After a 5800% surge in one year, how much heat remains for DeFi Summer?

Since June 2020 to June 2021, while people were still hotly discussing liquidity mining, DeFi Summer had quietly passed an entire year. During these 12 months, we witnessed the疯狂 moments from Compound issuing tokens to YFI surpassing BTC, as well as rational reflections after market cooling. If we measure this period with data, 6 key indicators can reveal the true development trajectory of the DeFi ecosystem.

The Origin of DeFi: From MakerDAO to the Awakening of Liquidity Mining

To understand the explosion of DeFi Summer, we need to go back to the source. Although MakerDAO was born as early as 2014, this Ethereum-based lending protocol long remained in a “cold storage” state—high participation barriers, immature economic models, and lacked widespread recognition. It wasn’t until the emergence of the concepts of “liquidity mining” and “yield farming” that DeFi moved from the fringe to the center stage.

Compound’s governance token COMP became the spark that ignited this storm. Although “liquidity mining” was not invented by it, COMP led the market’s mining craze through its Staking mechanism, triggering a series of chain reactions. That summer, various DeFi projects emerged one after another, and the first crypto asset ever to surpass Bitcoin’s price was also born during this period.

6 Data Points Restoring the True Face of DeFi Summer

Total Value Locked (TVL): From $2 billion to $110 billion in疯狂 growth

The most direct indicator of the scale of the DeFi ecosystem is the Total Value Locked (TVL)—the total value of all crypto assets locked in DeFi protocol smart contracts.

According to on-chain data, the Ethereum-based DeFi TVL skyrocketed from $1.92 billion at the end of June 2020 to $113.57 billion on May 11, 2021, an increase of 58 times. Although it later retraced to $71.37 billion due to market adjustments, this figure still grew more than 35 times from the initial point.

It’s important to note that TVL is denominated in USD and fluctuates with crypto asset prices. To remove the influence of price volatility, we can look at the actual locked amounts of Ethereum and Bitcoin—ETH in the Ethereum network increased from 3.448 million to 11 million (219% increase), eventually stabilizing at 8.8 million, about a 155% increase; meanwhile, BTC locked in DeFi surged from 12,000 to 168,300, now accounting for about 1% of the total circulating supply of Bitcoin, contributing nearly a hundred billion dollars in value. In comparison, the Bitcoin Lightning Network currently locks only 1,500 BTC, illustrating how attractive DeFi is to Bitcoin holders.

User Scale: Explosive growth from 6,000 to 850,000

DeFi user numbers reflect ecosystem activity (here represented by unique wallet addresses). On June 1, 2020, daily active users were just over 6,000, but by May 11, 2021, this number soared to 850,000, a 140-fold increase.

This growth wave was mainly driven by the incentives of yield farming during the bull market, leading to a “blossoming” prosperity in the DeFi ecosystem.

Lending Scale: From $540 million to $19.3 billion

Lending is a core function of DeFi. The total amount borrowed via protocols like Compound and MakerDAO provides insight into user activity and market confidence.

Data shows that the total DeFi loans increased from $540 million at the end of June 2020 to $19.3 billion on May 9, 2021, a 34-fold increase. This growth directly reflects the increasing importance users place on DeFi lending services.

DEX Trading Volume: From $60 million to $23 billion in transformation

The emergence of DEXs like Uniswap and SushiSwap has injected new vitality into DeFi trading. Trading volume is the most telling indicator—by the end of June 2020, DEX daily trading volume was only $60 million, but by May 29, 2021, it reached $230 billion, a 380-fold increase.

DEXs are rapidly approaching the scale of traditional centralized exchanges.

Gas Fees: Ethereum network “congestion phenomenon”

The most immediate side effect of DeFi Summer’s explosion was the surge in Gas fees. Before liquidity mining started, Ethereum Gas prices stayed in single digits Gwei, but after the DeFi boom, within just three months, from June 2020, Gas prices soared from 30 Gwei to 544 Gwei on September 17 of the same year, an 18-fold increase.

High Gas fees caused many small-cap players to complain—sometimes mining yields were not enough to cover transaction fees. This also became a key reason why Ethereum scalability solutions gained significant attention later.

Oracle Call Count: From 72 to 40,000 demands explosion

Oracles are critical infrastructure that bring off-chain data onto the chain, and their call frequency reflects the urgency of data needs in DeFi.

From an average of 72 calls per day on June 1, 2020, to a peak of 40,000 on December 18 of the same year, a growth of over 500 times in half a year. This indicates that as the DeFi ecosystem expanded, the demand for real-time, accurate data grew exponentially.

Will DeFi Fire Up Again?

It seems that after the secondary surge in April and May, the DeFi ecosystem indeed fell into a trough—Gas fees decreased, token prices declined, and new user growth slowed. Does this mean DeFi has reached a ceiling?

In the long term, the answer may be no. The current DeFi ecosystem is still in an ultra-early stage; even if TVL shrinks to just over $70 billion, it only indicates that more assets have yet to enter the DeFi world.

More importantly, DeFi has already proven a fundamental fact: the financial system can operate normally in a fully decentralized, intermediary-free environment. This opens the door for over 1.7 billion unbanked people worldwide—they could bypass traditional finance and directly participate in DeFi.

With infrastructure improvements, better user experience, and lower entry barriers, the next wave of DeFi explosion may not be far off. This time, it will be larger in scale and more enduring.