A total of $252 million was generated by the top protocols in the DeFi ecosystem during the month of April, according to The Block’s Data Dashboard.
A total of $113.66 million of that amount was generated by DEX protocol Uniswap, and revenue generated by DeFi protocols covered both token holders as well as users, including liquidity providers.
Comparatively, the protocols Compound, SushiSwap and Ave produced $40.48 million, $35.23 million, and $24.72 million, respectively.
Since most major economies have low interest rates, crypto has become an attractive investment option for profit-seeking capital. Even institutions with limited risk tolerance and a preference for passive income over capital appreciation, such as university endowments and institutional investors, have begun investing in cryptocurrencies. After the OCC’s recent ruling on crypto custody, Goldman Sachs, JPMorgan, and Citi are considering entering the market. Visa partners with Anchorage to enable banks’ customers to purchase bitcoin. Traditional risk-averse institutions are gearing up to get exposure to crypto.
What to Expect Next?
The aftermath of the Gamestop company settlement – with Robinhood suspending trading in Reddit-promoted stocks – suggests that there may be demand for investment platforms that allow retail investors to trade directly while shielded from the fury and censure of corporations. DeFi has already tapped into this opportunity with mirror finance and synthetix, which allows investors access to synthetic assets, like stocks, without interruption. It appears that DeFi is in prime position to benefit from the Gamestop saga even if the ripple effects are slow to materialize.
Nonetheless, the fundamental law of risk-return tradeoff might shed some light on why interest rates are so attractive: At the end of the day, DeFi is still a more risky investment with risks not well understood by the average investor. In addition, it is obvious that there is no FDIC insurance protecting the deposits: lending protocols such as Compound or savings accounts such as BlockFi, which are subject to run risks, are entirely different from alternative market mechanisms such as Uniswap, which have a dramatically lower risk tolerance.
DeFi products may not be all about saving, and those that are certainly aren’t for retirement plans. Yet. But there is a long-awaited era where every household has crypto assets working for it. After all, money never sleeps, so why should cryptos?