DeFi Ecosystem Fees Decline Sharply as the Market Cools Off
DeFi tokens have not recovered completely yet.
In the past 30 days, these coins have lost considerable value with bZrx Network leading the losses with -85.50% because of losing $8 million in its third hack.
Other prominent losers include Swerve (-80%), Curve (-72%), Melon Protocol (-62%), Balancer (-55%), Kava (-50%), Kyber Network (-42%), Compound (-39%), UMA (-38%), SUSHI (-35%), SNX (-33%), Aave (-29%), Maker (-23%), and YFI (-18%).
Still, there are a few gainers, including the dominating DeFi project Uniswap’s UNI, which is down today but up over 22% in the past month.
Unlike the prices, the total amount of value locked in the space is not pulling back anytime soon, hitting a new peak of over $11 billion, as per DeFi Pulse. This growth is further propelled by non-fungible tokens (NFTs) whose merge with DeFi to create new forms of yield has the investors and BUILDers’ imagination firing.
As the hot space has cooled down some, these platforms started seeing a decline in fees. From Ethereum to Uniswap and SushiSwap, all saw a reduction in their fees this week compared to last week as transaction activities dropped after reaching all-time highs.
Not two weeks ago, there was a record rise in transaction activity on the Ethereum blockchain that pushed the gas fees on the network to new highs. At one point, the simple transfer of an ERC-20 token across the network cost $20, while interaction in yield farming contracts was in the hundreds of dollars.
But now that transaction activity has fallen to more sustainable – July levels, fees are also coming down.
At the beginning of last week, one-day fees on Ethereum were $5.2 million, which has now more than halved to $2.2 million. Uniswap V2’s has gone down from $1.4 million to $876,000. On Balancer, it is just above $60k from last week’s $253k.
Additionally, SushiSwap has disappeared completely from the top ten projects this week, which was sitting at 5th spot with $248k in daily fees, as per TradeBlock.
Bitcoin meanwhile saw a jump from $500,000 to $630,000 during the same period.
Ethereum total transaction fees in 2020 are now over $350 million, which is more than twice of Bitcoin. By comparison, this time last year, cumulative Bitcoin Transaction Fees were $135 million, and Ethereum transaction fees were $27 million, as per Coin Metrics.
Despite the recent decline, fee revenues remain robust across decentralized finance networks.
“Mini 2017 bubble and burst for DeFi…The cooling off was inevitable. However, unlike after 2017, it will not take years to see strong price gains again,” noted John Todaro, Head of research Trade Block. “Over next 1-2 mos could be buying oppties. The cash flows are still strong and we did not even tap non-crypto users.”