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The total value committed to decentralized lending protocols has surpassed $30 billion, a milestone not reached since the cryptocurrency market recession in mid-2022.
According to facts from DeFiLlama, the increase in TVL lending to more than $31 billion. This is due to multiple factors, including the recovery of the broader cryptocurrency market and increased interest from institutional investors in DeFi offerings. This figure excludes centralized lenders such as Celsius and BlockFi.
The growth from a low of $10.5 billion in TVL in January 2023 to current levels represents a substantial recovery, effectively tripling the value set in the credit protocols. Meanwhile, it is up 36% since the start of this year.
“The recent recovery of the crypto market has fueled demand for leverage, leading to increasing demand for lending protocols,” noted Eden Au, research director at The Block.
Decentralized lending protocols, which enable cryptocurrency borrowing and lending without traditional financial intermediaries, have played a major role in the sector since the notable “DeFi Summer” of 2019.
Aave leads this credit category with a TVL of $9.9 billion, with $8.4 billion on the Ethereum network and the rest spread across different chains. Other major protocols include JustLend at $6.8 billion, Spark at $3.7 billion, Compound at $2.8 billion and Morpho approaching the $1 billion threshold.
Total TVL in DeFi has increased 50% since the beginning of the year, from $60 billion to over $95 billion, based on The Block’s data dashboard.
Challenges remain
Despite the growing trend, the DeFi sector, of which lending is a major part, still faces regulatory uncertainties and security challenges. Expanding market coverage often entails increasing systemic risks. “Lending protocols must continually refine a wide range of parameters to strike a balance between improving capital efficiency and preventing defaults and bad debts,” Au added.
Au noted that such protocols also face regulatory uncertainties, as some institutional investors may be unwilling to engage in permissionless systems unknown to their counterparties.
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