The boost to yield farming due to the launch of COMP makes DeFi more attractive. Amid the huge boom in DeFi, major security challenges arose.
Joseph Lubin, Ethereum Co-Founder, and Consensys Founder, recently announced the release of the report on DeFi growth on Ethereum in the second quarter of 2020. Consensys’ Codefi unit, dedicated to systems for decentralized finance, released the report.
Highlights of the report include the fact that the presence of Bitcoin-pegged tokens on Ethereum outpaces BTC on the Lightning Network. Besides, the last quarter recorded three security incidents that led to the theft of USD 26 million. The study also highlighted the mid-June launch of Compound’s governance token, COMP, responsible for the recent yield farming fever on Ethereum.
According to the report, one of the main indicators of the boom in DeFi’s Ethereum operations is the total locked volume of ETH (including ETH-pegged tokens, WETH). Said volume had reached a record high in the first quarter but the market crash on March 12th caused that volume to drop to stagnate between 2.5 and 3 million ETH.
However, locked ETH recorded an increase of 500,000 in mid-June, after the launch of the COMP token of the lending platform Compound. The quarter ended with a new all-time high of 3.3 million ETH locked.
USD Total Locked Value Grows
When Ethereum reached USD 6 billion locked in DeFi on February 6th, the total USD value of locked ETH corresponded to 64% of the total, that is, USD 640,000. The remaining 36% of the value in US dollars was for the ERC-20 tokens.
Codefi notes in its report that, for the second quarter, the USD value of locked ETH doubled from less than USD 400 million in early April to USD 750 million at the end of the quarter. From that increase, the report indicates that around USD 200 million emerged in the last two weeks of the quarter, which it attributes to Compound.
The daily number of DeFi platform daily users interacting with the various decentralized protocols remained between 3,000 and 5,000 most of the quarter.
However, it is possible to observe an increase to 6,333 daily users since mid-June, a figure that the platforms reached on June 21st. According to the report, a total of 79,648 unique addresses interacted with a DeFi protocol on Ethereum during the quarter.
The amount of locked ETH grew significantly since mid-June, according to the study. However, the impact of the launch of COMP on the total users of the DeFi ecosystem was not as significant as the growth of users of the platform Compound.
Compound users went from 30,000 to 40,000 at the end of June, but that increase only represented about 3.42% of total users. This suggests that most new users of Compound turned to this protocol in the last two weeks of June, motivated by the benefits of yield farming.
Furthermore, the study addresses automated market makers (AMMs), which are liquidity pools of two or more assets. These AMMs adhere to a smart contract that determines the price of each asset against another asset in the pool, basing on the volumes of each asset.
The report says that Uniswap is one of the most successful AMMs on Ethereum, while others like Balancer and Curve have emerged in 2020. As for the number of users, Balancer grew from zero to 4,000 in the quarter, while the number of daily users rose to 1,678. From 260 ETH locked in early April, at the end of the quarter there are more than 45,000 ETH locked.
By Alexander Salazar
