DeFi TVL Hits $192B Milestone After 15 Months: DappRadar

In May, decentralized finance (DeFi) applications saw a significant surge, with the total value locked (TVL) reaching an impressive $192 billion, as detailed in a report by DappRadar, a blockchain analytics platform. This figure marks the highest TVL since February 2022. The increase in TVL did not coincide with a rise in user engagement. In fact, the number of unique active wallets (UAW) using DeFi applications dropped by 21%.

The rise in the U.S. dollar value of cryptocurrencies locked within DeFi apps was primarily driven by a 17% increase in token prices and Ether (ETH). Ethereum emerged as the dominant network in the DeFi landscape, contributing an overwhelming $130 billion to the TVL, which is about 68% of the total amount. Solana followed as the second-largest contributor, with $10.9 billion locked, representing 5.7% of the overall TVL. Notably, Solana’s DeFi TVL experienced a 14% growth over the preceding month.

Despite the robust growth in TVL, the data revealed a concerning trend: the number of daily unique active wallets in DeFi decreased significantly. This suggests that while the remaining users were either depositing more funds or benefiting from increased portfolio values, the broader user base was shrinking. The decline in UAW amounted to 21%, leaving the count at 1.75 million for the month, which is only 17% of the UAW for all Web3 applications.

A notable catalyst behind the TVL increase was short-term speculation regarding a potential Ethereum exchange-traded fund (ETF). According to DappRadar, most trading activities seemed to be driven by speculative behavior, primarily due to the hype surrounding an ETH ETF. During this period, there was a notable rise in the 24-hour trade volumes of decentralized exchanges, which jumped from $1.7 billion to $5.1 billion between October 1, 2023, and June 7, 2024. This surge likely provided higher yields for liquidity providers and lenders, prompting them to contribute more crypto assets to DeFi platforms.

Interestingly, while DeFi saw a drop in UAW, other sectors within the Web3 ecosystem witnessed growth. For instance, the gaming sector reported over 3 million active users, marking a 7.5% increase from the previous month. Similarly, NFT marketplaces experienced an 11% rise in users, reaching 1.52 million UAW. Social media applications within Web3 also grew, with their user count improving by 29% to reach 1.92 million UAW.

The total number of unique active wallets across the Web3 spectrum has now climbed to 10.4 million, as per the June 6 report. This growth is part of a broader trend, as an earlier report from April had noted that UAW had reached 7 million in the first quarter of 2024, up from 4.3 million users in 2023. This steady increase in Web3 users showcases a growing acceptance and usage of decentralized applications.

Despite the positive trends in user growth for Web3 applications, some experts have raised concerns regarding the onboarding process. They argue that the current complexities associated with joining and using these applications could hinder the sector’s future growth if not addressed. Thus, while the data points to a promising trajectory for Web3’s user base, simplifying the onboarding process remains a critical challenge to ensure sustained growth and broader adoption.

The DeFi sector’s sizable increase in TVL coupled with a declining active user base presents a dual-natured scenario of growth and contraction. Other Web3 sectors are flourishing with increased user engagement. Moving forward, the primary challenge for the industry’s stakeholders will be to streamline user access and engagement to sustain and expand this growth trend.