DeFi lending protocols, such as Aave and Compound, are driving the recovery, showing a strong upward trend and gaining more market share. In terms of usage, these protocols have experienced fantastic expansion, as open borrows have skyrocketed by nearly 960% from Q4 of 2022 to Q4 of 2023. With crypto lending still positively impacted by this resurgence, we can truly see the resilience and potential of decentralized finance.
The entire crypto lending market was rocked hard. It fell by roughly 78% from its all-time high in 2022 to the bottom of the bear market. Contrary to the trends seen in broader lending markets these past few months, centralized lenders have hobbled while DeFi lending protocols have flourished. By the end of 2024, DeFi-based crypto lending accounted for approximately 65% of the total market, consistently increasing or maintaining its market share against centralized entities since Q4 2022.
Aave, a multichain lending protocol, is perhaps the most recognizable leader in the DeFi lending space. As it stands, Aave has $25 billion of value locked with it, making it a dominant player. Almost half of the entire DeFi lending market. This sizable market share is a testament to Aave’s power and the confidence that it has built among members of the DeFi community.
Reaching this optimistic recovery Galaxy Digital was quick to highlight the components behind this powerful recovery, specifically highlighting the natural strength of certain borrowing models.
"the benefits of algorithmic, overcollateralized and supply-and-demand-driven borrowing models." - Galaxy Digital
These models price and transfer risk. For one, they’re the first to offer sustainable lending solutions within the decentralized finance ecosystem.
Although DeFi lending protocols have been very successful, the Total Value Locked (TVL) in crypto lending protocols has been volatile. As reported by DeFiLlama, TVL fell $85.3 billion in November 2021 to just $21.5 billion. Meanwhile, the advent of intent-based swaps might have accelerated this decrease of the DEX TVL, continuing to hurt DeFi lending protocols.
Providing stablecoins and Ether to DEX pools like Uniswap can offer higher rewards, but these rewards are often unsustainable and fluctuate daily. Henrik Andersson of Tredje AP-fonden recommends a longer term strategy for yield generation.
"only sustainable way to produce yield" - Henrik Andersson
Sahan De Silva
Industry News Editor
Sahan De Silva offers in-depth, analytic coverage of the blockchain industry, rigorously balancing data-driven insights with accessible explainer pieces. He values collaborative investigation and thorough reporting. In his personal life, Sahan practices photography and is passionate about Ceylon tea culture.
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