DEXs And DeFi Products Report Gains Even As Most Tokens Have Dumped As Third Quarter Closes

After a booming summer, DeFi has faced a major correction over the past month with most tokens down over 50%.

A new report from Messari research covering the ups and downs of quarter three of this year showed that of the four DeFi sectors: lending, decentralized exchanges, prediction markets and asset management/synthetic assets only one outperformed ETH. Asset management and synthetic assets like Synthetix, UMA and Melon gained 257.6% this quarter while ETH gained only 60%. Lending and decentralized exchanges gained near 33% while prediction markets performed a little stronger gaining 44.8%.

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While decentralized exchanges (DEXs) were not the best performing DeFi sector in terms of gains, they saw huge spikes in on-chain trading. DEXs benefitted from the frequent launch of new governance tokens which were often first-listed on DEXs. For the most part that liquidity stayed in place even after tokens were listed on centralized exchanges. From the beginning to the end of the third quarter DEXs went from representing 2.8% of volume across all exchanges to 13.6% of volume.

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Automated market makers like Uniswap make up more than 90% of all DEX volume. The permissionless nature of AMMs gave them an edge because assets could be listed immediately rather than having to go through a diligence process.

The breakout project of the quarter was by far Yearn Finance whose yield farming innovation ushered in the era of DeFi. As of Monday, October 19 Yearn.finance holds $750 million and still remains a leading project. The suite of products offered by yearn.finance is quickly expanding to support various yield strategies, insurance options and exchange and lending products.

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As usual, the caveat to all the growth in the mostly Ethereum-based DeFi ecosystem is high gas fees. For the past three years, Ethereum fees have stayed near a level that was sustainable for retail investors, however the popularity of DeFi products has congested the network leading to astronomical fees. These new operation costs mean only large transactions are profitable, pricing out most retail users.

If gas fees don’t come down in the near future, the DeFi space may start to see new products offering pooled investments to help retail investors benefit from the new protocols without bearing the gas fees on their own.

By Emily Mason​

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