A uniform distribution of TVL across applications mitigates overall ecosystem risk and indicates a healthy ecosystem.
More TVL, More Stability
A recent report from blockchain analysis firm Messari dinged BNB Chain for having nearly half of its Total Value Locked (TVL) by a single dApp PancakeSwap. The firm flagged that TVL hegemony as a potential weakness for the network if the Decentralized Exchange (DEX) ever suffered an exploit or technical breakdown.
But how do the other major blockchain’s compare? Let’s explore:
When you are assessing a blockchain’s performance, TVL is a crucial metric for the profit potential and usability of Decentralized Applications (dApps). A network’s TVL distribution among Decentralized Finance (DeFi) protocols can reveal a lot about its health.
TVL can be defined as the total value of cryptocurrency locked in a smart contract. As a DeFi platform’s TVL rises, its liquidity, popularity, and usability also increase. DeFi protocols with a higher TVL lock in more capital, resulting in more participant benefits and profits. A lower TVL implies lower availability of money, and therefore lower yields.
However, as Messari points out, a blockchain’s reliance on a single dApp can be seen as a potential vulnerability for the network as a whole.
TVL Distribution Across Networks
This section analyzes the TVL distribution among DeFi protocols in a network. Our calculations include “double counts” and exclude staked governance tokens and borrowed coins in lending protocols.
We will be talking about the top five layer-one protocols (Ethereum, BNB Chain, Tron, Avalanche, and Solana) using data from DefiLlama as follows:
TVL: $59.95 billion.
Top Protocol by TVL: Maker DAO has the most TVL on Ethereum, contributing 14.7% of the entire Ethereum DeFi ecosystem with $8.79 billion.
Top Five by TVL: With a total of $33.46 billion, accounting for 55.8% of TVL, the top five protocols include Maker DAO, Lido, Uniswap, Curve and AAVE.
The Rest: The rest of the protocols make up $26.49 billion, or 44.2% of TVL.
TVL on Ethereum. Source
TVL: $7.18 billion
Top Protocol by TVL: DEX protocol PancakeSwap dominates 46.2% of TVL on BNB Chain with $3.32 billion.
Top Five by TVL: PancakeSwap, Venus, Alpaca, BiSwap and PinkSale comprise 71.7% of the TVL with $5.15 billion.
The Rest: The rest of the protocol amounts to 28.3% with $2.03 billion.
Total Volume Locked(TVL): $5.92 billion
Top Protocol by TVL: JustLend protocol makes up 57.4% of the network’s TVL with $3.4 billion.
Top Three by TVL: Of the total TVL on the network, 99.8% comes from the top three protocols, JustLend, SUN and JustStables, totaling $5.91 billion.
The Rest: The remaining five prominent protocols make up 0.2% of the TVL with $15 million.
Total Volume Locked(TVL): $2.74 billion
Top Protocol by TVL: Aave accounts for 39.1% of TVL with $1.07 billion
Top Five by TVL: With $2.03 billion, Aave, Benqi, Trader Joe, Platypus Finance and Vector Finance make up 74.1% of TVL in the network.
The Rest: The rest makes up $710 million, which is 25.9% of the whole network.
Total Volume Locked(TVL): $2.65 billion
Top Protocol by TVL: Marinade Finance accounts for 12.7% of TVL with $338 million.
Top Five by TVL: With a total of $1.31 billion in TVL, the top five networks, including Marinade Finance, Solend, Serum, Radium and Atrix, make up 49.6% of the network’s TVL.
The Rest: The rest makes up $1.34 billion, accounting for 50.4% of the network’s TVL.
Thus, we see that in most of the top five networks (BNB, Tron and Avalanche), one or a few protocols dominate all other ones. The numbers, however, show a more uniform distribution in Ethereum and Solana. Unlike other ecosystems, both networks exhibit a diversified allocation of TVL across applications that arguably mitigate overall ecosystem risk.
Source : bsc.news
Founded in 2020, BSCNews is the leading media platform covering decentralized finance (DeFi) on the Binance Smart Chain (BSC). We cover a wide range of blockchain news revolving mainly around the DeFi sector of the crypto markets. BSCNews aims to inform, educate and share information with the global investment community through our website, social media, newsletters, podcasts, research, and live ask me anything (AMA). Our content reaches hundreds of thousands of global investors who are active in the BSC DeFi space.