Where is Terra’s DeFi market share going? Ethereum, BNB chain and Tron

Decrypt DeFi is Decrypt’s DeFi email newsletter. (drawing: Grant Kempster)

Before its horrific implosion last month, Terra’s ecosystem benefited from nearly 15% of all DeFi market to share. This has made it the second largest hub for all things decentralized finance, according to data from DeFiLlama.

But when a $40 billion network collapses and investors head for the hills, where do they rush?

Let’s first look at protocols like Ethereum, Avalanche, Solana, Fantom, Tron, and Binance’s BNB Chain (formerly known as BSC).

On May 6, when Earth was still alive and active, Ethereum had 55% of all DeFi activity, BNB Chain had 6%, Avalanche had 4%, Solana had 3%, Fantom had 2%, and Tron had 2%.

Today, those numbers are very different. The biggest gainers were Ethereum, with a market to share 61% now, BNB with a to share by 7.6%, and Tron now grabbing almost 6%. Less well known, Harmony now benefits from 5.2%.

Interestingly, Fantom and Avalanche actually lost a small portion of the market meanwhile, while Solana was flat at 3%.

TVL on DeFi channels across Ethereum (green), BNB (teal), Tron (royal blue), Harmony (aqua), Avalanche (sage), and Solana (burgundy). Source: DeFillama.

After combing through DeFiLlama, we can also identify which specific projects some of that money is going towards.

On Ethereum, projects like Arrakis Finance (a cash management protocol), Iron Bank (a protocol-to-protocol lending platform), and Euler (another lending platform) have played a key role in absorbing new funds into the world. within DeFi.

As for BNB Chain, projects like pNetwork (a validation network), Wombat Exchange (a Curve-like decentralized exchange) and TokensFarm (a yield aggregator), have also flourished over the past month.

For all the maximalism in this space, the wide variety of project types gaining traction across different channels is a healthy phenomenon.

Tron’s USDD looks a lot like Terra’s UST

This is not the case with Tron. Although Tron has essentially doubled its market to share since Earth collapsed, it did so with effectively the exact same product as Terra’s UST: USDD.

USDD is a new algorithmic stablecoin that performs a mint and burn mechanism similar to that Earthis UST. These days, the Tron DAO also bought Bitcoin, Tron, and USDT as collateral. So it’s a weird amalgamation of various strategies.

Although stablecoins are the bread and butter of DeFi, users seem to be flocking to USDD not because of its merits as a decentralized dollar, but rather for the massive returns they can earn. On the USDD site, for example, Tron promises pretty exorbitant double-digit returns on a few different platforms.

And thanks to this promise, these platforms are driving Tron’s DeFi business. Lending platform JustLend, where you can earn 17% on USDD, has seen a total value locked (TVL) increase of 120% over the past month. Elsewhere on Sun.io users can earn up to 21%; its TVL also jumped more than 230% over the same period.

These returns may be attractive at first glance, but users should obviously exercise extreme caution given the arrangement’s similarity to Earth and its Anchor protocol.

They are also the only two DeFi platforms in Tron’s ecosystem of eight projects that are currently showing signs of growth. The others are all in bad shape.

Behind these massive returns, USDD’s surge is hot on the heels market capitalization.

USDD market capitalization of Tron since inception on May 1, 2022. Source: CoinMarketCap.

Over the past month, USDD has risen over 200% according to CoinMarketCap, but with a market cap of $703 million, it is still far from the UST’s peak of $18.6 billion.

But stay. The fact that Tron has essentially doubled in value since the collapse of Earth is quite the title.

Perhaps even more remarkable is that it has benefited from this growth by taking advantage of many of the same smoldering components attributed to Earthis success. You really can’t make this up.

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Lance B. Holton