DeFi enjoys prolific start to 2023: DappRadar report

Published at: Feb. 2, 2023

Decentralized finance (DeFi) protocols experienced a boom in total value locked across different staking pools in January 2023. The market hit $74.6 billion worth of staked assets, increasing by 26% from December.

In its latest monthly report, DappRadar outlined the growth of the DeFi sector alongside rejuvenated nonfungible token (NFT) markets that have also had upticks in trading volume and sales.

Optimism emerges as the top DeFi performer, seeing a 57.44$ increase in total value locked (TVL) at $808 million. Blockchain Analyst Sara Gherghelas told Cointelegraph that Optimism’s transaction volumes were likely driven by a "learn-to-earn" incentives program that ended midway through January.

A sudden drop in daily transactions on Jan. 17 suggests that educational incentive programs might play a role in driving DeFi adoption and onboarding as Gherghelas explained:

“By providing a hands-on learning experience, these incentives can help users gain a deeper understanding of DeFi technologies and the potential benefits they offer, thereby driving greater adoption and usage of DeFi products and services.”

Solana saw a 57% increase in its TVL to reach $548 million, driven by Marinade Finance’s introduction of a token incentive scheme rewarding SOL depositors with liquid staking derivative mSOL. The protocol reached $152 million TVL between December 2022 and January 2023.

It’s not all positive for the Solana ecosystem, with platform Everlend announcing its closure on Feb. 1, citing a lack of liquidity for shutting down its service.

Ethereum’s upcoming Shanghai upgrade is also driving staking in DeFi due to the expected opening of withdrawals from Ethereum staking contracts. Lido Finance flipped Maker DAO as the largest DeFi protocol in January, driven by popularity of liquid staking derivative protocols.

According to Gherghelas, Lido’s liquid staking solutions have proven to be a major drawcard for users looking to maximize staking returns.

“What sets Lido apart from other DeFi protocols is its innovative staking solution, which allows users to access liquid Ether staking without committing to the traditional 32 ETH minimum.”

Lido saw over $8 billion worth of value staked in its platform, an increase of over 36% since December 2022. Gherghelas highlighted the recent rally in cryptocurrency markets contributing to the increase in DeFi’s TVL:

“The crypto market has been bullish, leading to an increase in investor confidence and an inflow of capital into the DeFi space.”

NFTs have also enjoyed a resurgent start to the year. Trading volume reached $946 million, marking a 38% increase month on month and the highest trading volume seen since June 2022.

Ethereum still dominates the NFT market, accounting for 78.5% of total trading volume at a value of $659 million in January. Yuga Labs enjoyed a good month, with $324 million in trading volume from its exclusive collections.

NFT collections DeGods and Monkey Kingdom helped drive a 23% increase in Solana’s NFT trading volume. Meanwhile, Polygon saw a significant 124% jump in its NFT trading volume and a total of 4.5 million NFT sales, driven in part by the Collect Donald Trump Cards.

As Cointelegraph explored at the end of 2022, unique active wallet data (UAW) comparing 2022 to 2021 showed a 50% increase, with DeFi, NFTs and blockchain gaming-driven activity and trading volumes.