As we glance again throughout 2023, we see a DeFi panorama that has undergone a metamorphosis, shaking off a tough prior 12 months and a lingering bear market.

This retrospective delves into key elements of the area, encapsulating the developments, challenges, and triumphs that formed a 12 months marked by vital milestones and intriguing developments.

2023 DeFi TVL

Complete DeFi TVL grew 110%, with Mainnet TVL reaching $46.768 billion. TVL for the principle Layer-2 chains (Optimism, Arbitrum, Base) was $3.30 billion. (Knowledge supply: Defi Llama)

In 2023, the Complete Worth Locked (TVL) in DeFi skilled vital development, significantly on Ethereum, which stays DeFi’s major blockchain. This surge in TVL could be attributed to the continued adoption of DeFi protocols and the growth of the ecosystem.

The surge in TVL for Layer-2 options continued via the 12 months, aided by the arrival of Base in August. These Layer-2 options contribute to assuaging congestion on Ethereum, by processing transactions off-chain and settling them on the Ethereum mainnet. They provide quicker and cheaper transactions, additional enhancing DeFi’s total scalability.

2023 DeFi Lending Markets

The three lending market giants (Aave, Maker, Compound) continued to carry out effectively. Aave strengthened its place as customers migrated from v2 to v3. New entrant Spark loved a momentous first few months. (Knowledge supply: Defi Llama)

In 2023, the DeFi lending market witnessed some notable developments amongst main gamers and the emergence of recent protocols. The panorama demonstrated ongoing innovation, regulatory concerns, and elevated adoption. The migration to Layer-2 options and the introduction of recent lending protocols added additional range to the market.

Maker stays a power in DeFi lending with a TVL of $8.387 billion. It additionally launched the Spark Protocol in Could, a fork of Aave v3, and positioned as a possible rival to Aave. Spark’s TVL rocketed via the 12 months to a considerable $1.491 billion.

Regardless of challenges, Aave maintained a powerful place in 2023, experiencing a resilient development trajectory. Aave’s TVL of $6.183 billion was pushed partially by customers migrating from Aave v2 to v3.

2023 Bulls vs Bears

For Summer season.fi, August was probably the most bearish month. This was proceeded by probably the most bullish a part of the 12 months, peaking in December. (Supply: Summer season.fi inhouse information.)

At Summer season.fi, we noticed the bulls profitable out towards the bears in all however two months (Could and August). Bullish exercise is denoted by will increase to lengthy positions and bearish exercise by decreases to lengthy positions.

It’s a winter bull season at Summer season.fi, with the bears being left behind in August, probably the most bearish month of the 12 months. December has confirmed probably the most bullish, with 65% of actions represented by will increase to lengthy positions, towards 35% decreases.

2023 DeFi Bluechips

This 12 months noticed super rise in many of the bluechip DeFi tokens, because the crypto market as a complete went up. Ethereum has seen a 12 months up to now enhance of 93%, AAVE of 81%, MKR 139.4%, COMP 57.3%, and UNI of 16.3% in greenback phrases.

All the crypto market cap rose from $840B to $1700B, in accordance with Coingecko. So from that perspective, simply MKR beat the market.

For 2024, DeFi is the place to be. What is best to maintain your eyes on? In keeping with Tastycrypto, the most important DeFi segments are DEXs with 31% of the TVL and lending protocols with 17%.

• Some examples of DeFi tokens:
  DEX cash: Uniswap (UNI), Curve (CRV), PancakeSwap (CAKE), Balancer (BAL)
• Staking cash: Lido (Lido) & Rocket Pool (RPL)
• Lending/borrowing Cash: Aave (AAVE), Compound (COMP), Simply (JST)
• Spinoff Cash: GMX (GMX) & dYdX (DYDX)

2023 DeFi Protocols

Constructing within the bear market: we finish the 12 months with 4 further DeFi protocols at scale.

Defi protocols with over $250m TVL:

• Maker
• Aave
• Compound
• Uniswap
• Convex Finance
• Curve Finance
• Spark (new 2023)
• Frax finance
• Liquity
• Balancer
• Morpho (new 2023)
• Synthetix (new)
• Prisma Finance (new 2023)
• dYdX
• Lybra Finance (new 2023)
• Sushi
• Yearn
• Aura
• EigenLayer (new 2023)

In 2023, the DeFi panorama witnessed notable development. Together with TVL growth, the 12 months additionally noticed a rise within the variety of protocols at scale. At first of the 12 months, there have been 15 protocols thought of vital (with a TVL of $250 million or extra, excluding liquid staking). By the tip of the 12 months, this quantity had expanded to 19 protocols.

The rise in protocols signifies a speedy growth within the DeFi ecosystem. Their addition suggests a diversification of choices throughout the area, as completely different protocols typically cater to particular functionalities or monetary companies. Buyers, builders, and customers look like more and more assured within the capabilities and potential of decentralized monetary options.

Wanting Forward

It’s clear that the DeFi sector has taken one other step in its improvement throughout 2023 and, exiting the 12 months, the sector’s development appears to be like set to proceed.

The 12 months was marked by outstanding TVL development, Ethereum’s sustained dominance, and the numerous function of Layer-2 options in addressing scalability considerations. Regulatory concerns, innovation, and elevated adoption characterised a dynamic lending market, demonstrating a rising range with new protocols and an growth of functionalities and choices.

Market sentiments depicted a transparent shift from bearish to bullish. The DeFi panorama expanded, ending the 12 months with 5 extra vital protocols than at the start. As 2023 concludes, DeFi’s growing maturity has set the stage for a dynamic future, trying set to basically problem conventional monetary companies.

This analysis report was contributed to The Defiant by Summer season.fi CEO Chris Bradbury.