Ethereum’s Blockchain is Growing, Rising Amount of Crypto Held in Decentralized Finance Apps
Decentralized finance (DeFi) apps are getting pretty popular these days and you can see that from the amount of Ethereum these apps are using. This week, the amount of ETH used reached an all-time high of $2.36 million ETH, around USD 420 million.
With the use of DeFi apps, you can lend money, borrow it or make several investments. Most of the time, for this to happen securely, the money needs to be locked up as collateral and this is why the number of ETH being locked in these apps is so high at the moment.
Smart contracts are generally used to only release the money at an appropriate time, so this means that nobody will lose out unfairly. The only issue is that by locking up that much ETH, the supply is considerably reduced. This means that the success of the app affects the network.
The effect is not 100% clear, however. Some people argue that reducing the supplies can push prices up, but others disagree with this and believe that volatility can go up and down.
From all these apps, MakerDAO is possibly the most famous. The stablecoin locks ETH to keep its price stable and this has worked out so far, despite how the ecosystem had to hike several fees at the beginning of the year, due to issues.
In MakerDAO alone, the amount of ETH locked went from $14 million only two months ago to around USD 25 million now. It seems that the DeFi segment is about to grow even more, especially if it depends on popular projects such as MakerDAO.