NFT marketplaces thrive when DeFi protocols suffer
A number of decentralized financial applications (DeFi) and their communities are fighting for protection against a wave of liquidations as a result of the record-breaking collapse of cryptocurrencies, sometimes by taking unheard of actions.
DeFi wobbles in winter
Although the cryptocurrency market’s lending problem caused a gloomy period last week, the DeFi ecosystem experienced a number of new advances. Celsius, another cryptocurrency lender with significant interests in DeFi technologies, filed for bankruptcy. In the second quarter, the market as a whole reached new lows.
A new alarm-equipped decentralized application platform (DApp) was introduced by the BNB chain. The insolvent lender of cryptocurrency Celsius was the subject of an investigation by the Vermont state regulator.
A huge user account that faced the possibility of a significant liquidation was temporarily taken over by token holders of Solend, a lending app on the Solana blockchain, earlier in June. This drastic action for DeFi seems to be the first. Later last month, a new vote led to the ruling being overturned.
All of this happened after MakerDAO, a cryptocurrency community-driven software that supports stablecoin DAI and runs Aave, one of the first decentralized autonomous organizations, stopped the token’s ability to deposit and create on Defi’s cryptocurrency lending platform.
The collapse of Terra and its stablecoin TerraUSD Classic (USTC) in May was a major factor in the entire market value of DeFi falling from $ 142 million to $ 36 million during the second quarter, according to a report released by cryptocurrency data aggregator CoinGecko on Wednesday.
BTC/USD trades above $20k. Source: TradingView
Despite a fall in market value of 74.6% in Q2, user activity has largely remained stable, according to CoinGecko. It highlighted that the number of daily active users decreased only 34.5% from 50,000 to 30,000 in Q2 2022.
In addition, the report noted that the increase in the protocol is utilized during the quarter, which affected companies such as Reverse finance and Rari, which saw hacks totaling $ 1.2 million and $ 11 million, contributed to the decline. The report said:
“These attacks have negatively affected token prices as investors lose faith in these hacked protocols.”
Due to their tendency to be networks, DeFi apps are struggling – allowing users to shop, lend from and lend to each other without the use of intermediaries such as banks. Users often use tokens as security when borrowing coins from one app to deposit into another for higher rewards.
Related reading | DeFi protocols with a higher risk of exploitation during the bear market, here’s why
NFT marketplaces thrive, but defi with revenue flows
According to Token Terminal data, NFT marketplaces such as LooksRare and OpenSea are the most important platforms that still generate revenue.
Top dapps based on cumulative protocol revenue in the past 180 days. Source: Token Terminal
The majority of the surviving protocols with the highest income are decentralized financial platforms, which shows that while DeFi is down, it is still in play. These selected protocols include MetaMask, Decentral Games, Axie Infinity and Ethereum Name Service.
Decentralized applications (DApps) and protocols that share fees with token holders and liquidity providers are also profit-positive.
Historical view of crypto / web3 projects that generate fee income for their token holders.
Market Share Leaders for Protocol Revenues in ’21:
Q1: MakerDAO
Q2: PancakeSwap
Q3: Axie Infinity
Q4: Ethereum pic.twitter.com/zNRFnss7c4– Token Terminal (@tokenterminal) January 29, 2022
Protocols that give token holders passive income streams have a stronger chance of surviving to the start of the next beef market as the bear market continues to hammer prices and eliminate unproductive and poorly managed platforms.
Related reading | DeFi will lose 678 million dollars to hackers in the second quarter of 2022, a new report reveals
Featured image from Getty Images, charts from TradingView.com and Token Terminal
