Exploring the Surge in TVL of Defi on Cardano

Defi on Cardano - The Numbers

Starting with TVL, after many months with a fairly stable TVL(Total Value Locked) of 200 million ADA we have seen a consistent climb to 380 million ADA since the end of January. This is an all time high for Cardano's TVL in ADA terms, with the previous high of 324 million in march of 2022 being surpassed comfortably. However, when we look at Volume (Total Value being Traded across the Decentralised Exchanges) in USD it has been showing signs of a bounce, achieving a similar Volume that Cardano saw in April and May of last year. With the price of ADA currently being less than half of what it was around that time.

Defi Projects Recently Launched in the Ecosystem

Cardano has seen a recent spike in TVL and Volume in part thanks to some highly anticipated Defi projects such as Djed by Coti, Indigo Protocol and Liqwid Finance all launching in the past few months.

Indigo Protocol

At the end of 2022, the Cardano Community saw the launch of Indigo Protocol, a Synthetic Asset Platform. Indigo’s goal is to equalize ‘the playing field’ by giving everyone access to an autonomous synthetics protocol which gives them on-chain price exposure to real-world assets. The protocol works by users depositing their ADA in smart contracts in order to mint IAssets which are pegged to the assets which they are replicating. Currently, Indigo only allows for the minting of 3 IAssets which are IETH, IBTC and IUSD but plan to launch more in the future. Indigo Protocol has accumulated 63 million ADA in TVL(#2 for TVL on Cardano) and is sitting at over 217.06% combined collateral ratio for all collateralized debt positions in the protocol.

Djed

Djed is an over-collateralised stablecoin that was launched by Coti along with Shen, the accompanying reserve coin. Djed was developed by IOG (One of the three founding companies of Cardano) and was launched on Mainnet on the 31st of January 2023. The relationship between ADA, Djed and Shen is quite unique when compared to other algorithmic stablecoins. By using Shen as a reserve coin to ensure that Djed does not de-peg from the Dollar, it allows holders of ADA to provide liquidity in the protocol by buying Shen and earning fees from individuals minting and burning Shen.

Since its inception the protocol has accumulated over 34 million ADA in TVL (#4 for TVL on Cardano) and although there is only 2,479,736 Djed in circulation, the reserve ratio of the protocol is at 497%. This gives a strong degree of assurance to Djed holders that the protocol will be able to maintain its peg for the foreseeable future.

Liqwid Finance

The most recent launch on Cardano Mainnet was Liqwid Finance which went live on February 2nd, with the ability to Lend and Borrow ADA. Liqwid is a decentralized interest rate protocol for lending on Cardano and is one of the most long awaited projects to launch, being active in the community since the very early days of Cardano.

Since its launch, Liqwid has added support on the platform for Djed, allowing users to supply and borrow both ADA and Djed on the Liqwid Finance platform, with plans to add support for other tokens in the future. Liqwid Finance has accumulated close to 24 million ADA in TVL in under 2 months (6th for most TVL on Cardano).

Looking Ahead towards Cardano's TVL

With these projects having launched and many others in the space such as MinSwap, Wingriders and MuesliSwap (the 1st, 3rd and 5th highest TVL respectively), all still being in their early stages of adoption and development, we can expect to see these metrics continue to climb. Looking to the future launch of further Defi Protocols in the Cardano ecosystem like Genius Yield and Axo Trade being expected to launch this year, it is shaping up to be an interesting 2023 for the Cardano TVL and its Defi landscape.