Monthly number of unique DeFi users worldwide up to April 2024
Decentralized Finance users reached a peak of 7.5 million unique users in late 2021, whereas figures in 2023 are considerably lower. This according to a network crawling code that tries to measure the number of unique user addresses involved in buying or selling specific projects associated with DeFi. For example, the code lists data fetching commands associated with Uniswap and Aave — two DeFi protocols with a market cap that was higher than one billion U.S. dollars in March 2022. As Decentralized Finance — much like cryptocurrencies or NFTs — are not being tracked by an official government, these procedures try to measure "network activity". Such activity on the Ethereum blockchain/network, the most used blockchain for DeFi, or elsewhere — tend to be the only source of information on the market size of these topics. However, the source does acknowledge the numbers shown are not without their potential flaws.
DeFi in 2023 is relatively small-scale
Often remarked as a potential breakthrough trend for 2024, the TVL (total value locked) of DeFi in 2023 reveals a market that is much smaller than in 2021. The amount of money stored in Decentralized Finance was worth about 50 billion U.S. dollars by November 2023, compared to 175 billion U.S. dollars at the end of 2021. Two reasons can be named for this decline. First, the overall cryptocurrency markets has witnessed several dramatic moments. Prices declined after the crash of stablecoin LUNA, and the sudden collapse of crypto exchange FTX in 2022. In 2023, the United States government handed out one of its largest ever corporates fines to Binance — the world's largest crypto exchange. Second, analysts believe the high yield on U.S. Treasury bonds in 2023 when compared to DeFi yields negatively impacted the young industry — as these bonds pose lower risk than DeFi.
DeFi use cases: Supporting crypto investments
Decentralized Finance hopes to offer different digital financial services, which are run by a community in a so-called decentralized autonomous organization (DAO) away from banks or governments. These services can include asset management, money lending, or trading, potentially making it possible to offer services that traditional finance cannot do. By late 2023, however, DeFi focused on two main use cases: Liquid staking and money lending. These processes are there to support crypto investors, specifically. The market size of insurance within Decentralized Finance, for example, was much smaller in comparison.
