NoSleep | DeFi total TVL continues to decline! How far away are we from returning to mainstream trends?

If the total amount of capital in a capital market is limited and there are changes in the internal mainstream trends, it will inevitably affect the flow of funds. This is exactly the case with the DeFi industry. With the rise of the NFT market, although it has brought in a lot of funds from outside the industry, it has also attracted some DeFi funds. In addition, the current tightening monetary policy and the UST decoupling event have caused a significant shrinkage in the TVL of the DeFi industry. In this situation, when will DeFi be able to return to the mainstream?

DeFi TVL Continues to Decline

According to data from DeFiLlama, the total value locked (TVL) across all DeFi protocols is currently only at $126.4 billion, hitting a new low in nearly 10 months, clearly showing the significant impact of the UST incident.

NoSleep's View on the Current State and Future of DeFi

In a recent article published on NoSleep by renowned crypto researcher Jon, he expressed his views on the current state of DeFi. He believes that some of the most innovative aspects of DeFi have bled to death because their governance tokens are too useless, leading to a massive dump in the market after a large release of liquidity mining.

However, the new wave of DeFi protocols has introduced token economies that consider their own impact, even adopting Ponzi economics to give tokens more "utility." Yet, the overcompensation of Ponzi economics has led to many tokens dramatically crashing.

With the outcomes of token economies at both ends of the spectrum—too useless and too useful—now established, Jon believes a healthier equilibrium should emerge in the coming months and years.

However, the question remains: How will DeFi make its way back to the mainstream?

Crypto Adoption Distribution

Before answering this question, it's necessary to understand the current distribution of crypto adoption.

Jon believes that applications on the left side of the normal distribution curve are the most adopted because they are easier to understand. What are Shitcoins? Who knows, but they might pump. What is an NFT? A tradable jpeg.

Going deeper, people on the left side of the normal distribution curve may not even know what blockchain is, let alone liquidity pools. Perhaps they haven't even traded an NFT, so how can they use DeFi?

From Frugal to Luxurious is Easy, From Luxurious to Frugal is Hard

Jon believes that although many DeFi evangelists may disdain what is adopted on the left side, this is actually the simplest way to guide people into the crypto industry.

By trading Shitcoins, people start to familiarize themselves with using centralized exchanges; by trading NFTs, people start to understand MetaMask and OpenSea; by actively participating in DAOs, people begin to grasp the concept of Web3.

Next comes gradually understanding the use of DeFi through playing GameFi, unlocking more chain use cases step by step.

"As media coverage of every new crypto trend and concept begins to seep into people's minds, these concepts will start to emerge and eventually resonate in their surroundings. Retail awareness is evolving from shitcoins to NFTs, and the next wave of adoption may be driven by applications further beyond NFTs. Slowly but surely, we are getting closer to mainstream adoption of DeFi and cryptocurrencies," Jon concludes in the article.