Is it too dangerous to lock 3.1 million Ethereum in DeFi?
Editor's Note: This article comes fromBabbitt Information (ID: bitcoin8btc), compiled by: Wendy, released with permission.
Editor's Note: This article comes from
Babbitt Information (ID: bitcoin8btc)
, compiled by: Wendy, released with permission.
The use of decentralized finance (DeFi) on the Ethereum blockchain continues to grow and is very popular. The amount of ETH locked has nearly doubled in the past few months. This number has reached an all-time high of 3.1 million ETH, and the value locked in DeFi applications has reached 798 million US dollars (including other currencies in addition to ETH).
In comparison, in November last year, only 2.4 million ETH ($439 million) was locked.
While the amount of Ethereum is increasing, the value locked is also increasing at a faster rate. However, this is in large part because the price of Ethereum has surged in recent days, as the cryptocurrency market in general has recovered.
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(The surge in the price of Ethereum has pushed up the value of ETH locked in DeFi applications, image source: DeFi Pulse)
“It appears that during yesterday’s mild volatility in cryptocurrencies, there has been a significant increase in allocations to this new space. Presumably traders are using this new option to add funds to take advantage of the large market volatility.”
The top three DeFi projects locked in over $700 million, with decentralized lending app MakerDAO still leading the way with $452.4 million, up from $335.4 million in November.
The company's closest competitor last year, Compound, an open-source protocol for financial applications, has lost some market share, slipping to third place with $104.5 million.
In second place is crypto-synthetic asset platform Synthetix, which increased the lock-up period for ETH from $99.4 million to $148.8 million.
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Users lock ETH in DeFi applications for a variety of purposes. Take Maker as an example. The platform uses ETH and other currencies as collateral to obtain DAI loans. DAI is an algorithmic stablecoin pegged to the U.S. dollar.
In theory, if there is less ETH in circulation, it could drive up demand and put upward pressure on the price of ETH. This is why supporters of Ethereum believe that locking coins on DeFi platforms is a good thing. The rapid development of such applications may also mean that the network has strong prospects for real-world applications.
However, Greenspan warns:
“For anyone considering entering this space, just know that if lending money to the Brazilian government is risky, lending money to crypto startups is even more dangerous. While I’m excited to see the potential of this new market progress, but remember that when things do go bad, there is no Fed to rescue you, and over a long enough period of time, a lot of people are likely to be hurt.”
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