Multiple Metrics Reflect Growth Despite DeFi TVL Drop by 66%

The amount of money invested in smart contracts is tracked by the crypto market's aggregate total value locked (TVL), which dropped from $160 billion in mid-April to $70 billion at present—the lowest level since March 2021. While this 66% decline is worrying, a lot of evidence points to the decentralized finance (DeFi) sub-sectors resiliency.

The drawback of adopting TVL as a general metric is the inadequacy of the information that is displayed. The indicator does not account for factors such as the volume of DeFi transactions, the expansion of layer-2 scaling solutions, or venture capital inflows into the ecosystem.

Compared to the prior quarter, the DeFi Q2 transaction count closed down by 15%, according to statistics from DappRadar's July 29 Crypto adoption report. This figure is far less concerning than the devastating decline in TVL and is corroborated by a 12% drop in the number of unique active wallets in the same timeframe.

Layer-2 And VC Inflows Reflect Growth

Optimism is an Ethereum scalability solution using a layer-2 network to bundle transaction verifications off-chain, reducing the processing times and transaction costs for decentralized applications on the network. The increase in TVL in networks like Optimism predicts steady growth for DeFi.

The total value locked in Layer-2s has increased steadily over the past month. (Credit: CoinTelegraph)

Venture capital inflows into DeFi further emphasize the resilience of DeFi. On July 12, the crypto-centric Multicoin Capital announced a $430 million investment. The investment management company aims to concentrate on creating Web3 infrastructure, DeFi applications, and autonomous business models.

On July 28, Variant Fund announced a $450 million capital increase to fund, among others, "financial empowerment through DeFi." The strategy includes the financialization and productivity of NFTs, lending optimizers, stablecoins, and "products that bridge the legacy financial system with DeFi."

The number of Wallets Increases Over The Last 30 Days

According to information from DappRadar, the number of active addresses running DeFi applications has remained largely constant over the last 30 days. Furthermore, DEX aggregators 1inch Network and MetaMask reported significant user growth, dispelling worries about a "DeFi winter."

In a nutshell, the DeFi industry continues to grow with an increase in the number of active addresses, venture capital investments, and innovative solutions offering cheaper and faster processing capabilities compared to the last DeFi peak in late 2021.