DeFi protocols are seeing double-digit increases in user numbers over the past week, according to data from blockchain analytics platform Nansen.
MakerDAO, the largest DeFi protocol with $6.5 billion in total value locked (TVL), has increased addresses by a third in the past week. And other top 10 protocols have also attracted huge jumps in users, with Aave, a lending protocol, seeing a 70% increase and Curve, a DEX, a 63% spike.
The Lender Compound and yield booster Convex also saw a 30% increase in users, according to data Nansen shared with The Defiant.
To take control
It seems cryptocurrency users are eager to take control of their digital assets in the wake of the bankruptcy of FTX, the No. 1 cryptocurrency exchange. 2 in the world and one that was now notoriously centralized and run by a black box model of poor transparency and questionable practices.
Nansen analyst Martin Lee said the data also shows crypto users are switching to DeFi protocols in response to market volatility over the past week.
“There is evidence of people prioritizing self-custody, at least for now,” she told The Defiant. Lee said there have been massive outflows of both Ether and stablecoins from exchanges over the past week as potential further evidence of people’s drive for self-custody. (Nansen defines a “user” as a unique address that interacts with another address or smart contract that the company labels as belonging to a particular protocol).
The implication is that, if people take ETH off trades, they are at least partially withdrawing the asset into their own wallets.
In support of this analysis, Ian Rogers, chief experience officer of Ledger, which produces the hardware wallets often used by people to autonomously guard their digital assets, reported that November 15th was a record sales day for the company.
In addition to double-digit increases in the percentage of users of major protocols, Uniswap, another DEX, recorded the second largest volume of all cryptocurrency exchanges this week.
On Nov. 14, the DEX reached $1.1 billion in volume in a 24-hour period, second only to Binance and ahead of Coinbase, according to Uniswap founder, Hayden Adams.
This surge in DeFi comes after FTX went from crypto ambassador to embarrassment to bankruptcy in just over a week. The moment could prove to be pivotal for the cryptocurrency industry, but not in the way outsiders think.
Many in traditional finance and mainstream media view cryptocurrencies as a monolithic industry. Yet it is wrong: the blockchain proposal is divided into a myriad of sectors and DeFi, based on the purest application of decentralized governance, is structurally and practically different from the FTX, Binance and Celsisus of the world.
“Not your keys, not your coins,” has long been a catchphrase to emphasize that a person must possess the cryptographic keys that allow access to their digital assets to truly claim ownership.
Yet despite slogans promoting self-custody and hardware wallets like Ledger’s, players like BlockFi, Celsius and Voyager Digital have become major forces during the latest cryptocurrency bull run despite their control of customers’ private keys.
BlockFi, Celsius, and Voyager all suspended customer withdrawals this year, simply implying that the company didn’t have any deposited assets on hand.
FTX joined these firms last week to halt withdrawals, but its inability to produce funds for clients is surprising due to its intimacy with wealthy financial institutions such as venture capitalists Sequoia Capital and Tiger Global. By embracing TradFi’s practices of buying naming rights for sports arenas and getting celebrities like Tom Brady to pay for his services, FTX championed the idea that cryptography was finally mainstream.
CZ is committed to demonstrating that Binance is different from FTX
Binance Begins Disclosing Wallet Assets in Transparency Push
Amidst all the chaos of the past two weeks, a number of global financial institutions have continued to perform R&D projects with blockchain-related technology. On Tuesday, Citigroup, Wells Fargo and other banks joined the New York Federal Reserve in a pilot project to place deposits on distributed ledgers.
And JPMorgan Chase, the US bank no. 1, highlighted the distinction between DeFi and CeFi.
“Even though the news of the FTX crash is strengthening crypto skeptics, we stress it all the recent collapses in the crypto ecosystem came from centralized players and not decentralized protocols,” analysts said in a report released by the company this week.
Now the push to get cryptocurrency users to take self-custody of their assets may well have truly begun, and if the industry is to quickly weather the disaster FTX will need to provide utility and ease of use to average consumers.
Perhaps the DeFi migration measured by Nansen over the past week is the first step on that journey.