Large Institutional Transactions Push Total Value Locked in DeFi to $239B

The growth has come despite a series of high-profile hacks that resulted in the loss of hundreds of millions of dollars

article-image

Source: Shutterstock

share

key takeaways

  • Transactions of more than $10 million became the largest segment of DeFi transactions by volume
  • Hackers made off with $3.2 billion in cryptocurrency in 2021, according to Chainanalysis

Total value locked in DeFi increased from $601 million at the start of 2020 to $239 billion so far in 2022, a nearly 40,000% rise, according to a new research report.

The report’s author, blockchain data provider Amberdata, said the massive rise is “still in the early stages,” adding that total value locked (TVL) should “increase dramatically” in the next few years as institutions enter the market.

Large institutional transactions, which blockchain analytics company Chainalysis defines as above $10 million, became the biggest segment of DeFi (decentralized finance) trades by volume beginning in the fourth quarter of 2020 and grew to over 60% of transaction volume by the second quarter of 2021, according to the company. 

Even as more capital floods DeFi protocols, the industry remains vulnerable to hacks. In 2021, hackers made off with $3.2 billion in cryptocurrency, according to Chainanalysis data.

Ronin Network, an Ethereum-linked sidechain used for blockchain gaming group Axie Infinity, was breached in late March for roughly $600 million, or 173,600 ether, as well as $25.5 million USDC. Federal investigators later confirmed that North Korea-based hacker Lazarus Group led the hack.

DeFi protocol Wormhole suffered a $326 million hack in February — then the second-largest such incident to date. The largest hack in DeFi, and all of crypto, is still the August 2021 $600 million Poly Network hack.

The crime was attributed to a figure that went by the name “Mr. White Hat,” who, in an interesting turn of events, was later offered a security position at the interoperability protocol.

Despite mounting security concerns, researchers at Amberdata insist use cases for DeFi technology are only just emerging, particularly when it comes to financial infrastructure and efficiency. 

DeFi can offer new solutions for data storage, meaning financial services companies could save resources on infrastructure development, the Amberdata report said. 

“For example, a retail bank that maintains ATMs and branches needs to maintain data connections between those endpoints, its corporate offices, and the data center(s) where that data is stored,” researchers wrote. “This bank could leverage a DeFi solution on a private blockchain that reduces data center needs only to what is necessary to maintain blockchain nodes.”

DeFi-enabled smart contracts can also speed settlement times and support complex financial transactions, researchers added.

“In 2021, the global financial services market was estimated to be worth more than $23.3 trillion, meaning that at present, DeFi accounts for about 1% of the total,” the report said. “An increase to just 5% would see over a trillion dollars flow into the space.”


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Research report - cover graphics (1).jpg

Research

In this report, we dive into crypto private market data to gather insights on where the future of the industry is headed. Despite a notable downturn in private raises, capital continues to infuse promising projects that aim to transform payments, banking, consumer experiences, community, and more, with 2023 being the fourth-largest year for crypto venture capital.

article-image

The results mark “a major positive inflection point,” one analyst says, as the exchange carries net income momentum into a crypto rally

article-image

While the slate of 10 US spot bitcoin funds have tallied $4.6 billion of net inflows thus far, half of the field is lagging the leaders

article-image

Trading volumes totalled $154 billion in Q4, including $125 billion in institutional volume

article-image

DeFi on Bitcoin is all the rage right now and Stacks is positioned to benefit

article-image

The Boston Globe reports that lawyer John Deaton is weighing a possible bid

article-image

Ethereum’s Dencun upgrade will enable Uniswap v4 to optimize smart contracts for complex functionality