DeFi blue-chip stocks down 80% since 2021 as a new generation of DeFi projects rises

The new generation of DeFi projects - Terra, Fantom - have performed well over the past 30 days. Veterans, let’s call it DeFi 1.0 blue-chip stocks.

We're talking about Uniswap, Aave, MakerDAO, Compound, and other members of the DeFi Summer generation. Their total value locked (TVL) is over $50 billion, and by this measure, they are as strong as ever. But when it comes to token performance, new entrants have been put off: Uniswap has grown 6% over the past 30 days, while Terra’s LUNA token has grown 38.7%.

The truth is that while the TVL of many protocols peaked in Q4 2021, most DeFi 1.0 blue-chip assets have fallen over 80% against USD and ETH since the first half of 2021 and are no longer among the top 50 cryptocurrencies column. A synopsis of what's going on:

Compound
Decentralized money market Compound was the main catalyst for DeFi Summer after launching liquidity mining incentives for borrowers and lenders through its governance token COMP in June 2020.

Compound is not the first DeFi protocol to launch liquidity mining on Ethereum, Synthetix rewarded sETH/ETH liquidity providers on Unsiwap v1 with its SNX token in 2019. However, as the community was only rewarded for using the protocol and did not require them to take the risk of impermanent loss associated with providing liquidity on decentralized exchanges, its liquidity mining measures soon led to a flurry of activity on the platform .

For much of DeFi Summer, Compound emerged as the top protocol in terms of TVL, displacing MakerDAO, the industry’s longtime leader, in the process. The agreement also inspired institutions to explore DeFi after partnering with institutional digital asset custodian Fireblocks.

Although Compound is the seventh-largest protocol on Ethereum, its token is down more than 87% against the U.S. dollar from its all-time high in May 2021.

COMP has performed even worse against ETH, plummeting 96% since June 2020.

Uniswap

The v2 iteration of Uniswap, launched in May 2020, helped ignite the explosion of DeFi by enabling permissionless token swaps without the need for centralized exchanges.

While Uniswap v1 was launched in November 2018, the protocol requires all transactions to be executed using ETH as an intermediate base pair, resulting in additional fees and slippage for users.

After facing liquidity vampire attacks from rival DEXs such as Yam Finance and SushiSwap, Uniswap airdropped its tokens to users, which in the form of governance tokens provide significant liquidity providers moving funds from Uniswap incentives. The DEX will continue to lead the way in centralized liquidity with its v3 iteration in May 2021.

Uniswap is now the ninth largest DeFi protocol with a TVL of $7.5 billion, while the exchange has processed over $15 billion in v2 and v3 volumes in the past 24 hours.

Even so, Uniswap’s price has fallen sharply since its all-time high in early 2021 and is currently trading at $9.21, down 79.3% since its May 2021 high.

Yearn Finance
The success of the pioneering yield aggregation protocol Yearn Finance catapulted its founder Andre Cronje to fame. The success of COMP inspired Yearn to launch its governance token, YFI, in July 2020. Cronje urges users to earn tokens by providing liquidity to one of the protocols in the Yearn ecosystem, rather than buying them on exchanges.

Yearn and Cronje have been involved in several disputes. The protocol is the 10th largest protocol on Ethereum and 14th in the industry. However, YFI is down 76.7% against the US dollar since its May 2021 high.