Aave (AAVE) is growing at a record pace as UniSwap V3 goes live and SushiSwap launches a new liquidity mining program on Polygon. Who is the new number one in DeFi space?
The total Total Value Locked (TVL) in DeFi space has reached a new all-time high of 141.27 billion US dollars. The TVL value measures the entire crypto capital that is stored in Smart Contracts with a DeFi reference. Compared to the previous week, the TVL was able to increase by over 18 billion US dollars. That represents a growth of 15.11 percent over the last seven days and illustrates how much capital is currently flowing into the decentralized finance sector.
But not only the Total Value Locked was able to set a new record this week, but also the DeFi lending project Aave.
Almost a year after Compound sparked the DeFi hype with a liquidity mining program, Aave is now launching its own liquidity mining program. Liquidity mining, also known as yield farming, is a process in which users can provide liquidity in a DeFi protocol and receive trading fees and token rewards in return.
The primary goal of liquidity mining programs is to get users to transfer liquidity to DeFi protocols so that they are more effective than those of the competition. Because whoever has the most liquidity in the DeFi space can usually offer better service for their users.
The start of the Aave liquidity mining program was extremely successful and in less than two weeks the project was able to double its TVL. With a TVL of over $ 12 billion, Aave is now the new number one in DeFi space. Aave has thus successfully ousted competitors such as Compound (COMP) or MakerDAO (MKR), who were previously at the top, from first place.
In addition to the liquidity mining program, the integration of the scaling solution Polygon (Matic) is probably responsible for the fact that Aave has been able to grow so strongly in the past few weeks. But not only the liquidity on Aave could grow strongly. At least as important as the growth that the lending project has seen in lending.
The total amount of the decentralized protocol’s outstanding loans increased 7-fold to $ 4.72 billion in 30 days. Based on the fees generated by the Aave protocol, Aave is now the second-largest DeFi protocol after Uniswap.
After Aave has already demonstrated how a DeFi protocol can be successfully scaled with Polygon, the decentralized exchange SushiSwap (SUSHI) now also wants to build on the success. On Twitter, the SushiSwap community announced last Thursday that a liquidity mining program had started.
Participants in the Liuqidty Mining Program have the opportunity to receive both SUSHI tokens and MATIC tokens for the provision of liquidity. It is now possible for liquidity providers to earn up to 50 percent return per year for providing trading pairs. These returns are paid out in the form of SUSHI and MATIC tokens.
At the time of going to press, SushiSwap has already won over $ 250 million in liquidity on Polygon. At the same time, traders have already traded over $ 5.6 million via SushiSwap on Polygon in the last 24 hours. In addition to the users, all SUSHI owners can also look forward to the expansion of the decentralized exchange. The SUSHI token has increased by over 20 percent in the last seven days.
The new update promises its liquidity providers higher returns . In addition, the capital efficiency of the decentralized exchange should be 4,000 times better than before thanks to V3, according to the developers. This should not make trading significantly cheaper, but liquidity providers should be able to provide capital more efficiently than before.
This in turn means that the total value locked indicator is less meaningful for the success of UniSwap than in other DeFi projects. This is because even comparatively little liquidity can enable efficient trading. We can already see how this increased capital efficiency is having an impact. There is currently only $ 452.51 million in the Uniswap V3 smart contract. At the same time, more than 298.56 million US dollars were traded in the last 24 hours.
If you compare that with the SUSHI-TVL of 5.39 billion US dollars with a daily trading volume of 570 million US dollars, you quickly see how efficient Uniswap V3 is. While it is said that Uniswap V3 can use capital more efficiently, that does not mean that trading fees will go down. This is because the trades on Uniswap V3 still take place on the Ethereum mainnet.
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