DeFi on Ethereum L2 Networks Sees Significant Growth
Total value locked (TVL) in decentralized finance (DeFi) platforms built on Layer-2 networks for Ethereum (ETH) rose by a massive 964% in the first quarter of 2022 compared to the same quarter 2021, despite the average transaction fees on Ethereum’s base layer fell by 80%.
This boom in activity on Ethereum L2s is likely due to the high transaction fees seen on the Ethereum mainnet during the first quarter. With gas prices averaging around $50 per transaction, many users were priced out of participating in DeFi protocols and instead turned to L2 solutions.
The data about the growth in TVL on Layer-2 platforms was shared in a quarterly State of Ethereum report stating that the amount increased by 964% from USD 686.9m as of the end of Q1 2021 to USD 7.3bn at the end of Q1 2022.
The figure includes the total value locked across all Ethereum Layer-2 scaling solutions, including optimistic rollups, zero-knowledge rollups, and validiums, the report said. As part of the report, researchers also broke down the growth in TVL across different DeFi protocols.
According to the findings, MakerDAO is still leading in terms of total value locked (TVL), growing by an impressive 91% from USD 3.3bn as of the end of Q1 2021 to USD 6.3bn by the end of Q1 2022.
However, it was Compound Finance that saw the highest growth in TVL, increasing by a massive 4,569% from USD 333.6m to USD 16.2bn over the same period. The report attributes this to the launch of Compound’s synthetic assets, which allow users to collateralize their positions with multiple Ethereum-based assets.
Other protocols that saw significant growth include Dharma (up 2,007%), Uniswap (up 1,316%), and Aave (up 964%).
The report also added that more than USD 23bn in digital assets, including USD 4.2bn worth of ETH, have been bridged from Ethereum to Layer-2 networks and other Layer-1 blockchains.
This trend is likely to continue as Ethereum’s gas fees remain high and users look for alternatives that can offer cheaper and faster transactions. With the DeFi sector still in its early stages, it is expected that more protocols will launch on Ethereum’s Layer-2 networks in the coming months.
What do you think about the growth of DeFi on Ethereum’s Layer-2 networks? Let us know in the comments below!
I am a bitcoin and crypto currency writer. I also work as a professional trader, and I have experience with stock trading and bitcoin trading. In my work, I aim to provide clear and concise information that helps people understand these complex topics.
