On a general note, the entire decentralized finance (DeFi) space has seen tremendous growth over the past few months. This is evident following the increases in total value locked (TVL) in DeFi protocols on Ethereum, Binance Smart Chain, and other blockchain networks, although the price of the assets is also a factor.
The second-largest blockchain network, Ethereum, still houses the majority of DeFi projects. However, a recent Q2 report from Messari noted that Ethereum’s dominance had been gradually shrinking since this year.
10x Increase in DeFi TVL Since October 2020
According to the crypto data insight and research platform, the decentralized finance space has seen over a tenfold increase in TVL since October 2020, from $10 billion to the current value of $110.12 billion.
Of all the TVL, Ethereum accounts for about 77 percent of it. About 47 percent of all the assets locked in Ethereum actually came from six protocols, which include Curve, Aave, MarkerDAO, Compound, Yearn, Uniswap, and SushiSwap. Although Ethereum still holds a significant share of the DeFi space, its dominance is dropping.
The 77 percent TVL in Ethereum represents over percent decline compared to the record in the past five months, as per Messari.
More DeFi Projects are Finding Home in BSC, Polygon, Solana, and Cosmos
Owing to Ethereum’s dominance, the number of users and activities on the network increased exponentially amid the boom in DeFi and non-fungible tokens (NFTs). This consequently resulted in high fees, which rendered the network usable for the average users.
“In the end, Ethereum’s success also became its burden,” says Messari.
Many users could not contend with the slow transactions and expensive fees on the network, which led them, including developers, to seek alternatives. Binance Smart Chain (BSC) was one network that benefited the most from Ethereum’s burden. As reported some months ago, many user and Ethereum-based projects began migrating BSC, which led to the increase in transaction count on BSC, Ethereum’s shrunk.
BSC gained about 13 percent of Ethereum’s TVL at the beginning of May 2021. The scalability platform Polygon as gained traction in April, going from about $50 million to more than $5 billion TVL in Q2. Solana and Cosmos are two other challengers for Ethereum, as people are gradually migrating to them due to transaction speed and other functions.