Some of the most well-known segments of the cryptocurrency ecosystem are clearly growing, but decentralised finance (DeFi) appears to be falling behind. Patrick Hansen, Senior Policy Director for Europe at Circle, noted this oddity and said that the industry requires a total makeover.
DeFi hiccup in spotlight
The DeFi Total Value Locked (TVL) has stayed at the same level it was at more than three years ago, according Hansen’s assessment. Hansen claims that when the Liquid Staking capital lockup is taken out of the equation, this statistic is even less than half of what it is.
As of December 2021, the DeFi TVL is estimated to be $142.347 billion, down more over $220 billion, according to statistics from DeFiLlama. The number of dApps on Ethereum (ETH) and other protocols with strong ties to smart contract financial applications is increasing, although this sharp decline still occurs.
https://x.com/paddi_hansen/status/1790335541419942227
Patrick Hansen thinks that there should be a significant difference in the locked TVL for a sector that is expanding outside. The policy expert pointed out that DeFi need a fresh wave of inventions and applications in general, even if he acknowledged that the TVL is a poor measure for assessing overall market success.
Why regulation may hinder innovation
Over the past several years, traders’ attention has noticeably switched to Ethereum restaking methods. This is the main area of the DeFi ecosystem that saw a notable increase, and EigenLayer and Lido DAO were in the forefront of it.
But going future, the market can put a lot more pressure on the desire to innovate. This is predicated on the stringent legal environment in the US, which serves as the primary DeFi liquidity market.
A Wells Notice was sent by the U.S. Securities and Exchange Commission (SEC) to Uniswap, the leading pioneering protocol in the decentralised exchange (DEX) ecosystem.
Hansen has called for new inventions, but these regulatory roadblocks may impede and stifle hope.
