The DeFi boom, ignited by Compound's "lending-as-mining" model in June 2020, popularized liquidity mining for nearly two years. While DeFi spurred on-chain activity, it also led to persistently high gas fees. By August 2020, depositing into Curve under a Gas Price of 250 GWEI could cost ~0.3 ETH per transaction. Though liquidity mining helped projects cold-start, it also inflated bubbles—many DeFi blue chips have since dropped 90% from their peaks.
Despite the current crypto bear market, DeFi has grown exponentially. Data from DeFi Llama shows:
- Total Value Locked (TVL): $128.65B (May 2022) vs. $1.1B (May 2020) — a 116x increase.
- However, TVL is down 53.7% from its December 2021 peak ($277.98B).
Top DeFi projects have since built brand moats and iterated innovations. Below, we analyze 10 early DeFi protocols post-liquidity-mining hype.
1. Uniswap
Launched: November 2018
Progress:
- V1: ERC20/ETH pairs only.
- V2: Any ERC20 pairs.
- V3: Customizable liquidity ranges/fee tiers (0.01%–1%).
Metrics:
- Trading Volume: $62.6B (May 2022) vs. $284M (May 2020) — 220x growth.
- Liquidity: $5.97B (May 2022), down 43.1% from December 2021 ($10.5B).
👉 Why It Dominates: V3’s concentrated liquidity reduced fees (e.g., 0.05% tier for USDC/ETH) and boosted capital efficiency, capturing 74% DEX market share.
2. SushiSwap
Launched: August 2020
Status: Initially a Uniswap fork with aggressive APR incentives (up to 1000%+). Struggled post-Uniswap’s token launch despite multichain expansion (Kashi lending, Miso IDO).
Metrics:
- Liquidity: $2.07B (May 2022), down 70.6% from November 2021 ($7.04B).
- Trading Volume: $3.93B (May 2022) vs. $25.2B (May 2021) — 84.4% drop.
Challenges: Leadership instability (e.g., Chef Nomi, 0xMaki exits) and lack of core differentiation.
3. Curve
Launched: January 2020
Focus: Stablecoin swaps ("Curve War"), now expanding to cross-asset trades (e.g., tricrypto2 pool: $470M TVL in WBTC/WETH/USDT).
Metrics:
- TVL: $8.93B (May 2022), down 63.3% from January 2022 ($24.3B) but 700x higher than May 2020 ($12.75M).
Innovation: Collaborated with Synthetix for low-slippage DAI→WBTC routes (via sUSD/sBTC).
4. Bancor
Launched: 2017 (AMM pioneer)
Updates:
- V2: Single-sided liquidity + IL protection.
- V3 (2022): Omnipool vaults eliminate BNT intermediation.
TVL: $620M (May 2022), down 74.4% from May 2021 ($2.42B).
5. Synthetix
Origin: Evolved from Havven (2019). Pioneered "LP rewards" (pre-"liquidity mining" term).
Key Metric: sUSD supply at $98.7M (May 2022), down 70% from August 2021 ($329M).
6. Yearn
Launched: July 2020
Status: Yield aggregator facing competition (e.g., Convex).
TVL: $1.19B (May 2022), down 82.8% from December 2021 ($6.91B).
Issue: "DeFi risk-free rate" (e.g., Curve 3pool + Aave) fell to ~1%, shrinking profits.
7. MakerDAO
Launched: 2017 (earliest DeFi)
DAI Stats:
- Supply: $6.76B (May 2022), down 34.9% from February 2022 ($10.38B).
- Collateral: 50% via PSM (Peg Stability Module).
Stability: Rarely deviates from $1, even during March 2020 crash (~10% premium).
8. Aave
Launched: 2019 (as EthLend)
Progress: V3 boosts cross-chain capital efficiency (deployed on 6 chains).
Metrics:
- Deposits: $12.56B (May 2022), down 60.2% from October 2021 ($31.59B).
- Borrows: $3.6B.
9. Compound
Launched: September 2018
Challenges:
- Lost ground to Aave due to slow innovation.
- Bugs (e.g., $80M COMP misdistribution in September 2021).
Metrics:
- Deposits: $5.62B (May 2022).
- Daily Users: ~78 depositors, ~24 borrowers (30-day avg).
10. dYdX
Focus: Perpetuals/margin trading (L2 via StarkEx).
Volume: BTC/USD pairs dropped 89.8% from February 2022 ($17.27B/week) to June 2022 ($1.77B/week).
Key Takeaways
- Brand moats (e.g., Uniswap, MakerDAO) resist fork competition.
- Innovation (e.g., Curve’s cross-asset pools) drives market share.
- Multichain expansion is critical for growth.
👉 Explore DeFi’s evolution further
FAQ
Q1: What’s the biggest risk for DeFi protocols?
A1: Smart contract vulnerabilities and over-reliance on unsustainable token incentives.
Q2: How did Uniswap V3 improve capital efficiency?
A2: By allowing LPs to concentrate liquidity in specific price ranges, reducing slippage.
Q3: Why did SushiSwap decline?
A3: Leadership churn and lack of unique value post-Uniswap’s token launch.
Q4: What’s next for DeFi?
A4: Layer-2 scaling, real-world assets (RWAs), and deeper institutional adoption.