DeFi activity on the Ethereum blockchain slows down

By: Bharggavi Ssayee

June 10, 2021 6:44 PM

Despite the drop in transaction costs, the volume of activity in DeFi is declining, as is the price of tokens of the main protocols.

DeFi protocols regularly complain about Ethereum's congestion and the inflation of fees it causes. These substantial costs in fact discourage many investors from carrying out transactions.

However, these fees are currently at extremely low levels. On average, a transaction on the Ethereum blockchain cost $ 4.82 on May 30. By comparison, it cost around $ 71 when the crisis began on May 19.

Ethereum transfers plunge 60%

This ebb is not, however, a sufficient incentive for traders today. The volume of transactions in DeFi has declined sharply since the end of May. Thus, activity is now showing levels comparable to those of 2020.

The indicators from Glassnode Insights are a good illustration of this sudden stop on Ethereum and the protocols of decentralized finance. Uniswap, the first DEX, recorded a 28% drop in business compared to mid-May.

Another key to understanding, the volume of transfers on Ethereum, measured in dollars, plunges 60% in the space of two weeks. Despite a boom in operations at the height of the crisis, May was a dark month for DeFi.

“By almost every measure of on-chain activity, the past month was marked by a decline of historic proportions, with a rapid transition from booming on-chain economies to [record] prices, and nearly empty mempools and waning demand for transactions and settlements, ”notes Glassnode.

The fantastic 4 show $ 30 billion in TVL

And the main DeFi protocols are no exception to the trend, both in terms of activity and the listing of their governance tokens. Compound (COMP), Aave (AAVE), Uniswap (UNI) and Yearn Finance (YFI) saw the value of their transfers decrease “significantly” in May.

Less demand is also synonymous with a decline in cryptocurrency prices. And Nomics gives a good overview. Over the past month, Uniswap’s UNI, for example, has lost 40% of its value. For YFI, the drop reached 26%.

Aave and COMP are no exception and are down 27% and 55% respectively. Chips in decline, activity at half mast, of course, but not all indicators are in the red nonetheless.

As DeFi Pulse points out, the dollar value of locked tokens (TVL) in all four protocols exceeds $ 30 billion. This is almost twice the value of all DeFi protocols as of January 1.