment, Andre assesses that everyone who had shorted had sold their coins but appear not confident to exit, which is why he is confident the current yields are “really low” despite being relatively higher than in early 2020.
Considering this development, he disagrees with people who think DeFi is dead and periods of high yields are long gone. He argues that this assertion is based on comparing the “current market with an unsustainable and highly delusional market peak, and not its progression.”
If you plot a growth chart on TVL, yield, and trade volume, and you flatten the curve to avoid oscillating, it is a clear linear growth chart.
Andre maintains that DeFi works as designed and doesn’t need a new narrative or a “shiny toy”.
DeFi provides an alternative to users who would otherwise not participate in traditional finance. The ecosystem comprises decentralized exchanges, insurance protocols, investment platforms, and more.
Because they depend on smart contracts, DeFi protocols devolve control to the end user, unlike centralized platforms like BlockFi or FTX, whose collapse saw clients lose billions in crypto assets that were under the custody of the exchange.
Feature image from Canva, Chart from TradingView