DeFi October Review: Veterans take a collective break while new recruits take over

In October, the cryptocurrency market was full of mixed emotions. PayPal, DBS Bank, FTX and others announced progress in cryptocurrency trading and payment. Bitcoin also successfully broke through $14,000, reaching its highest point in more than two years. In contrast to Bitcoin, the DeFi sector is in decline. The decline in yields has made DeFi less attractive to investors, and the funds entering DeFi have reached a bottleneck after several months of growth.

The most affected are the aggregated financial projects, with YFI and YFII both falling by more than 60% in October. Due to the lower rate of return, the income from using the aggregated financial platform will hardly make up for the 0.5% loss of principal. Thanks to the deep binding with Curve, the funds locked in yEarn are still $540 million; while the funds locked in dfi.money have dropped to $22.45 million, which is less than half of the market value of YFII. Other DeFi projects in inflation have not escaped the fate of a sharp drop. The price of UNI fell 45% in October, returning to around $2; the price of COMP also fell below $100.

In October, the assets locked in various DeFi protocols began to decrease, with a total locked amount of $13.76 billion, a decrease of 3.9% from a month ago, and a 2.1% increase in real locked amount, which is also related to the price plunge of DeFi tokens. After Uniswap issued its own governance token, many large funds entered Uniswap to provide liquidity for ETH and stablecoin trading pairs. The funds locked in Uniswap alone are close to $3 billion.

In the case of the sluggish DeFi market, star projects have emerged in every market segment. BarnBridge is a cross-platform graded derivative protocol that quantifies and marks the risks of different DeFi products through indicators such as yield and volatility, and grades the risks. Different financial derivatives will be launched according to different risks. Another project of Andre Cronje, keep3r, has also attracted a lot of attention. Keep3r is a decentralized crowdsourcing network that can complete a certain task through everyone in a decentralized manner. The first task is UniswapV2Oracle, which collects the moving average price of Uniswap trading pairs and realizes the function of decentralized oracle. Both projects are very innovative. The former realizes complex financial functions, and the latter greatly simplifies DeFi protocols such as oracles.

The scale of stablecoins has grown steadily

As demand continues to grow, the size of stablecoin assets continues to increase. As of the end of October, the stablecoins in the Ethereum network have reached 16.6 billion US dollars, an increase of 10.2% in the past month. Among them, the issuance of ETC20 USDT rose to 10.93 billion US dollars, accounting for 65.76% of the total stablecoins in the Ethereum network, and the proportion decreased. The issuance of USDC rose from 2.53 billion US dollars to 2.94 billion US dollars, and the proportion rose to 17.69%.

Stablecoin projects are favored by many investors, and various stablecoin projects are emerging in the market. OUSD is a stablecoin with elastic supply issued by Origin Protocol. It generates income by deploying the underlying stablecoins such as USDT, USDC, and DAI to other DeFi protocols, which is equivalent to the aggregated mining of stablecoins. dForce and others also have similar functions.

The Big Three in Mortgage Lending Are Solid

The mortgage lending market is still dominated by Compound, Maker, and Aave, with total borrowing volume rising to $2.48 billion, up 26.1% over the past month. Compound and Aave are both underlying protocols in the lending market, and various financial management platforms will deposit funds into Compound and Aave to obtain token rewards. The assets pledged in the decentralized stablecoin protocol MakerDAO and the stablecoin DAI generated by the pledge have also been rising steadily.

The Qian protocol, which was issued at the end of last month, is a folk from MakerDAO, but has a lower liquidation line than MakerDAO and no stable rate, making it more friendly to those who want to borrow stablecoins. However, if you encounter an extreme market like March 12, the risk you encounter is also higher. As of October 31, the assets locked in the Qian protocol are $24 million, and 17 million QUSD stablecoins have been generated.

DEX trading volume dropped 17.7%

A large amount of funds are locked in decentralized exchanges (DEX), but trading volume has not increased with the amount of funds. Daily trading volume at the end of October was 17.7% lower than a month ago. Uniswap firmly occupies the top spot in trading volume, accounting for almost 70% of the total trading volume of DEX. The gas fees consumed by Uniswap also account for almost 20% of the Ethereum mainnet. After a round of forks and improvements, the pattern of decentralized exchanges has basically stabilized. After more than two months of pre-mining, the 1INCH token of 1inch.exchange and its automatic market-making service platform Mooniswap may be close to launch.

Cross-chain assets anchored to BTC increased by 27.9%

Although the returns of DeFi financial management have decreased, there are still more native Bitcoins locked up and cross-chained to Ethereum. At the end of October, the issuance of Bitcoin-pegged coins reached 150,000, an increase of 20.2% in the past month. As a centralized Bitcoin-pegged coin, WBTC's issuance has always dominated. At present, the issuance of WBTC has reached 118,000, an increase of 27.9% in the past month, and its share in Bitcoin-pegged coins has also increased from 73.9% to 78.7%.

As a new type of cross-chain asset, tBTC has maintained a good growth trend in issuance in recent months. tBTC adopts a decentralized custodian approach and is jointly issued by Keep, Summa, and Cross-Chain. Each BTC deposit is controlled by a different multi-signature user, who must over-collateralize Ethereum as collateral. Currently, the issuance of tBTC is 983.

Synthetic assets

Affected by the overall DeFi market, the representative of synthetic asset projects, Synthetix, also performed poorly. Any DeFi asset in high inflation has not escaped the fate of plummeting. The price of SNX has fallen by 35% in the past month. After modifying the economic model last year, the price of SNX has been rising all the way until this year, becoming one of the few hundred-fold coins in the market. Staking SNX can not only obtain transaction fees in the system, but also obtain higher inflation rewards. At the same time, this also means that it is more likely to enter a death spiral when the market is generally downward.

New leveraged trading projects emerge

Leveraged trading platforms have not been well developed due to issues such as fund security and efficiency. According to DeBank data, as of the end of October, the total leveraged trading position in Ethereum was only 23.17 million US dollars, and dYdX accounted for 97.16% of the total. dYdX has also suffered flash loan attacks many times, and Nexus Mutual has also paid compensation for this. In contrast, the decentralized options market has attracted a lot of attention, and the locked positions of Opyn, Hegic, etc. are still growing.

After several months of rapid development, DeFi has collectively retreated, and the market has shifted its attention from DeFi to Bitcoin. In general, DeFi is also a direction that is relatively easy to implement, and after the low-cost miners withdraw, the market is still likely to continue to develop.