{"id":72224,"date":"2023-01-06T08:00:00","date_gmt":"2023-01-06T06:00:00","guid":{"rendered":"https:\/\/forklog.com\/en\/?p=72224"},"modified":"2025-09-08T13:47:47","modified_gmt":"2025-09-08T10:47:47","slug":"2022-in-review-how-the-defi-sector-fared-amid-the-terra-and-ftx-crashes","status":"publish","type":"post","link":"https:\/\/forklog.com\/en\/2022-in-review-how-the-defi-sector-fared-amid-the-terra-and-ftx-crashes\/","title":{"rendered":"2022 in Review: How the DeFi Sector Fared Amid the Terra and FTX Crashes"},"content":{"rendered":"<p>The year 2022 was full of upheavals for the DeFi sector and the crypto industry as a whole. Bold forecasts by optimistic analysts <a href=\"https:\/\/forklog.com\/en\/news\/skybridge-capital-major-investors-could-push-bitcoin-above-500000\">did not materialize<\/a>, and the laser-eyes meme <a href=\"https:\/\/forklog.com\/en\/news\/peter-brandt-mocks-bitcoin-supporters-and-laser-eyes\">failed to help<\/a> the market.<\/p>\n<p>The Terra collapse and the unraveling of Sam Bankman-Fried&#8217;s (SBF) business empire <a href=\"https:\/\/forklog.com\/en\/news\/terras-death-spiral-how-and-why-luna-and-ust-collapsed\">weighed heavily<\/a> on the industry. These events had far-reaching consequences for the decentralised finance segment <a href=\"https:\/\/forklog.com\/en\/news\/how-the-collapse-of-ftx-and-alameda-research-will-affect-the-crypto-industry\">.<\/p>\n<p>ForkLog recalls the important DeFi events of 2022, and considers the sector&#8217;s key development metrics <\/a>.<\/p>\n<div class=\"wp-block-text-wrappers-keypoints article_keypoints\">\n<ul class=\"wp-block-list\">\n<li>Prices of many utility tokens of decentralized applications fell by 80-90% over the year. <span data-descr=\"total value of assets locked in the smart contracts of decentralized applications\" class=\"old_tooltip\">TVL<\/span> of the sector collapsed to levels seen at the start of 2021.<\/li>\n<li>Despite the bear market, developers are working on promising projects, and venture-capital investors are showing noticeable activity.<\/li>\n<li>A tendency emerged to move coins from centralized exchanges to non-custodial platforms.<\/li>\n<\/ul>\n<\/div>\n<h2 class=\"wp-block-heading\">Slowing Activity<\/h2>\n<p>A string of negative events weighed on the sector&#8217;s overall TVL \u2014 from the start of the year the figure fell from about $260 billion to about $58.7 billion at the time of writing (a drop of around 77.4%).<\/p>\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"281\" src=\"https:\/\/forklog.com\/wp-content\/uploads\/1-defi-llama-3-1024x281.png\" alt=\"1-defi-llama-3\" class=\"wp-image-194717\" srcset=\"https:\/\/forklog.com\/wp-content\/uploads\/1-defi-llama-3-1024x281.png 1024w, https:\/\/forklog.com\/wp-content\/uploads\/1-defi-llama-3-300x82.png 300w, https:\/\/forklog.com\/wp-content\/uploads\/1-defi-llama-3-768x211.png 768w, https:\/\/forklog.com\/wp-content\/uploads\/1-defi-llama-3.png 1365w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><figcaption>Data: <a href=\"https:\/\/defillama.com\/\">DeFi Llama<\/a> as of 29.12.2022.<\/figcaption><\/figure>\n<p>The steepest pace of decline came in early May, amid the sudden collapse of the multi\u2011billion Terra ecosystem.<\/p>\n<p>Shortly after the collapse <a href=\"https:\/\/forklog.com\/en\/news\/algorithmic-stablecoins-how-alternatives-to-usdt-and-usdc-are-evolving\">of the algorithmic stablecoin<\/a> UST and the once-highly capitalised token LUNA, serious problems began for well-known firms such as <a href=\"https:\/\/forklog.com\/en\/news\/how-celsius-3ac-and-steth-problems-could-shape-ethereums-price-and-the-crypto-market\">the crypto lender Celsius and the hedge fund Three Arrows Capital<\/a>. The latter was among the major buyers of the Terra ecosystem&#8217;s native token.<\/p>\n<p>The ensuing months saw a period of stagnation. Many thought the cycle had bottomed and that consolidation with a recovery and a new bull run was near. Yet in early November another <a href=\"https:\/\/ru.wikipedia.org\/wiki\/%D0%A7%D1%91%D1%80%D0%BD%D1%8B%D0%B9_%D0%BB%D0%B5%D0%B1%D0%B5%D0%B4%D1%8C_(%D1%82%D0%B5%D0%BE%D1%80%D0%B8%D1%8F)\">&#8220;black swan&#8221;<\/a> \u2014 the collapse of Sam Bankman-Fried&#8217;s vast business empire.<\/p>\n<p>This time, Bitcoin traded firmly below the psychological threshold of <a href=\"https:\/\/forklog.com\/en\/news\/bitcoin-price-sinks-below-20000\">$20,000<\/a>, dragging the rest of the market lower. The TVL of the DeFi sector again began to fall.<\/p>\n<p>The Fear and Greed Index consistently <a href=\"https:\/\/forklog.com\/en\/news\/cryptocurrency-fear-and-greed-index-hits-march-2020-levels\">indicated<\/a> exceptionally pessimistic investor sentiment. Many companies <a href=\"https:\/\/forklog.com\/en\/news\/kraken-cuts-around-30-of-staff\">laid off staff<\/a>, and miners faced acute financial pressures, often resulting in exits or <a href=\"https:\/\/forklog.com\/en\/news\/foundry-to-buy-two-mining-centres-from-the-bankrupt-compute-north\">acquisitions<\/a> by other market participants.<\/p>\n<p>Even hodlers, once famed for their resilience, <a href=\"https:\/\/forklog.com\/en\/news\/ftx-collapse-triggers-one-of-the-largest-capitulations-by-bitcoin-holders\">recorded losses<\/a>. A mass move to a \u201csafe haven\u201d was reflected in a surge of on-chain activity among stablecoins.<\/p>\n<p><script async=\"\" src=\"https:\/\/telegram.org\/js\/telegram-widget.js?21\" data-telegram-post=\"forklog\/28734\" data-width=\"100%\"><\/script><\/p>\n<p>The situation hit relatively illiquid DeFi assets hard. The collapse of SBF&#8217;s empire also affected the Solana ecosystem, as Alameda Research <a href=\"https:\/\/www.coindesk.com\/business\/2022\/11\/02\/divisions-in-sam-bankman-frieds-crypto-empire-blur-on-his-trading-titan-alamedas-balance-sheet\/\">held sizeable SOL on balance sheets<\/a>.<\/p>\n<p>Solana&#8217;s price fell more than 70%, and its quotes, amid the renewed crisis, fell more than any other top-20 by market cap, <a href=\"https:\/\/www.coingecko.com\/en\/coins\/solana\">Solana<\/a>.<\/p>\n<p>On the other hand, the November market crash triggered a spike in trading volume on decentralized exchanges (DEXs). Evidently, many investors began gravitating toward non-custodial platforms.<\/p>\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"904\" height=\"464\" src=\"https:\/\/forklog.com\/wp-content\/uploads\/2-weekly-dex-volume.png\" alt=\"2-weekly-dex-volume\" class=\"wp-image-194718\" srcset=\"https:\/\/forklog.com\/wp-content\/uploads\/2-weekly-dex-volume.png 904w, https:\/\/forklog.com\/wp-content\/uploads\/2-weekly-dex-volume-300x154.png 300w, https:\/\/forklog.com\/wp-content\/uploads\/2-weekly-dex-volume-768x394.png 768w\" sizes=\"auto, (max-width: 904px) 100vw, 904px\" \/><figcaption>Trading volumes on popular Ethereum exchanges. Data: <a href=\"https:\/\/dune.com\/hagaetc\/dex-metrics\">Dune Analytics<\/a>.<\/figcaption><\/figure>\n<p>Uniswap remains the undisputed leader among Ethereum-exchanges. Its share of total <span data-descr=\"decentralized (non-custodial) exchanges\" class=\"old_tooltip\">DEX<\/span> turnover is disproportionately higher than that of other platforms.<\/p>\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"577\" height=\"448\" src=\"https:\/\/forklog.com\/wp-content\/uploads\/3-dex-market-share.png\" alt=\"3-dex-market-share\" class=\"wp-image-194719\" srcset=\"https:\/\/forklog.com\/wp-content\/uploads\/3-dex-market-share.png 577w, https:\/\/forklog.com\/wp-content\/uploads\/3-dex-market-share-300x233.png 300w\" sizes=\"auto, (max-width: 577px) 100vw, 577px\" \/><figcaption>Share of popular Ethereum platforms in total DEX turnover. Data: <a href=\"https:\/\/dune.com\/hagaetc\/dex-metrics\">Dune Analytics<\/a> as of 29.12.2022.<\/figcaption><\/figure>\n<p>Uniswap continues to attract substantial investments, despite the bear market. The project team is focusing on <span data-descr=\"integration of new protocols\" class=\"old_tooltip\">the integration of new protocols<\/span> and <span data-descr=\" Layer-2 solutions\" class=\"old_tooltip\">2nd-layer solutions<\/span> such as <span data-descr=\"zero-knowledge proofs\" class=\"old_tooltip\">zkSync<\/span>, and is actively expanding into the NFT space. This further solidifies the platform&#8217;s position.<\/p>\n<p>The diagram below shows the recovery in the number of Uniswap&#8217;s active users after the May shock from the Terra collapse.<\/p>\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"915\" height=\"367\" src=\"https:\/\/forklog.com\/wp-content\/uploads\/4-uniswap-monthly-active-users.png\" alt=\"4-uniswap-monthly-active-users\" class=\"wp-image-194720\" srcset=\"https:\/\/forklog.com\/wp-content\/uploads\/4-uniswap-monthly-active-users.png 915w, https:\/\/forklog.com\/wp-content\/uploads\/4-uniswap-monthly-active-users-300x120.png 300w, https:\/\/forklog.com\/wp-content\/uploads\/4-uniswap-monthly-active-users-768x308.png 768w\" sizes=\"auto, (max-width: 915px) 100vw, 915px\" \/><figcaption>Uniswap monthly active users. Data: <a href=\"https:\/\/dune.com\/jefftshaw\/Balancer\">Dune Analytics<\/a>.<\/figcaption><\/figure>\n<p>Ethereum remains the leader by share of total TVL.<\/p>\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"306\" src=\"https:\/\/forklog.com\/wp-content\/uploads\/5-ethereum-tvl-share-1024x306.png\" alt=\"5-ethereum-tvl-share\" class=\"wp-image-194721\" srcset=\"https:\/\/forklog.com\/wp-content\/uploads\/5-ethereum-tvl-share-1024x306.png 1024w, https:\/\/forklog.com\/wp-content\/uploads\/5-ethereum-tvl-share-300x90.png 300w, https:\/\/forklog.com\/wp-content\/uploads\/5-ethereum-tvl-share-768x230.png 768w, https:\/\/forklog.com\/wp-content\/uploads\/5-ethereum-tvl-share.png 1281w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><figcaption>Share of different ecosystems in total TVL of the DeFi sector. Data: <a href=\"https:\/\/defillama.com\/chains\">DeFi Llama<\/a>.<\/figcaption><\/figure>\n<p>In 2021, Ether&#8217;s share declined as newer blockchains gained traction, yet by May the downtrend was halted and the flagship partially regained ground. In recent months, the ecosystem&#8217;s share in total TVL has hovered around 58%.<\/p>\n<p>Despite ongoing development, DeFi Dominance remained below 1.5% for the year, which could signal substantial growth potential for decentralised finance, NFT and Web3 more broadly.<\/p>\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"537\" src=\"https:\/\/forklog.com\/wp-content\/uploads\/6-defi-dominance-1024x537.png\" alt=\"6-defi-dominance\" class=\"wp-image-194722\" srcset=\"https:\/\/forklog.com\/wp-content\/uploads\/6-defi-dominance-1024x537.png 1024w, https:\/\/forklog.com\/wp-content\/uploads\/6-defi-dominance-300x157.png 300w, https:\/\/forklog.com\/wp-content\/uploads\/6-defi-dominance-768x403.png 768w, https:\/\/forklog.com\/wp-content\/uploads\/6-defi-dominance-1536x806.png 1536w, https:\/\/forklog.com\/wp-content\/uploads\/6-defi-dominance-2048x1075.png 2048w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><figcaption>Trend of the DeFi Dominance indicator. Data: <a href=\"https:\/\/www.theblock.co\/data\/decentralized-finance\/asset-management\/defi-dominance\">The Block<\/a>, CoinGecko.<\/figcaption><\/figure>\n<p>The ratio of DEX turnover to centralised-exchange turnover showed a downtrend from February to September. Some rebound in November was driven by investors migrating to non-custodial platforms amid the FTX collapse.<\/p>\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" loading=\"lazy\" decoding=\"\" width=\"1024\" height=\"537\" src=\"https:\/\/forklog.com\/wp-content\/uploads\/7-dex-to-cex-spot-trade-volume-1024x537.png\" alt=\"7-dex-to-cex-spot-trade-volume\" class=\"wp-image-194723\" srcset=\"https:\/\/forklog.com\/wp-content\/uploads\/7-dex-to-cex-spot-trade-volume-1024x537.png 1024w, https:\/\/forklog.com\/wp-content\/uploads\/7-dex-to-cex-spot-trade-volume-300x157.png 300w, https:\/\/forklog.com\/wp-content\/uploads\/7-dex-to-cex-spot-trade-volume-768x403.png 768w, https:\/\/forklog.com\/wp-content\/uploads\/7-dex-to-cex-spot-trade-volume-1536x806.png 1536w, https:\/\/forklog.com\/wp-content\/uploads\/7-dex-to-cex-spot-trade-volume-2048x1075.png 2048w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><figcaption>Dynamics of the ratio of the total DEX turnover to centralised-exchange turnover. Data: <a href=\"https:\/\/www.theblock.co\/data\/decentralized-finance\/dex-non-custodial\/dex-to-cex-spot-trade-volume\">The Block<\/a>, CoinGecko.<\/figcaption><\/figure>\n<p>Decentralised exchanges continue to dominate the DeFi sector&#8217;s total TVL \u2014 accounts for about 27% of the overall figure.<\/p>\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"965\" height=\"583\" src=\"https:\/\/forklog.com\/wp-content\/uploads\/9-tvl-po-osnovnym-sektoram-defi-ekosistemy-na-baze-ethereum-15.png\" alt=\"9-tvl-po-osnovnym-sektoram-defi-ekosistemy-na-baze-ethereum-15\" class=\"wp-image-194724\" srcset=\"https:\/\/forklog.com\/wp-content\/uploads\/9-tvl-po-osnovnym-sektoram-defi-ekosistemy-na-baze-ethereum-15.png 965w, https:\/\/forklog.com\/wp-content\/uploads\/9-tvl-po-osnovnym-sektoram-defi-ekosistemy-na-baze-ethereum-15-300x181.png 300w, https:\/\/forklog.com\/wp-content\/uploads\/9-tvl-po-osnovnym-sektoram-defi-ekosistemy-na-baze-ethereum-15-768x464.png 768w\" sizes=\"auto, (max-width: 965px) 100vw, 965px\" \/><figcaption>TVL by major DeFi categories. Data: ForkLog&#8217;s November report.<\/figcaption><\/figure>\n<p>Among DEXs, AMM-based platforms prevail, accounting for about 80% of turnover. Hybrid trading models are relatively popular as well. The share of non-custodial order-book exchanges is small \u2014 around 12%.<\/p>\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"537\" src=\"https:\/\/forklog.com\/wp-content\/uploads\/10-dex-mechanism-volume-share-1024x537.png\" alt=\"10-dex-mechanism-volume-share\" class=\"wp-image-194725\" srcset=\"https:\/\/forklog.com\/wp-content\/uploads\/10-dex-mechanism-volume-share-1024x537.png 1024w, https:\/\/forklog.com\/wp-content\/uploads\/10-dex-mechanism-volume-share-300x157.png 300w, https:\/\/forklog.com\/wp-content\/uploads\/10-dex-mechanism-volume-share-768x403.png 768w, https:\/\/forklog.com\/wp-content\/uploads\/10-dex-mechanism-volume-share-1536x806.png 1536w, https:\/\/forklog.com\/wp-content\/uploads\/10-dex-mechanism-volume-share-2048x1075.png 2048w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><figcaption>Share of different DEX types in total trading turnover. Data: <a href=\"https:\/\/www.theblock.co\/data\/decentralized-finance\/dex-non-custodial\/dex-mechanism-volume-share\">The Block<\/a>, CoinGecko.<\/figcaption><\/figure>\n<p>As before, the largest AMM platform Uniswap occasionally surpasses the Coinbase exchange in trading volume.<\/p>\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"345\" src=\"https:\/\/forklog.com\/wp-content\/uploads\/8-uniswap-vs-coinbase-1024x345.png\" alt=\"8-uniswap-vs-coinbase\" class=\"wp-image-194726\" srcset=\"https:\/\/forklog.com\/wp-content\/uploads\/8-uniswap-vs-coinbase-1024x345.png 1024w, https:\/\/forklog.com\/wp-content\/uploads\/8-uniswap-vs-coinbase-300x101.png 300w, https:\/\/forklog.com\/wp-content\/uploads\/8-uniswap-vs-coinbase-768x259.png 768w, https:\/\/forklog.com\/wp-content\/uploads\/8-uniswap-vs-coinbase.png 1164w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><figcaption>Trading volumes of Uniswap and Coinbase. Data: <a href=\"https:\/\/www.theblock.co\/data\/decentralized-finance\/dex-non-custodial\/uniswap-vs-coinbase-and-binance-trade-volume-7dma\">The Block<\/a>, CoinGecko.<\/figcaption><\/figure>\n<p>Notably, there was a marked decline in the supply of the \u201cBitcoin on Ethereum\u201d token \u2014 the metric had been rising until the Terra crash.<\/p>\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"537\" src=\"https:\/\/forklog.com\/wp-content\/uploads\/11-btc-on-ethereum-daily-1024x537.png\" alt=\"11-btc-on-ethereum-daily\" class=\"wp-image-194727\" srcset=\"https:\/\/forklog.com\/wp-content\/uploads\/11-btc-on-ethereum-daily-1024x537.png 1024w, https:\/\/forklog.com\/wp-content\/uploads\/11-btc-on-ethereum-daily-300x157.png 300w, https:\/\/forklog.com\/wp-content\/uploads\/11-btc-on-ethereum-daily-768x403.png 768w, https:\/\/forklog.com\/wp-content\/uploads\/11-btc-on-ethereum-daily-1536x806.png 1536w, https:\/\/forklog.com\/wp-content\/uploads\/11-btc-on-ethereum-daily-2048x1075.png 2048w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><figcaption>Dynamics of tokenised-BTC supply on Ethereum. Data: <a href=\"https:\/\/www.theblock.co\/data\/decentralized-finance\/asset-management\/btc-on-ethereum-daily\">The Block<\/a>.<\/figcaption><\/figure>\n<p>In the segment, Wrapped Bitcoin (WBTC) dominates \u2014 its share <a href=\"https:\/\/dune.com\/eliasimos\/btc-on-ethereum_1\">exceeds 90%<\/a>. <\/p>\n<p>In the wake of the FTX and Alameda collapse, the wrapped token WBTC, as well as Lido&#8217;s stETH, lost parity with Bitcoin and Ethereum respectively.<\/p>\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1023\" height=\"816\" src=\"https:\/\/forklog.com\/wp-content\/uploads\/12-wbtcbtc.png\" alt=\"12-wbtcbtc\" class=\"wp-image-194728\" srcset=\"https:\/\/forklog.com\/wp-content\/uploads\/12-wbtcbtc.png 1023w, https:\/\/forklog.com\/wp-content\/uploads\/12-wbtcbtc-300x239.png 300w, https:\/\/forklog.com\/wp-content\/uploads\/12-wbtcbtc-768x613.png 768w\" sizes=\"auto, (max-width: 1023px) 100vw, 1023px\" \/><figcaption>Daily WBTC\/BTC chart on Binance. Data: <a href=\"https:\/\/www.tradingview.com\/chart\/NwnTupdg\/?symbol=BINANCE%3AWBTCBTC\">TradingView<\/a>.<\/figcaption><\/figure>\n<p>2022 also saw the blocking of the largest transaction mixer \u2014 Tornado Cash.<\/p>\n<p>In August 2022 the platform was placed under U.S. sanctions, and in the Netherlands its co-founder Alexey Pertsev was arrested.<\/p>\n<p>As a result of regulatory actions, all assets, user funds and the source code were blocked, and residents were barred from using the service.<\/p>\n<p>Apart from the cryptocurrency, Tornado Cash repositories and their founders on GitHub, <span data-descr=\"remote procedure call\" class=\"old_tooltip\">RPC<\/span> Infura and Alchemy Platform, and some domains were blocked. Because of this, the mixer site and related services stopped functioning. Uniswap blocked more than 250 frontend addresses.<\/p>\n<p>The amount of funds engaged in the service accordingly plummeted.<\/p>\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"537\" src=\"https:\/\/forklog.com\/wp-content\/uploads\/13-tornado-cash-privacy-pool-usd-value-daily-1024x537.png\" alt=\"13-tornado-cash-privacy-pool-usd-value-daily\" class=\"wp-image-194729\" srcset=\"https:\/\/forklog.com\/wp-content\/uploads\/13-tornado-cash-privacy-pool-usd-value-daily-1024x537.png 1024w, https:\/\/forklog.com\/wp-content\/uploads\/13-tornado-cash-privacy-pool-usd-value-daily-300x157.png 300w, https:\/\/forklog.com\/wp-content\/uploads\/13-tornado-cash-privacy-pool-usd-value-daily-768x403.png 768w, https:\/\/forklog.com\/wp-content\/uploads\/13-tornado-cash-privacy-pool-usd-value-daily-1536x806.png 1536w, https:\/\/forklog.com\/wp-content\/uploads\/13-tornado-cash-privacy-pool-usd-value-daily-2048x1075.png 2048w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><figcaption>Dynamics of funds engaged in Tornado Cash. Data: <a href=\"https:\/\/www.theblock.co\/data\/decentralized-finance\/asset-management\/tornado-cash-privacy-pool-usd-value-daily\">The Block<\/a>, Etherscan.<\/figcaption><\/figure>\n<p>In 2022 activity in lending services declined significantly as well. For example, outstanding debt on Compound and <a href=\"https:\/\/www.theblock.co\/data\/decentralized-finance\/cryptocurrency-lending\/aave-outstanding-debt-weekly\">Aave<\/a> fell markedly.<\/p>\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"537\" src=\"https:\/\/forklog.com\/wp-content\/uploads\/14-compound-outstanding-debt-weekly-1024x537.png\" alt=\"14-compound-outstanding-debt-weekly\" class=\"wp-image-194730\" srcset=\"https:\/\/forklog.com\/wp-content\/uploads\/14-compound-outstanding-debt-weekly-1024x537.png 1024w, https:\/\/forklog.com\/wp-content\/uploads\/14-compound-outstanding-debt-weekly-300x157.png 300w, https:\/\/forklog.com\/wp-content\/uploads\/14-compound-outstanding-debt-weekly-768x403.png 768w, https:\/\/forklog.com\/wp-content\/uploads\/14-compound-outstanding-debt-weekly-1536x806.png 1536w, https:\/\/forklog.com\/wp-content\/uploads\/14-compound-outstanding-debt-weekly-2048x1075.png 2048w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><figcaption>Trends in outstanding debt on the Compound platform. Data: <a href=\"https:\/\/www.theblock.co\/data\/decentralized-finance\/cryptocurrency-lending\/compound-outstanding-debt-weekly\">The Block<\/a>, Compound Finance.<\/figcaption><\/figure>\n<p>Worries in 2022 took a heavy toll on the DeFi sector. Even the once-competitor to Uniswap, SushiSwap, faced a liquidity squeeze threatening its operations. To address the issue, the project head Jared Gray proposed temporarily directing all fee revenues to the treasury.<\/p>\n<h2 class=\"wp-block-heading\">Hacks and Scams<\/h2>\n<p>In March 2022 the oldest hack in the sector&#8217;s history occurred. Exploiting a vulnerability, the attacker <a href=\"https:\/\/forklog.com\/en\/news\/ronin-the-ethereum-sidechain-hacked-attacker-siphons-625-million\">theft<\/a> of Axie Infinity&#8217;s Ronin sidechain assets totaling about $625 million took place. The network was down for several months. The sidechain re-launch <a href=\"https:\/\/forklog.com\/en\/news\/ronin-sidechain-relaunch-what-happened\">took place in late June<\/a>.<\/p>\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"537\" src=\"https:\/\/forklog.com\/wp-content\/uploads\/15-stolen-funds-by-blockchain-1024x537.png\" alt=\"15-stolen-funds-by-blockchain\" class=\"wp-image-194731\" srcset=\"https:\/\/forklog.com\/wp-content\/uploads\/15-stolen-funds-by-blockchain-1024x537.png 1024w, https:\/\/forklog.com\/wp-content\/uploads\/15-stolen-funds-by-blockchain-300x157.png 300w, https:\/\/forklog.com\/wp-content\/uploads\/15-stolen-funds-by-blockchain-768x403.png 768w, https:\/\/forklog.com\/wp-content\/uploads\/15-stolen-funds-by-blockchain-1536x806.png 1536w, https:\/\/forklog.com\/wp-content\/uploads\/15-stolen-funds-by-blockchain-2048x1075.png 2048w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><figcaption>Volumes of funds stolen from DeFi protocols by month and by blockchain. Data: <a href=\"https:\/\/www.theblock.co\/data\/decentralized-finance\/exploits\/stolen-funds-by-blockchain\">The Block Research<\/a>.<\/figcaption><\/figure>\n<p>In early October, hackers breached the BSC Token Hub bridge of the BNB Chain ecosystem. The network had to be halted for a period.<\/p>\n<p>The attackers <a href=\"https:\/\/forklog.com\/en\/news\/bnb-chain-team-restores-network-after-100-million-hack\">stole<\/a> digital assets worth more than $544 million, but only about $100 million was moved out.<\/p>\n<p>The February Wormhole cross-chain protocol hack on Solana was the third on the leaderboard. Attackers exploited a vulnerability and drained 120,000 WETH (over $319 million at the time).<\/p>\n<p>On 2 August 2022 a hack hit another cross-chain protocol \u2014 Nomad. The damage exceeded $190 million.<\/p>\n<p>The incident <a href=\"https:\/\/forklog.com\/en\/news\/crypto-industry-loses-428-million-in-q3-to-hacks-and-scams\">contributed significantly<\/a> to the total Web3 losses from hacks and scams in Q3 \u2014 $482.7 million, according to Immunefi\u2019s bounty platform researchers.<\/p>\n<p>Rounding out the top five is the Beanstalk Farms hack. The Ethereum protocol lost $181 million due to the attacker\u2019s actions. On the platform Rekt there is a list of the biggest hacks in recent years. In addition to DeFi projects, it includes centralised platforms such as FTX and <a href=\"https:\/\/forklog.com\/en\/news\/hackers-stole-160-million-from-wintermute\">Wintermute<\/a>.<\/p>\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"401\" height=\"724\" src=\"https:\/\/forklog.com\/wp-content\/uploads\/16-rekt.png\" alt=\"16-rekt\" class=\"wp-image-194732\" srcset=\"https:\/\/forklog.com\/wp-content\/uploads\/16-rekt.png 401w, https:\/\/forklog.com\/wp-content\/uploads\/16-rekt-166x300.png 166w\" sizes=\"auto, (max-width: 401px) 100vw, 401px\" \/><figcaption>Leaderboard of the biggest hacks. Data: <a href=\"https:\/\/rekt.news\/leaderboard\/\">rekt<\/a>.<\/figcaption><\/figure>\n<p>Hacks of DeFi projects often rely on <span data-descr=\"instant loans\" class=\"old_tooltip\">flash loans<\/span>.<\/p>\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"537\" src=\"https:\/\/forklog.com\/wp-content\/uploads\/17-stolen-funds-by-using-flash-loans-1024x537.png\" alt=\"17-stolen-funds-by-using-flash-loans\" class=\"wp-image-194733\" srcset=\"https:\/\/forklog.com\/wp-content\/uploads\/17-stolen-funds-by-using-flash-loans-1024x537.png 1024w, https:\/\/forklog.com\/wp-content\/uploads\/17-stolen-funds-by-using-flash-loans-300x157.png 300w, https:\/\/forklog.com\/wp-content\/uploads\/17-stolen-funds-by-using-flash-loans-768x403.png 768w, https:\/\/forklog.com\/wp-content\/uploads\/17-stolen-funds-by-using-flash-loans-1536x806.png 1536w, https:\/\/forklog.com\/wp-content\/uploads\/17-stolen-funds-by-using-flash-loans-2048x1075.png 2048w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><figcaption>Amounts stolen by hackers through attacks using flash loans. Data: <a href=\"https:\/\/www.theblock.co\/data\/decentralized-finance\/exploits\/stolen-funds-by-using-flash-loans\">The Block Research<\/a>.<\/figcaption><\/figure>\n<p>From the start of 2022 to December 1, the market saw <a href=\"https:\/\/forklog.com\/en\/news\/scammers-have-launched-nearly-120000-tokens-this-year\">117,629<\/a> fraudulent tokens tied to rug pulls. This roughly equates to 15 scam projects per hour, according to Solidus Labs.<\/p>\n<figure class=\"wp-block-image size-full is-resized\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/forklog.com\/wp-content\/uploads\/Obshhee-chislo-moshennichih-tokenov-po-godam.jpg\" alt=\"Obshhee-chislo-moshennichih-tokenov-po-godam\" class=\"wp-image-194734\" width=\"582\" height=\"413\" srcset=\"https:\/\/forklog.com\/wp-content\/uploads\/Obshhee-chislo-moshennichih-tokenov-po-godam.jpg 582w, https:\/\/forklog.com\/wp-content\/uploads\/Obshhee-chislo-moshennichih-tokenov-po-godam-300x213.jpg 300w\" sizes=\"auto, (max-width: 582px) 100vw, 582px\" \/><figcaption>Total number of fraudulent tokens by year. Data: Solidus Labs.<\/figcaption><\/figure>\n<p>Among networks, the highest share of scammers is on BNB Chain: roughly 12% of BEP-20 token issuances are scams. Ethereum sits at about 8%.<\/p>\n<p>Over this period, rug-pull victims numbered almost 2 million investors. This compares with roughly 2.3 million people affected by four major industry bankruptcies \u2014 FTX, BlockFi, Celsius and Voyager.<\/p>\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"694\" height=\"346\" src=\"https:\/\/forklog.com\/wp-content\/uploads\/Obshhee-chislo-postradavshih-ot-moshennichih-tokenov-i-krupnyh-bankrotstv-kriptokompanij.jpg\" alt=\"Obshhee-chislo-postradavshih-ot-moshennichih-tokenov-i-krupnyh-bankrotstv-kriptokompanij\" class=\"wp-image-194735\" srcset=\"https:\/\/forklog.com\/wp-content\/uploads\/Obshhee-chislo-postradavshih-ot-moshennichih-tokenov-i-krupnyh-bankrotstv-kriptokompanij.jpg 694w, https:\/\/forklog.com\/wp-content\/uploads\/Obshhee-chislo-postradavshih-ot-moshennichih-tokenov-i-krupnyh-bankrotstv-kriptokompanij-300x150.jpg 300w\" sizes=\"auto, (max-width: 694px) 100vw, 694px\" \/><figcaption>Total number of rug-pull victims and major crypto-company bankruptcies. Data: Solidus Labs.<\/figcaption><\/figure>\n<p>The cumulative value of funds stolen by hackers from DeFi protocols is approaching $3 billion.<\/p>\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"537\" src=\"https:\/\/forklog.com\/wp-content\/uploads\/18-funds-stolen-by-defi-attackers-1024x537.png\" alt=\"18-funds-stolen-by-defi-attackers\" class=\"wp-image-194736\" srcset=\"https:\/\/forklog.com\/wp-content\/uploads\/18-funds-stolen-by-defi-attackers-1024x537.png 1024w, https:\/\/forklog.com\/wp-content\/uploads\/18-funds-stolen-by-defi-attackers-300x157.png 300w, https:\/\/forklog.com\/wp-content\/uploads\/18-funds-stolen-by-defi-attackers-768x403.png 768w, https:\/\/forklog.com\/wp-content\/uploads\/18-funds-stolen-by-defi-attackers-1536x806.png 1536w, https:\/\/forklog.com\/wp-content\/uploads\/18-funds-stolen-by-defi-attackers-2048x1075.png 2048w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><figcaption>Total funds stolen from Web3 platforms (cumulative). Data: <a href=\"https:\/\/www.theblock.co\/data\/decentralized-finance\/exploits\/funds-stolen-by-defi-attackers\">The Block Research<\/a>.<\/figcaption><\/figure>\n<p>The sum looks enormous and invites reflection on the sector&#8217;s future prospects. A number of questions arise:<\/p>\n<ul class=\"wp-block-list\">\n<li>Are there solutions being developed to make platforms safer?<\/li>\n<li>When will Web3 finally become more user-friendly?<\/li>\n<li>Is there a future for NFTs, metaverses and Layer-2 solutions?<\/li>\n<\/ul>\n<h2 class=\"wp-block-heading\">Sector Outlook<\/h2>\n<p>Indeed, in the bear market DeFi tokens have lost much of their value. But that does not mean projects have halted their work, and liquidity inflows from venture capital have not dried up.<\/p>\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1008\" height=\"498\" src=\"https:\/\/forklog.com\/wp-content\/uploads\/19-top-20-defi-6.png\" alt=\"19-top-20-defi-6\" class=\"wp-image-194737\" srcset=\"https:\/\/forklog.com\/wp-content\/uploads\/19-top-20-defi-6.png 1008w, https:\/\/forklog.com\/wp-content\/uploads\/19-top-20-defi-6-300x148.png 300w, https:\/\/forklog.com\/wp-content\/uploads\/19-top-20-defi-6-768x379.png 768w\" sizes=\"auto, (max-width: 1008px) 100vw, 1008px\" \/><figcaption>Top-20 DeFi coins by market cap. Data: Messari (as of 01.12.2022).<\/figcaption><\/figure>\n<p>Developers are at work, regardless of price movements.<\/p>\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"532\" src=\"https:\/\/forklog.com\/wp-content\/uploads\/20-smart-contracts-not-tied-to-prices-1024x532.jpg\" alt=\"20-smart-contracts-not-tied-to-prices\" class=\"wp-image-194738\" srcset=\"https:\/\/forklog.com\/wp-content\/uploads\/20-smart-contracts-not-tied-to-prices-1024x532.jpg 1024w, https:\/\/forklog.com\/wp-content\/uploads\/20-smart-contracts-not-tied-to-prices-300x156.jpg 300w, https:\/\/forklog.com\/wp-content\/uploads\/20-smart-contracts-not-tied-to-prices-768x399.jpg 768w, https:\/\/forklog.com\/wp-content\/uploads\/20-smart-contracts-not-tied-to-prices.jpg 1266w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><figcaption>Trend in the number of deployed smart contracts against Ethereum price. Data: <a href=\"https:\/\/assets.website-files.com\/6086f3afee58e6430b6c8041\/63474cac85f7227804fc46e1_Web3%20Developer%20Report%20-%20Q3%202022%20-%20Alchemy-min.pdf?fbclid=IwAR1K5LDunfGC13N8gFBg5gXTF0m9caMjbIaVa3zLm9etNEPxkkYlRJvxJEY\">Alchemy<\/a> report.<\/figcaption><\/figure>\n<p>Despite the <a href=\"https:\/\/forklog.com\/en\/news\/metaverse-focused-meta-units-loss-rises-to-3-7-billion\">colossal losses<\/a> at Meta and <a href=\"https:\/\/forklog.com\/en\/news\/meta-to-cut-more-than-11000-jobs-in-restructuring\">mass layoffs<\/a>, the firm remains committed to developing <a href=\"https:\/\/forklog.com\/en\/news\/what-is-the-metaverse\">metaverses<\/a>, seeing them as humanity&#8217;s future.<\/p>\n<p>Partnerships and NFT launches are being pursued by <a href=\"https:\/\/forklog.com\/en\/news\/porsche-announces-its-own-nft-collection\">Porsche<\/a>, <a href=\"https:\/\/forklog.com\/en\/news\/starbucks-launches-nft-based-loyalty-program\">Starbucks<\/a> and even the developers of the Winamp media player <a href=\"https:\/\/forklog.com\/en\/news\/winamp-adds-nft-support-on-ethereum-and-polygon\">Winamp<\/a>. <\/p>\n<p>The sportswear brand Nike <a href=\"https:\/\/forklog.com\/en\/news\/nike-to-unveil-its-own-web3-platform-swoosh\">announced<\/a> the creation of the Web3 platform .Swoosh. It aims to promote virtual footwear.<\/p>\n<p>Even Interpol unveiled its own metaverse.<\/p>\n<p>The Web3 world is highly diverse. For its rapid development, Layer-2 scaling solutions are essential. The fate of mass adoption largely hinges on their progress. <\/p>\n<p>Ethereum co\u2011founder Vitalik Buterin <a href=\"https:\/\/forklog.com\/en\/news\/vitalik-buterin-says-zk-rollups-will-be-ethereums-main-layer-2-solution\">is convinced<\/a> that in the future the second-largest cryptocurrency will rely heavily on <span data-descr=\"zero-knowledge proof-based L2 solution\" class=\"old_tooltip\">ZK-Rollups<\/span>.<\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p>\u00abYou don&#8217;t need to wait seven days to transfer assets. I expect that in about ten years all Rollups will be largely based on <span data-descr=\"zero-knowledge proofs\" class=\"old_tooltip\">cryptographic proofs<\/span>\u00bb, said he.<\/p>\n<\/blockquote>\n<p>In early November Buterin <a href=\"https:\/\/forklog.com\/en\/news\/vitalik-buterin-unveils-updated-ethereum-development-roadmap\">published<\/a> an updated Ethereum roadmap. The document states the team intends to tackle <span data-descr=\"MEV issues\" class=\"old_tooltip\">MEV<\/span> problems and fully integrate <span data-descr=\"zero-knowledge proofs\" class=\"old_tooltip\">zk-SNARKs<\/span>, without using sharding. According to Erik Wall of Arcane Assets, the latter is less efficient.<\/p>\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p>\u00abL2 scaling is undoubtedly one of the biggest changes. It can dramatically accelerate DeFi mass adoption by reducing costs and increasing transaction speeds\u00bb,<\/p>\n<\/blockquote>\n<p>\u00abL2-scale is undoubtedly one of the biggest changes. It can dramatically accelerate DeFi mass adoption by reducing costs and increasing transaction speeds\u00bb, \u2014 explained Jakub, founder of Finematics.<\/p>\n<p>In 2022 Ethereum delivered the most significant upgrade in its history \u2014 The Merge, which successfully moved the network to a Proof-of-Stake consensus. Ether\u2019s energy consumption also fell by more than 90% as miners were removed from the equation.<\/p>\n<p>Thanks to this upgrade and the earlier implementation of <span data-descr=\"EIP-1559\" class=\"old_tooltip\">EIP-1559<\/span>, inflation of the second-largest cryptocurrency diminished substantially. In October the amount of ETH burned surpassed new issuance.<\/p>\n<p>A new token standard \u2014 <span data-descr=\"EIP-4626\" class=\"old_tooltip\">EIP-4626<\/span> \u2014 is gaining traction, designed to improve interaction for <span data-descr=\"decentralised applications\" class=\"old_tooltip\">dapps<\/span> and expand yield-farming capabilities for <span data-descr=\"income farming\" class=\"old_tooltip\">yield farming<\/span>.<\/p>\n<p>The community also looks forward to EIP-4488. It aims to make Rollups more accessible by reducing the cost of transferring one byte of calldata on the Ethereum blockchain by about 80% \u2014 from 16 to 3 gas units.<\/p>\n<p>Venture investments propel DeFi and the crypto industry forward. Their volume in the first half of the year exceeded $30 billion.<\/p>\n<p>More than a third of all funds across 1,199 investment rounds went to CeFi \u2014 $10.2 billion.<\/p>\n<p>The remainder was allocated to:<\/p>\n<ul class=\"wp-block-list\">\n<li>infrastructure companies ($9.7 billion);<\/li>\n<li>NFT projects ($6.7 billion);<\/li>\n<li>Web3 developers and DeFi protocols (about $1.8 billion each).<\/li>\n<\/ul>\n<p>The FTX crash certainly dampened but did not fully shut off funding to promising projects. For example, in recent months:<\/p>\n<ul class=\"wp-block-list\">\n<li>Web3 games publisher <a href=\"https:\/\/forklog.com\/en\/news\/fenix-games-raises-150-million-to-finance-blockchain-games\">Fenix Games<\/a> raised $150 million for a fund to finance blockchain games;<\/li>\n<li>staking platform <a href=\"https:\/\/forklog.com\/en\/news\/kiln-raises-more-than-e17-million-about-17-8-million-from-kraken-and-consensys\">Kiln<\/a> raised more than $17 million from Kraken, ConsenSys and other notable players;<\/li>\n<li>cybersecurity-focused startup <a href=\"https:\/\/forklog.com\/en\/news\/cybersecurity-focused-cyvers-raises-8-million\">Cyvers<\/a> attracted $8 million;<\/li>\n<li>NFT platform <a href=\"https:\/\/forklog.com\/en\/news\/nft-platform-shibuya-raises-6-9-million-from-a16z-and-other-investors\">Shibuya<\/a> received seed funding of $6.9 million from a16z and other market participants;<\/li>\n<li>the Uniswap-based protocol <a href=\"https:\/\/forklog.com\/en\/news\/uniswap-based-panoptic-protocol-raises-4-5-million\">Panoptic<\/a> attracted $4.5 million.<\/li>\n<\/ul>\n<p>Most likely, the projects listed above passed stringent due diligence. The funds raised in new rounds are likely to be deployed effectively to create market-ready products.<\/p>\n<h2 class=\"wp-block-heading\">Conclusions<\/h2>\n<p>The DeFi segment remains relatively small and is still highly dependent on overall market conditions. Prices and TVL figures react sharply to headline events such as bankruptcies, hacks, and scams.<\/p>\n<p>Nonetheless, the DeFi sector continues to develop despite the headwinds and shocks of the bear market. Developers are building new platforms, and investors are funding startups, albeit with greater caution.<\/p>\n<p>Drawing a parallel with the dot-com crash or the ICO era\u2019s end, one could argue that in the long run only the highest-quality projects will survive \u2014 as Amazon and Uniswap did.<\/p>\n<p>The DeFi sector remains young and promising, and there is much to come: new products, scams and hacks, bankruptcies and takeovers, booms and busts.<\/p>\n<p>Follow ForkLog\u2019s bitcoin news in our <a href=\"https:\/\/telegram.me\/forklog\" target=\"_blank\" rel=\"nofollow noopener\">Telegram<\/a> \u2014 cryptocurrency news, prices and analysis.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>ForkLog recalls the important DeFi events of 2022 and the sector\u2019s key metrics.<\/p>\n","protected":false},"author":1,"featured_media":72225,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"select":"1","news_style_id":"5","cryptorium_level":"","_short_excerpt_text":"","creation_source":"","_metatest_mainpost_news_update":false,"footnotes":""},"categories":[1144],"tags":[2331,1093],"class_list":["post-72224","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-longreads","tag-bitcoin-2022","tag-defi"],"aioseo_notices":[],"amp_enabled":true,"views":"70","promo_type":"1","layout_type":"5","short_excerpt":"","is_update":"","_links":{"self":[{"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/posts\/72224","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/comments?post=72224"}],"version-history":[{"count":1,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/posts\/72224\/revisions"}],"predecessor-version":[{"id":72226,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/posts\/72224\/revisions\/72226"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/media\/72225"}],"wp:attachment":[{"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/media?parent=72224"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/categories?post=72224"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forklog.com\/en\/wp-json\/wp\/v2\/tags?post=72224"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}