DeFi on Cardano is booming

Total Value Locked (TVL) has been rising steeply since the start of February 2023 and is making new ATH in a bear market when that is not usual. Cardano reached its previous ATH in March 2022 when TVL was at 324M ADA. We are now at 362M ADA (118M USD). DeFi on Cardano is unique in this respect. For all other major smart contract platforms, the number of native coins locked in DeFi is deeply below ATH. TVL in dollar value is low in the case of Cardano compared to some platforms where it is locked up to over a billion dollars and even tens of billions of dollars for Ethereum. If the trend holds, Cardano has a chance to catch up to the current champions within a year or two.

Cardano is just warming up

DeFi on Cardano is still in the early stage. The reasons for the current growth are protocol upgrades that allow the creation of more efficient applications and connections to other ecosystems. Also, the launch of the overcollateralized algorithmic stablecoin DJED, or the ability to tokenize bitcoins and other digital assets supports the rise. Many people are waiting for the launch of the USD-backed stablecoin USDA from Emurgo.

The projects with the most value locked in are Minswap, Indigo, WingRiders, Djed, and MuesliSwap.

Some of the projects anticipated by the community are still in development, and it is expected that once they are launched, people will go and try them out. The important factor is that there haven't been any major hacks on Cardano yet. Right from the start, it was said that the platform would put a lot of emphasis on security and application quality. So far, this has been confirmed. While it is more difficult to create an app for Cardano, as many things are new to developers, tools and documentation are still being worked on. However, so far it is paying off from a security perspective.

Many EVM-compatible platforms had a huge advantage in that third-party teams could copy applications from Ethereum and deploy them elsewhere. The DeFi ecosystem could have been created significantly faster, and all they had to do was pour liquidity into the apps to keep the TVL high. Unfortunately, there have been many hacks.

Developing applications on Cardano will be easier in the near future thanks to projects like Aiken and Eopsin. Developers will be able to create applications without having to learn Haskell.

It is not common for anything to grow in a bear market. As the market values of native coins fall, user interest in both holding cryptocurrencies and using DeFi also decline significantly. This is logical, as if people are at a loss, the blockchain industry may not make sense to them. DeFi needs to offer services that work well regardless of market sentiment. This can be done through stablecoins. For DeFi services, the high volatility of cryptocurrencies must not be a hindrance but an advantage. After the collapse of centralized exchanges and lending platforms, people's attention is turning to DeFi because decentralization is the solution to the problems of centralized services.

It makes sense to hedge into the dollar before an expected market crash or look for ways to secure passive income. Centralized services are failing at this, largely because of unreliable CEOs.

The growth of the Cardano ecosystem is very surprising, but I wouldn't put it in the context of the collapse of CeFi services. Rather, it is a natural organic growth that goes hand in hand with the launch of new projects. They say a bear market is good for building. I don't know how true this is in other ecosystems, but Cardano's development continues. Third-party teams are building new applications, some of them through funding from the Catalyst project.

Catalyst is one of the most underrated projects, but what could be better than a project treasury and users deciding what ADA is used for?

Next to DeFi, we could look at the NFT sector, or the number of assets issued. We would find that Cardano is doing very well in these areas as well.

Conclusion

Personally, I don't consider TVL to be the most important metric, as the number of unique users is more important. The mission of the Cardano project is not to break TVL records, but to serve as many users as possible. Therefore, the number of active addresses is the more important metric. However, if DeFi on Cardano grows in a bear market, it will surely grow in a bull market, which will attract new users.

From my point of view, staking on the first layer should also be counted in DeFi, as it involves finances and is decentralized. It gives users a stable passive yield, which is exactly what they expect from DeFi services. If staking of ADA were counted in the stats, Cardano would do very well as there are staked normally about 25 billion ADA coins, which is over 8 billion USD in the current market value of ADA.