While some Layer 1 networks have struggled to maintain the total value locked in their DeFi ecosystems, others have held strong. While Solana outperformed most other crypto assets in 2021, recent developments hint that its DeFi ecosystem is lagging. Solana says it’s working to fix the issue. The Solana network has additionally faced problems of its own caused by repeated spamming issues, which have caused clogs on the network on multiple occasions. The Solana ecosystem also suffered a major setback in February when Wormhole, a bridge that connects Solana DeFi to Ethereum and other Layer 1 networks, was hacked for $322 million. Solana’s top DeFi protocols-the likes of Saber, Raydium, and Serum-have all experienced sharp drawdowns in recent months. The total value locked on Solana has plummeted over 50% from its high of $14.9 billion in December 2021 to $6.9 billion today. However, SOL is now 60% short of its high, and the amount of liquidity locked in Solana DeFi has also been on a decline for several months. Unlike many other Ethereum competitors, Solana isn’t compatible with the Ethereum Virtual Machine, which contributed to its breakout surge in 2021. Solana has also been hard hit in recent months. Nevertheless, BNB Chain is still among top three Layer 1 blockchains in terms of total value locked, thanks mainly to the large sums of liquidity locked in applications like PancakeSwap, Venus, Alpaca, and Ellipsis Finance. BNB Chain has also been plagued by countless hacks and rug pulls, which has tarnished its reputation as a credible DeFi ecosystem. That’s likely what’s dissuaded Ethereum DeFi staples like Aave and Curve from deploying on the network despite making clear moves to embrace the multi-chain future. BNB Chain is an Ethereum clone, but it’s far more centralized with only 21 validators. There are several factors that could explain the drop, including BNB Chain’s centralization, its lack of innovation, and the vast number of hacks on the network. The ecosystem has shed almost 60% of its locked value and now holds around $12.5 billion, per Defi Llama. DeFi on BNB Chain also plummeted and has been on a decline since. However, May 2021 saw a sharp drop in the crypto market. From January to May 2021, the total value locked in the network soared from $124 million to $31 billion. Throughout the beginning of 2021, the Binance-run chain gained popularity as Ethereum’s soaring gas fees priced out many DeFi enthusiasts. Amid the rocky market conditions, Ethereum remains the number one DeFi hub.īNB Chain, previously known as Binance Smart Chain, was arguably the first alternative Layer 1 network that offered stiff competition to Ethereum when it started to gain traction in late 2020. While some networks have seen the total value locked in their DeFi ecosystems shrink over the last few months, others have thrived. The change in total value locked across the so-called “alternative Layer 1” blockchains competing for Ethereum’s market share has seen huge variance.
That marks a 30% decline from November 2021 when ETH was trading at all-time high, and Ethereum held $163 in locked value. The decline came as the cryptocurrency market experienced a slump across the board.Įthereum, the world’s largest smart contract blockchain, holds about $115 billion worth of digital assets across hundreds of DeFi applications. The overall total value locked in DeFi has fallen over the last few months.Īccording to data from Defi Llama, there’s currently $210 billion locked in decentralized finance protocols, down from a peak of $255 billion in December 2021.
DeFi on other Layer 1 chains like Terra and Fantom has fared much better. The total value locked in decentralized finance across Solana and BNB Chain has declined sharply over the course of last year.
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