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DeFi Bubble Fueled by Token Value Growth

Is TVL really the most valuable metric in DeFi?

Compound’s COMP token recently triggered a massive yield farming effect within the DeFi ecosystem. Numerous headlines suggested the category had reached an all-time high value. According to, the DeFi sector has now surpassed $3 billion in value.

But does yield farming really attract more assets and users to the category?

The key fundamental growth factors are going to be considered within this overview: Daily active wallets and total value locked. The value of the protocols native tokens will be analyzed too.

Historical perspective

Compound started distributing its governance token on the 15th of June 2020. Unexpectedly, the demand for the token kicked off and assisted Compound into gaining a leadership position in the DeFi category back in June.

Compound is the second protocol in the DeFi category when ranked by value and accounts for 21% of total value locked now. The growth of value was mostly driven by the COMP governance token frenzy.

Although the token was the biggest driver of growth. It seems that the increase was mainly triggered by users locking tremendous amounts of ETH into protocol smart contracts. On June 22nd the ETH value locked skyrocket from 300,000 ETH to almost 1 million.Screenshot 2020-07-30 at 11.35.15

Compound was not the only dapp that participated in the yield farming frenzy. There are other important dapps within the DeFi category that showed significant movement.

Synthetix first to join the hype

Not long after yield farming gained its momentum, Synthetix announced they would be joining the movement. On June 19th, Synthetix joined the Ren Project and BitGo in creating a pool of bitcoin-backed tokens.

Resulting in a new BTC yield farming pool being created from sBTC, renBTC, and WBTC tokens.

The decision to join the project was an important step for the Synthetix protocol and its future growth. On the other hand, it is compelling to investigate what happened next.

Synthetix Daily Active Wallets grew more than 40% month-on-month

As already reported, Synthetix is the second most popular dapp by daily active wallets now. During the past couple of months, we see increased activity in daily active wallets of Synthetix. On average the wallet activity grew by around 41% month-on-month.

It could be debated how much of this growth was accelerated by yield farming and how much of it was organic. One thing is for sure, we have already witnessed in other projects, like Compound, that a lot of activity could be driven by only a few users.

This gives us an understanding that daily wallet growth does not necessarily result in value growth and vice versa.

Synthetix Daily Active Wallets copy

Synthetix Total Value Locked decreased by 8%

Looking at the performance of Synthetix, we spot a decrease in total value locked. Despite the heat around yield farming it doesn’t seem to have affected the locked value of Synthetix. As the graph indicates the increase in value locked was only driven by the growth of the SNX token.

On average, SNX value locked even decreased in July compared to June by 8%. In total, Synthetix accounts for 13% of total value locked right now. The percentage share increased lately and it was driven only by a spike in SNX price.

 Synthetix Total Value Locked, M copy

SNX price surged by 275% from May

It is evident that the increased interest in yield farming and the DeFi category itself boosted the token prices. If you look at the SNX price, it surged to $2.8 USD now and increased its value by 275% from May.

As already stated, this is the only reason behind the growth of total value locked in the protocol.

SNX price change, USD copy

Curve entered into yield farming together with Synthetix

The joint project created by Synthetix, Curve and Ren resulted in a new pool created on Curve back in June. As already stated, the BTC yield farming pool was created from sBTC, renBTC, and WBTC tokens.

Curve acted as a key middle man in the yield farming frenzy and as such also witnessed some peak moments in its metrics.

Curve Daily Active Wallets grew by 350%

Within a few months, daily active wallets grew by 350%. The graph clearly shows the growth of daily activity post 15th June. As already acknowledged, this increase in wallet activity does not necessarily help to increase value.

Curve Daily Active Wallets copy

Total Value Locked in Curve unaffected

We can see that the total value locked on Curve in June slightly increased since the 19th of June, but it was steady for the entire month. The most value locked on the dapp is in USDC. One might argue the slight increase is due to yield farming but it was definitely not a huge impact.

CurveTotal Value Locked, M copy

Aave is another lending protocol

Aave is a lending & borrowing protocol that suggests having some of the best rates in the DeFi space and is mainly used for borrowing purposes to facilitate yield farming.

Aave Daily Active Wallets increased by more than 30% month-on-month

The Aave protocol has made remarkable progress in terms of daily active unique wallets month on month.

From the data, it can definitely be argued that the acceleration of yield farming may be the reason for the increase. However, while observing the graph we can understand it made little difference to activity after the 15th of June.

Aave Daily Active Wallets copy

No peaks in June for Aave

Back in June Aave experienced an increase in total value locked, but it was mostly driven by the ETH price growth. As the graph explains, Aave experienced a total value locked increase in dollars that was mainly due to ETH price jumps.

The value locked in the lending protocol did not change drastically during the yield farming peak.

Aave Total Value Locked, ETH in K & USD in M copy

LEND price skyrockets in July

Aave’s native token, LEND has been slightly growing since the 19th of June. It can be considered from the data that the increase in LEND token value has not been influenced by the acceleration of yield farming and DeFi growth itself.

However, the massive growth of the LEND token can be observed after 15th July. This could have been stimulated by the recent news that Aave sold $3M worth of LEND tokens to crypto funds Three Arrows Capital and Framework Ventures.

LEND Token Price USD copy


Total value locked in dollars might represent a distorted view of the category development. When adjusted for inflation of assets in all discussed cases it is actually steady or even decreasing.

The discussed case accounts for 30% of total value locked in DeFi now.

We have already witnessed in other projects, like Compound, that a lot of activity could be driven by only a few users. This gives us an understanding that daily wallet growth does not necessarily result in value growth and vice versa.

Seemingly, yield farming created a speculative effect on token value. No evidence supports the increased value or activity in all three cases.

Limitations & Data Sources

  • For the value analysis total value locked by was considered. There is much criticism regarding this metric as different metrics might suggest a different outcome.
  • A few top dapps were analyzed. Additional dapps might be considered in the future.

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