In the past week, the DeFi field has felt the chill of late autumn.
According to data from the encrypted data website DeFiPulse, in the past week, the total locked value in the DeFi field has decreased from 12.46 billion U.S. dollars to 11.02 billion U.S. dollars, a reduction of more than 10%. In contrast, the popularity of Bitcoin, the cryptocurrency with the highest market capitalization, has shown that the price of Bitcoin has exceeded $13,500, which is only one step away from breaking the recent high point created in the middle of last year.
In fact, after September, the popularity of the DeFi field has gradually cooled down. With the obsolescence of the concept of liquidity mining, funds began to flow out, and the lightning loan attack on Harvest Finance this week was a blow to DeFi.
In addition to causing huge economic losses, the attack shook the confidence of investors and developers in DeFi. Such attacks have occurred many times before. According to previous reports, at the beginning of this year, two hackers used flash loans to attack the margin trading agreement bZx, and the arbitrage amount reached 1 million US dollars. Then in June of this year, the Balancer liquidity pool was attacked again by flash loans, and the loss reached 500,000 US dollars.
After the attack, Harvest Finance’s total lock-up value shrank by 50% in one day. According to data from DeFiPulse, its total locked-up value has been reduced to 310 million U.S. dollars, which is more than 70% lost compared to the 1.09 billion U.S. dollars before the attack.
In terms of DEX, the data in the past period of time is also not optimistic. According to data from Dune Analytics, an on-chain analytics platform, the weekly trading volume of DEX last week was $7.7 billion, and the daily trading volume fell by 28% compared to the beginning of the month. The trading volume of the main DEX is less than 50% of the high point. The decrease in DEX trading volume indicates that the DeFi fever is fading, the growing Bitcoin derivatives trading volume, and the recent entry of large institutions indicate that bulls are working, and investors are shifting their focus to Bitcoin.
Affected by the outflow of funds, the prices of major DeFi tokens have all experienced double-digit declines this week, among which Uniswap (UNI), Year.Finance (YFI), Ren (REN) and Loopring (LRC) have all fallen by more than 20 %.
In addition, DeFi’s governance model is also being questioned. A report jointly issued by DappRadar and Monday Capital shows that although DeFi projects are working hard to diversify their control, many projects (especially those with strong sources of venture capital) are still highly centralized.
The researchers analyzed projects such as MakerDAO (MKR), Curve (CRV), Compound (COMP) and Uniswap (UNI). All of these present an obviously uneven distribution of tokens, which is obviously more beneficial to large token holders.
Taking Compound as an example, researchers pointed out that users who hold a large number of COMP tokens mainly include venture capitalists, team members and some other blockchain projects, especially Dharma and Gauntlet. Only 2.3% of addresses can submit proposals and vote, so only a small part of the community participates in governance. Considering the existence of some exchange addresses, the actual percentage may be lower. The total supply of COMP tokens is also heavily tilted towards the top 20 addresses.
Various signs indicate that the focus of the current encryption market is moving away from the DeFi field. DeFi Alliance partner Wang Qiao told reporters that DeFI’s current decline has not yet reached the bottom, but “DeFi is completely different from ICO” because “DeFi is a real innovation.”
Regarding the future development of DeFi, Wang Qiao said, “The most direct application in the short term is DEX. They may seize the market share of centralized exchanges. Now the technology is relatively mature, especially in the second-tier expansion. Next year there will be a decentralized exchange for derivatives.”
Regarding whether DeFi is a bubble, he told reporters, “In fact, the real Silicon Valley is to blow bubbles. The best thing is to blow bubbles for a decade or two. The key question is that after the bubbles are blown, there are practical technologies that can be applied. The bubble will not burst, and it will become real. It is a good thing for this bubble. Blowing bubbles can attract more money and attract more entrepreneurs. Back then, the Internet bubble was very big, but in the end, the remaining ones were the same. Has changed our humanity and society.”
