Chains like to lock in their total value [TVL] dominance, as this is a way of enhancing acceptance and increasing their presence in the space. Ethereum is considered the ruling DeFi alt, but as the markets expand and more bridges and links are formed, what will investors choose?
clash of the alts
The 2o21 annual crypto review by Token Insight revealed some notable trends by coins in the multi-chain DeFi space. First and foremost, the report looked at Ethereum’s sliding dominance, which has not been subtle. The report declared†
“Compared to 2020, Ethereum’s dominance has dropped from 99% to 70%.”
Looking at data from 2022, we see how this decline has only continued in the first three months of the year. On March 13, Ethereum’s TVL was just 54.73% of the total. Chains with rising dominance include Terra with a 12.48% share and Avalanche with a 5.51% share.
The report added†
“Terra, Solana and Avalanche became later competitors since September.”
That said, the 2022 stats showed that BSC and Solana have fallen in terms of TVL share.
Time to spread your wings?
Naturally, these changes in TVL dominance raise the question of whether Terra and Avalanche could be the new winners. TokenInsight reported that Avalanche has a “good summer golf” in 2021 and since then, Avalanche’s TVL has grown, declined and recovered to 5.51%.
Meanwhile, Terra’s LUNA has been the apple of many investors’ eyes since the 2022 rallies. The asset has also gained DeFi players thanks to its rising TVL. However, according to Token Insight, Terra’s Anchor lending protocol – now with a TVL of $12.6 billion – appears to be struggling with maintaining its high yield†
But despite these changes, it may not be the time to throw Ethereum out the window just yet. The largest alt by market cap and TVL has seen a month where average gas prices fell well below 100 gwei each day. Since high fees are often a reason for investors to turn away from Ethereum, it remains to be seen whether this drop in price will lead to a resurgence in Ethereum’s TVL dominance.
Ghost of the TVL
TokenInsight’s report revealed that Fantom is one of the chains enjoying it “great success.” However, since the shocking departure of Andre Cronje and Anton Nell – members of the Fantom Foundation – Fantom’s TVL has fallen sharply.
This shows that, despite billions in TVL, DeFi projects can be fragile and highly susceptible to change.