Cryptocurrencies

Aave (LEND) is now the Champion of Decentralized Finance – Cryptocurrencies

DeFi in the first place: what better than the top of the podium for a DeFi project to be seen by the maximum number of cryptophiles and thus attract the maximum number of users. We swear by the Total Value Locked (TVL) of the project to judge its reliability, its performance: some indicators are apparently too easy to understand, and are therefore difficult to believe.


In DeFi, nothing should be taken for granted

Data from DeFi Pulse indicate that the decentralized lending platform Aave (LEND) has $ 1.44 billion in assets, ahead of the $ 1.42 billion in MakerDAO.

Theformer industry leader, Compound, was dethroned and fell from the top of the podium to land at 5th place, preceded by yEarn and Curve.

Contrary to Compound, Aave does not use liquidity mining to generate liquidity and boost its numbers. Aave now offers many assets for borrowing and deposits; stablecoins like Tether (USDT), the TrueUSD (TUSD) and theUSD Coin (USDC) represent the majority of its TVL.

The token LEND, whose price has been rising for about 90 days, weighs $ 461 million, in terms of TVL ; its market cap has exceeded 900 million dollars.

These increases in LEND, which recorded a growth of 20% for the day of August 25, 2020 alone, allowed him to take the place of Maker.

A TVL in disarray: are all DeFi projects scams?

DeFi and its exploding TVL: enough to entice investors willing to do anything to get rich quickly – go headlong and then think.

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Cryptoassets are highly volatile unregulated investment products. No EU investor protection. Your capital is at risk.

TVL is the subject of much criticism, although it continues to be used – maybe a little too simplistic – as an indicator of popularity – and therefore credibility and performance? – of a DeFi project.

TVL fromAave seems to vary depending on the price of LEND. “Seems” because, this correlation is not that simple in reality.

The use of liquidity mining – produce crypto dedicated to the project when using a DeFi service in which the user must make investments – inflates the TVL and can increase the price of the token – we then have a retroactive loop which ends up knowing its limits at a given moment, like any mechanistic system aiming to artificially increase prices.

TVL is also criticized for a reason, let’s say, pretty obvious: Locked-in value isn’t really locked in practice. The funds can be withdrawn at any time to be invested in a more profitable project.

Not to mention that the dollar value of the TVL depends on the price of the assets offered, which is for example the case for LEND.

To top it off, the researchers showed that TVL is biased due to double counting overestimating it. For example, cash DAI sure Aave are the object of a second count of DAI originals offered as warranty on Maker, to produce the stablecoin.

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Cryptoassets are highly volatile unregulated investment products. No EU investor protection. Your capital is at risk.

Being champion is easy, remaining champion … In short, you know the rest! DeFi is currently inflating its value with marketing and questionable financial practices – let’s say it as it is. The blockchain is ultimately insufficient for real decentralization. Mass financial education that would make even barbaric concepts obvious to a teenager is a sine qua non for a real redistribution of power in the hands of each individual. A popular jury, whose members have no basic knowledge of the law, may be able to properly judge the accused. Such a system would be the source of many legal errors in a DeFi with complex technical cogs and where each project continues to refine its bait to catch the most fish in its nets.

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