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DeFi Market Hits $9B, Over 7% of ETH Supply Locked

DeFi Market Hits $9B, Over 7% of ETH Supply Locked
  • Total value locked (TVL) in DeFi strikes a new all-time high of $9 billion.
  • The growing demand for gas and the Ethereum network’s congestion may affect the performance of DeFi protocols.
  • Ethereum 2.0 might be the solution.

The total value locked (TVL) in the decentralized finance (DeFi) market hits a new all-time high of $9.7 billion. Over 7% of the Ethereum (ETH) supply, worth $3 billion, are locked within DeFi protocols.

DeFi TVL Strikes New All-Time High, ETH Price Dips

Data from DeFi Pulse shows the TVL across DeFi protocols hovers at $9.77 billion, hitting a new record high.

DeFi TVL Strikes New All-Time High, ETH Price Dips
DeFi PULSE

A huge portion of DeFi applications, tokens, and platforms are hosted on Ethereum’s network. Considering this, EthHub Founder and Set Protocol Marketing Manager Anthony Sassano said,

There is now 7.9 million ETH powering the decentralized machines that live inside the economic nexus that is Ethereum. This is 7% of the circulating supply of ETH and is worth ~$3 billion.

But despite DeFi’s massive growth, the price of ETH has plunged to -8.6% within the last 30 days. At press time, ETH is at $369 with a 24-hour trading volume of $14.8 billion, according to CoinGecko.

DeFi on Ethereum: High Gas Fees, Network Overload

On the Ethereum blockchain, users depend on ETH to process transactions or smart contracts. As the network becomes more crowded due to DeFi’s growth, Ethereum’s fees, often called gas, have significantly increased.

Firstly, the high fees make it difficult to navigate their assets nowadays. Users would have to determine gas costs and excessively pay them, raising to premium rates on non-custodial wallets like Metamask. This makes the asset management process more difficult.

Average transaction fee since July 2015 (Source: blockchair)
Average transaction fee since July 2015 (Source: blockchair)

As of September 20, the average transaction fee on the network was $3.48, obviously higher as fees were below $1 until mid-July of this year. As per Etherscan, the highest number of transactions were recorded on September 17 reaching 1,406,016. In contrast, the lowest number of transactions, just around 1,329, was logged in August 2015.

The growing demand for gas and the Ethereum network’s congestion may affect the performance of DeFi protocols.

Ethereum 2.0 Is the Possible Solution

An increasing number of users are waking up to the fact that Ethereum and smart contracts are technological foundations that can be used for things beyond payments and money transfers.

One of the most evident solutions to mitigate the current gas prices could be to reduce the demand for Ethereum transactions as well as increase the network’s scalability.

The only solution in the near future that could offset the demand for DeFi is Ethereum 2.0, a mainnet upgrade where its Proof-of-Work (PoW) mechanism will switch to Proof-of-Stake (PoS). Ethereum Founder Vitalik Buterin pointed out that there are existing second-layer solutions that can be adopted to ease transactional flow on Ethereum.

Moreover, Vitalik debunked the vulnerability of the soon-to-be-launched network. As staking opportunities are presented in ETH 2.0, ETH holders can earn more profit as they maintain the network’s functionality.

Crypto trading has enticed Ananthi Reeta to write for CoinQuora. She consistently contributes news and feature articles. She has covered several different blockchain and crypto niches, especially altcoins.