DeFi rivals duke it out

Two enormous, decentralized finance (DeFi) projects, Aave and Maker, are battling for pecking order prowess on an otherwise dismal day for crypto.

Earlier this week, Aave displaced Maker as second-largest DeFi protocol in terms of total value locked (TVL), per AMBCrypto, citing data from DeFiLlama.

Lido remains the largest with a TVL of $14.9 billion. Aave's TVL was $5.8 billion; Maker's TVL was $5.4 billion.

Yeah, it's been a tough stretch of months for Maker, an Ethereum-run DeFi lending platform and the enabler of DAI minting; a decentralized stablecoin, DAI lost its dollar peg (briefly) back in March amidst U.S. banking turmoil that roiled the USDC stablecoin which to a large degree backs DAI.

In terms of governance token market capitalization, Maker and Aaave are suddenly neck and neck. Aave's AAVE ranks No. 42 on the CoinGecko chart. It has a total market cap of roughly $1 billion.

But Maker's MKR (No. 43) is around the exact same level following an 11% gain for MKR in the past 24 hours.

AAVE, meanwhile, slightly declined.

Most Top 50 digital assets, save for MKR, are in the red today.

Bitcoin, Ethereum and XRP all lost their grip on key handles while a slew of altcoins hit the skids. Total crypto assets fell 1.7% in the past 24 hours to reach $1.24 trillion.

Among larger-cap coins, Solana suffered the steepest one-day loss. SOL shed 7% since this time yesterday.

Chainlink had been having an otherwise solid week with the DeFi sector enjoying a sip of summertime nostalgia. But LINK slightly declined overnight.

Litecoin, which for crying out loud has a halving event right around the corner, is down 8% since last week at this time.

"A tumbling tech sector and rising dollar on Thursday kept crypto investors in a rangebound trance," CoinDesk said.

Maybe crypto is on the cusp of another sizzling DeFi summer a la 2020. Or maybe it isn't. Either way, we've been closely watching the space.

Authorities are poised to do the same.

Back in the summer of 2020, DeFi sector TVL, across smart-contract-enabled blockchains, shot up from $2 billion to $10 billion.

As of the start of the summer of 2023, that TVL figure stood north of $40 billion. This level hasn’t moved around too much but it has held steady over a turbulent period, going back to the torching of the Terra ecosystem last spring and the autumnal implosion of FTX/Alameda.

More than half of the current DeFi TVL total is tied to Ethereum-based DeFi protocols, with the remaining 42% spread across another 195 networks tracked by DeFiLlama, per Bitcoin.com.

Lido’s liquid staking platform holds the most value (nearly $15 billion).

"While major crypto industry failures are now long in the rear-view mirror, a return of the kind of optimism we saw towards DeFi in 2020 this summer seems unlikely," B2C's Joel Frank said in late June.

For one thing, the U.S. Securities and Exchange Commission is cracking down on DeFi, and on stablecoins, lifeblood of DeFi. And yields in the traditional financial system remain high relative to recent history.

Yesterday, Republicans in the U.S. House of Representatives introduced a newly revised crypto oversight bill, rewritten in such a conspicuous fashion there is genuine alarm in the DeFi community.

According to CoinDesk, Gabriel Shapiro, general counsel of Delphi Labs, spotted a change from the June discussion draft that would subject a range of DeFi assets, such as liquid staking tokens, to federal securities regulators' jurisdictional authority.

Thus, even if Congress were to ever pass legislation creating a unique framework for regulating cryptos, some DeFi assets would still fall outside that scope. Meaning, Shapiro tweeted, "the SEC can still go on the warpath."