The total value of capital tied up in Decentralized Funding Protocols (DeFi) increased 271% in less than two months to exceed $ 7 billion for the first time, according to DeFi Pulse.
If the current growth rate continues, DeFi will be worth more than $ 27 billion by the end of 2020.
Aave currently includes the largest DeFi project with $ 1.51 billion locked in, followed by MakerDAO with $ 1.42 billion, Curve Finance with $ 1.15 billion, Yearn.finance with $ 845 million, Synthetic with 801. billion dollars and Compound representing 797 million dollars.
Aave recently emerged as the first DeFi project after receiving an electronic money institution license from the UK Financial Conduct Authority, signaling the growing legitimacy of the industry.
However, while DeFi’s aggressive growth trajectory has been fueled by the recent rise in lending protocols that have disrupted Maker’s long-standing dominance in the space, only six protocols account for over 90% of the locked-in capital in the sector according to DeFi Pulse.
While many projects quickly captured the imagination of the crypto community amid the DeFi 2020 bubble, few have been able to establish themselves and become long-term leaders in the industry.
The recent dramatic rise and fall of Yam Finance offers a precautionary narrative that sheds light on the potential severity of contract risk – with over $ 750,000 in crypto lost alongside the protocol collapse. DForce also suffered a multi-million dollar hack in April, however, the stolen funds were returned by the hacker and returned to investors.
Industry leaders have warned of an exuberant uptrend in the DeFi sector, Compound founder Robert Leshner recently tweeting:
If https://t.co/9Kn1cUvYq8 has $ 500 million within 36 hours of launch, the industry needs to self-regulate and stop releasing these meme farming games. https://t.co/IyJSw9zS43
– 🤖 Leshner (@rleshner) August 18, 2020
Earlier this month, Ethereum co-creator Vitalik Buterin also wrote: “You don’t have to go on ‘the last hot thing of challenge’ to be at Ethereum. In fact, unless you * really * understand what’s going on, it’s probably best not to participate or to participate only in very small amounts. “