No, of course, but what’d you expect from us? The clue is in the name! But even long-time DeFi advocates such as ourselves have had to acknowledge the massive 75% drawdowns in DeFi tokens from May-2021 highs. And then there’s the speculative interest lately for all things NFTs, DAOs and games – which is overshadowing the old DeFi, seemingly forgotten.
Let’s look at both sides. The industry user base and overall market size has continued to grow on the back of the multichain expansion of the last year. And some promising projects came out of the DeFi 2.0 wave – as did a plethora of options protocols trying to find traction. But for the most part, these have failed to live up to sky-high expectations set by the success of DeFi Summer. And it’s surprisingly hard to point to a major DeFi innovation in 2021 that can compare to the likes of the Uniswap launch (November 2018), Synthetix (January 2019), MakerDAO multi-collateral Dai (November 2019), Curve (January 2020), COMP farming (June 2020), or YFI governance distribution (July 2020).
Is it just too early to evaluate success for the class of 2021, or have we seen the beginning of the end of breakthroughs in DeFi?
Covid-19 has distorted our conception of time; the last two years sometimes seem compressed together in our minds. And for crypto, 2021 was like that point in the night where you’re having a great time, but won’t remember it in the morning.
There was certainly a lot of hype and activity in 2021, but that was in large part due to the heightened interest of the market – not due to innovation.
dYdX is actually from the first DeFi wave, but was late to the token party. Convex is clearly the most successful token launch of the year; its innovation came from winning the Curve wars, which Yearn started in the fall of 2020. Tokemak is another iteration on tokenized liquidity flows, and some even argue that we’re in a golden age of Ponzi-nomics.
Speaking of, OHM took the biggest tumble of the class of ‘21. OHM, along with Tribe, Reflexer and Frax (which launched in December 2020), all use Protocol-Controlled Value, which would be like if Maker could manage and earn yield off of the collateral that’s backing Dai. Alchemix is the classic DeFi 2.0 protocol because its very existence depends on other underlying protocols.
And then there are all of the options and derivatives projects, like Ribbon and Dopex. These have been touted as the next logical step in the DeFi journey, as the system climbs the financial ladder of complexity. Lots of money has been thrown at DeFi native options and derivatives protocols, but none has broken out and found product-market fit.
Just a year ago, we wrote about what made DeFi special. It’s that every user could become a liquidity provider:
In the traditional world, you buy and hold assets and hope the asset appreciates. Maybe you have some dollars in a yield-generating bank account, but for the most part, assets that you own are not…
Read More: doseofdefi.substack.com