Solana’s 54% TVL Plunge Leads DeFi Decline

TVL is easily affected by market conditions, so the carnage left by FTX’s wake could be to blame

article-image

Blockworks exclusive art by axel rangel

share

The total value locked (TVL) across major DeFi protocols — as well as related smart contracts — has dipped outside the bounds of typical volatility since the collapse of FTX.

Though the declines so far have not been jarring on an absolute basis, data compiled by DeFiLlama illustrates how FTX’s speedy demise has started to spread from competing centralized exchanges into decentralized markets. 

Over the past seven days, MakerDAO, one of the most prominent DeFi lending protocols, has seen its TVL dip by 3.11%, per the data. Liquid staking protocol Lido, meanwhile, booked a 2% decline over the same period — and open source liquidity protocol AAVE’s TVL was down 4.7% by noon Wednesday in New York. 

TVL represents assets staked on a smart contract, indicating funding available to a protocol to carry out market functions, including spending, borrowing and facilitating transactions.

More broadly, Ethereum had its TVL drop by 14.84% in the last seven days. Despite Polygon’s MATIC token (ERC-20) remaining steady, the blockchain’s TVL dropped 10.8%. Most significantly, however, is the Solana network — the TVL ​​of which plummeted by 54.2%.

Solana was heavily promoted by former FTX CEO Sam Bankman-Fried, and its decline accelerated after FTX’s liquidity issues surfaced last week.

The Solana Foundation said that it had roughly $1 million in cash or cash equivalents on FTX — less than 1% of liquid assets on hand. The accounting comprises roughly $3.2 million worth of shares in FTX stocks, $3.4 million of the exchange’s native FTT tokens and $134.5 million in decentralized exchange Serum’s utility token — SRM, an asset that enables holders to receive up to a 50% discount on their trading fees. 

Several DeFi projects on Solana were also affected by the FTX contagion. Most notably, lending protocol Solend saw its TVL drop by 63.21% in the past week, its current TVL at the time of writing sits at $24.87 million.

It is important to note, however, that TVL is easily affected by market conditions and inflates when assets increase in value, Amberdata CEO Shawn Douglass said in a blog post. Other market metrics, as such, may be more apt in terms of evaluating the health of DeFi protocols and associated projects.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

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

Screenshot 2024-05-23 091855.png

Research

Bitcoin L2s aim to boost scalability while preserving decentralization and security, unlocking a better user experience, and new avenues for Bitcoin-powered innovations. However, no existing Bitcoin L2 leverages the full security of Bitcoin.

article-image

Sponsored

As part of the #Breakout2024 plans, Radix has introduced Token Trek

article-image

House members ask Gensler to keep a “consistent and equitable approach” with ether ETF proposals after the agency approved spot bitcoin ETFs in January

article-image

Using old-world instruments to address crypto user experience challenges goes against what this industry set out to do

article-image

And, weeks of a potential crypto ETF decision are no stranger to chaos

article-image

The FIT21 Act marks the second crypto-focused piece of legislation to advance in Congress this month

article-image

More than half of Solana transactions fail