Ethereum: This is how this blockchain skyrocketed DeFi's TVL!

The Total Value Locked (TVL) in the context of decentralized finance (DeFi) defines the total value of assets locked in DeFi protocols and smart contracts. In other words, it measures the total amount of cryptocurrencies locked and utilized in various decentralized financial services. These services include liquidity pools, borrowing and lending protocols, decentralized exchange platforms (DEXs), among others. TVL is often seen as an indicator of the popularity and adoption of different DeFi protocols. It acts as a barometer of this crypto ecosystem. Indeed, according to recent data, DeFi’s TVL is at the peak of its form thanks to the dynamism of Ethereum. This article explains the ins and outs of this trend.

DeFi at its Highest Level in 20 Months Thanks to Ethereum!

DeFi is experiencing a robust resurgence, marked by a substantial increase in its total value locked (TVL). This is shown by recently published data by crypto platform DefiLlama. According to it, the DeFi’s TVL has exceeded $69 billion, reaching its highest point in the last 20 months.

This resurgence is not limited to any specific blockchain, as various protocols from different networks contribute to the upward trend. Most notably is Ethereum. In just the past month, Ethereum’s TVL has jumped an impressive 37 %, reaching about $41 billion at present.

This increase can be attributed to the influential role played by protocols such as EigenLayer, which have contributed to a significant influx on the Ethereum network. Concurrently, Ethereum’s native crypto, Ether (ETH), has witnessed a remarkable rise, with bullish sentiments aiming for the $3,000 mark as the next target. A spike that coincides with the announcement by Franklin Templeton of its plans to launch an Ethereum Spot ETF, reinforcing the positive trend prevailing in the market. But then, what are the blockchains that are positively impacting DeFi’s TVL, besides Ethereum?

The Key Role of Solana and Arbitrum in DeFi’s TVL Rise

According to data, Solana and Arbitrum have played a major role in increasing DeFi’s TVL by attracting significant attention and substantial investment flows.

In February, for example, Solana experienced a remarkable increase in its TVL, which reached $1.90 billion. It’s Solana’s highest TVL since mid-2022. This increase follows a substantial upward trajectory. Solana’s TVL soared by 47 % in the month of January alone and over 500 % since October 2023.

The dynamism can be credited to platforms like Jupiter, Kamino, and Jito. They are indeed the key catalysts that have attracted considerable capital into the Solana ecosystem. Not to mention, the phenomenon of airdrops has triggered fervor within the crypto community, further consolidating the inflow of funds into Solana-based projects.

Similarly, Arbitrum, a layer 2 scaling solution designed for Ethereum, has seen a notable rise in its TVL. It reached a record level of $2.9 billion. This increase is attributed to the involvement of key protocols such as GMX, Hyperliquid, and Camelot, which have significantly contributed to Arbitrum’s growth.

The simultaneous rise of Solana and Arbitrum underscores the increasing importance of level 1 and 2 solutions in the crypto landscape. Indeed, these platforms not only offer scalability solutions but also provide a fertile ground for the development of innovative projects and decentralized applications (dApps). Interestingly, even the Bitcoin network has played a role in the increase of DeFi’s TVL.

The Unexpected Contribution of Bitcoin to the Surge in DeFi’s TVL

Traditionally, the Bitcoin network is not associated with decentralized finance. However, its influence on the recent dynamism of DeFi’s TVL is noted by experts. Over the past month, the TVL of Bitcoin-based DeFi has experienced a remarkable increase, reaching $927.5 million. This represents an impressive rise of 182.9 %. An increase attributed to the emergence and adoption of protocols such as Merlins Seal, Lightning Network and Thorchain.

The expansion of DeFi’s TVL across various blockchain networks highlights something significant. Namely, that this segment of crypto is experiencing sustained evolution, marked by a transition towards a multi-chain paradigm. This development underlines the growing importance of interoperability within the blockchain ecosystem and indicates the broader acceptance and integration of DeFi principles.

Furthermore, the remarkable growth of DeFi’s TVL across the Bitcoin network is revealing of the burgeoning relevance of BTC. This goes beyond its role as a store of value or means of exchange. While it is commonly regarded as an autonomous crypto, the integration of BTC into DeFi highlights its versatility and adaptability within the crypto ecosystem.

Moreover, the success of Bitcoin-based DeFi protocols signals a paradigm shift in the perceived utility of the leading crypto. BTC is no longer just seen as a digital currency. It is now recognized as a viable platform for decentralized financial applications. This contributes to the diversification and expansion of the DeFi ecosystem as a whole.

Conclusion

In conclusion, analyzing the dynamism of Ethereum and its impact on DeFi’s TVL reveals a positive evolution in the crypto ecosystem. The recent increase in TVL, marked by the essential contribution of Ethereum, Solana, Arbitrum and even the Bitcoin network, demonstrates the emergence of a multi-chain paradigm in decentralized finance. The increasing integration of Bitcoin into DeFi also underlines its versatility and relevance beyond its traditional role. This phenomenon sheds new light on the perception of the Bitcoin blockchain as a viable platform for decentralized financial applications, which serves to contribute to the diversification and expansion of the DeFi ecosystem in its entirety.