It is worrisome to see so many DeFi projects and protocols fail quickly. While it is understandable not every idea can be successful, seeing over 30 projects with $0 in TVL is problematic. Two of those lost all of their Total Value Locked in the past week, confirming the cutthroat nature of the decentralized finance space.

The DeFi TVL Graveyard Grows

Similar to alternative cryptocurrencies, DeFi projects will be hit-and-miss. Some ideas will become an overnight success, whereas others may not even last a full week. It is a very competitive business, although one that is also prone to scams and rug pulls. Throwing money at every new project that comes around is asking for trouble. 

Per DeFiLlama, there are now 32 DeFi protocols with $0 in Total Value Locked. Additionally, One project has under $0.0001 in TVL, meaning it is virtually dead in the water. Although there are hundreds of protocols and platforms to choose from, that remains a relatively high failure rate. Unfortunately, it doesn’t appear that situation will change, as competing in decentralized finance is a callous ordeal. 

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Source: DeFi Llama

It is rather problematic that four projects lost 100% of their TVL in the past week. Those are BunnyPark, TotemFi, Coinswap Space, and TreeDefi. Interestingly, all four projects exist on the Binance Smart Chain, an ecosystem home to many notable decentralized finance projects today. It is unclear why these four protocols lost all their Total Value locked suddenly and in the same week to boot.

Sadly, it seems there is no recourse for these projects. When users see no TVL in a project, they will not invest whatsoever. Traditionally, such a TVL decrease results from a hack, exploit, bug, or rug pull. Incidents like these are not too common, thankfully, but they can still affect any project in the cryptocurrency space at any given moment. 

Ethereum And BSC Failure Rates

Value-wise, Ethereum remains the biggest blockchain for DeFi TVL today. It is logical to assume it will have more failed projects than other blockchains due to its prominent market position. However, it appears Ethereum and Binance Smart Chain are on the same level regarding failures. Polygon, Avalanche, Solana, Fantom, zkSync, and Cronos have one or two failed projects, a relatively healthy average. 

Source: DeFi Llama

If we include the project holding under $0.0001 in TVL, Ethereum has 15 failed DeFi protocols to date. Binance Smart Chain has 11, which is more than one might expect. BaconDAO is the only failed project that existed on both of these blockchains, yet that approach was seemingly unsuccessful. Logically, there will be even more failed decentralized projects over the coming months, as several projects have under $20.000 in TVL today.