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Decentralized Finance (DeFi)

Disrupting the traditional financial system using blockchain

Overview

Decentralized Finance or DeFi comprises peer-to-peer financial services that use blockchain technology and eliminate intermediaries such as banks that make up the traditional financial system (TradFi). It has several advantages over TradFi, such as faster transactions, greater transparency, and streamlined cross-border transactions, among others. 

The Ethereum blockchain is home to the most number of DeFi projects, contributing to nearly 55% of the total value locked (TVL) in DeFi as of May 2022. Developments in blockchain technology have allowed for the creation of decentralized apps using smart contracts, which have, in turn, enabled DeFi. However, a high volume of activity has strained Ethereum, resulting in slower processing times and steep transaction fees. Planned upgrades to the chain, along with new blockchains emerging with innovative processes and interchain compatibility, are set to bring about more efficiencies in the space.

The search for high yields is the primary driving factor for this sector, as investors seek to generate returns that have consistently outperformed traditional investments like treasuries. In addition, a sizable underbanked population and difficulties faced by SMEs in obtaining credit are likely to drive demand for credit through DeFi applications.

What's driving this industry?
Market Sizing

The US protocol revenue for DeFi projects could reach USD 8.8 billion–16.4 billion by 2026

Conservative case

USD 8.8 Bn

Base case

USD 11.0 Bn

Expansion case

USD 16.4 Bn

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Market Mapping


Most startups in the DeFi space operate in the borrowing and lending segment, while much of the incumbent activity is seen in the marketplaces and wallets segments. The incumbents are mostly established cryptocurrency exchanges as most DeFi projects also operate in the same blockchains as major cryptocurrencies. These incumbents mostly have internally developed solutions to expand their existing marketplace and wallet offerings to support DeFi protocols, enabling access to tokens from DeFi projects such as Compound, from the borrowing and lending segment.

While limited, the infrastructure segment is also seeing activity from traditional banks, as they experiment with blockchain technology in their own internal processes or to trial DeFi projects. Another notable incumbent is the Ethereum Foundation (a non-profit dedicated to supporting the Ethereum blockchain), home to the most number of DeFi projects. Startups in the infrastructure segment have garnered the most funding as Ethereum-challengers emerge, offering high performance at a lower cost.

Most disruptors operate as decentralized autonomous organizations (DAOs), a non-hierarchical governance structure where holders of the DeFi project’s native token are able to vote on strategic and operational matters of the DAO. Further, given the relatively young age of the disruptors (and the industry itself), most DeFi startups are at an early/seed stage.

Incumbents
Growth
Early
Seed
Pre-Seed
Borrowing and Lending
?
Decentralized Insurance
?
Investment Platforms
?
DeFi Marketplaces
?
DeFi Wallets
?
Financial NFTs
?
Infrastructure
?
Technologies
Technologies
Technologies
Technologies
Technologies
Technologies
Technologies
Coinbase
Binance
Crypto.com
BlockFi
Celsius Network
Anchorage Digital
1inch Network
KuCoin
dYdX
MakerDAO
Nexo
Aave
Wellfield Technologies
Lido Finance
Compound
Mango Markets
Xion Finance
Reltime
Euler XYZ
Ondo Finance
Solend
Balancer Labs
Kiln
Badger DAO
Anchor Protocol
Aurigami
Liquity
iZUMI Finance
SushiSwap
Apricot Finance
Maple Finance
Idle DAO
Yearn Finance
Moonstake
Alpaca Finance
Inverse Finance
ChangeX
Grizzly.fi
Hubble Protocol
Morpho Labs
Exponential
Onomy
Delta One
Giddy
Sovryn
Texture
Rigor
Sender Wallet
Infinity Exchange
Precog Finance
Backd
Moon Mortgage
Masa Finance
Opium Network
XCarnival
Drops
Zefi
Stride
Alta Finance
Astaria
JellyFi
PennyWorks
sKCS.io
Torches Finance
Moola
Crema Finance
Nexus Mutual
InsurAce Protocol
Black Insurance
Etherisc
Insure
Re
Neptune Mutual
Amulet
Opium Network
Armor Fi
Uno Re
Carapace
Coinbase
Binance
FTX
MakerDAO
Swarm Fund
Securitize
Polymath Network
Synthetix
Oasis Pro Markets
Centrifuge
Opyn
RealT
Parcl
Arch
Opium Network
Alta Finance
Uno Re
Coinbase
Binance
Crypto.com
FTX
Kraken
Robinhood
BlockFi
Celsius Network
Anchorage Digital
1inch Network
KuCoin
Bancor
dYdX
Eidoo
Uniswap
Wellfield Technologies
Unizen
Serum
Phantom Wallet
Loopring
Mango Markets
Xion Finance
GRNGrid
Balancer Labs
Hashflow
Orderly
BitKeep
iZUMI Finance
SushiSwap
Curve
Alpaca Finance
ChangeX
Onomy
Nibiru
ZKX
Ultrade
DEFYCA
Volare Finance
FNDZ
Coinbase
Binance
Crypto.com
Robinhood
ConsenSys
BlockFi
Celsius Network
1inch Network
KuCoin
Eidoo
Wellfield Technologies
Phantom Wallet
Argent
Unstoppable Finance
Fordefi
BitKeep
XDEFI Wallet
Moonstake
Safe
ChangeX
Onomy
Braavos
Giddy
Sender Wallet
Cashmere
Centrifuge
Solv Protocol
Drops
Zefi
JellyFi
JPMorgan
Coinbase
Binance
Crypto.com
Ethereum Foundation
ING
ConsenSys
Near Protocol
Solana
Polkadot
Starkware
KuCoin
Algorand
0x Labs
bloXroute Labs
Fantom
Uniswap
District0x
Tron Foundation
Aptos Labs
Waves Platform
Loopring
Compound
Celo
Injective
XDC Network
GRNGrid
Reltime
QuickNode
Chainlink
Kiln
Ownera
Orderly
Skolem Technologies
Connext
Instadapp
Tezos
LI.FI
Sei Labs
Vybe Network
Idle DAO
Etherisc
Magna
Onomy
Redstone
Nibiru
Ultrade
Elrond
SSV Network

The Disruptors


Most startups in the DeFi space are involved in the borrowing and lending segment, and are built on an existing blockchain such as Ethereum. The blockchain landscape and cryptocurrencies, in general, have seen phenomenal growth during the last two years. The DeFi sphere has been no different. Around 40% of the key startups in this space were established after 2020, with nearly 90% of them being founded during the last five years. 

Crypto-backed borrowing and lending platform for institutional investors Anchorage Digital is the largest funded disruptor in this space, having closed its Series D round of USD 350 million in December 2021. However, companies in the infrastructure space have raked in the highest total funding, with Ethereum-challenger blockchain Solana leading the pack with over USD 335 million in funding as of May 2022. 

While established investors such as Andreessen Horowitz have amassed a notable portfolio in this space, most DeFi projects, given their DAO structure, also see significant retail participation in their coin offerings, in some cases attracting thousands of investors for a single offering.

Borrowing and Lending

?

Disruptors

?
Funding in USD Millions
BlockFi
1406
Celsius Network
904
Anchorage Digital
487
1inch Network
190
KuCoin
180
Lido Finance
167
dYdX
87
MakerDAO
80
Compound
71
Mango Markets
70
Nexo
53
Xion Finance
51
Reltime
50
Aave
49
Euler XYZ
41
Ondo Finance
34
Solend
33
Balancer Labs
32
Grizzly.fi
26
Kiln
23
Badger DAO
21
Anchor Protocol
20
Hubble Protocol
19
Morpho Labs
18
Exponential
14
Aurigami
12
Onomy
10
Liquity
8
iZUMI Finance
6
SushiSwap
5
Apricot Finance
4
Maple Finance
3
Yearn Finance
Unknown
Moonstake
Unknown
Alpaca Finance
Unknown
Wellfield Technologies
Unknown
Inverse Finance
Unknown
Alta Finance
Unknown
Watchlist
?
Delta One
Astaria
Giddy
Sovryn
Texture
Rigor
Sender Wallet
JellyFi
Infinity Exchange
Precog Finance
Backd
Moon Mortgage
Masa Finance
Opium Network
PennyWorks
XCarnival
Idle DAO
Drops
sKCS.io
Zefi
Stride
Torches Finance
Moola
Crema Finance
ChangeX

Decentralized Insurance

?

Disruptors

?
Funding in USD Millions
Re
14
Neptune Mutual
10
InsurAce Protocol
4
Nexus Mutual
3
Insure
Unknown
Watchlist
?
Amulet
Opium Network
Carapace
Black Insurance
Etherisc
Armor Fi
Uno Re

Investment Platforms

?

Disruptors

?
Funding in USD Millions
Securitize
100
MakerDAO
80
Polymath Network
59
Synthetix
46
Oasis Pro Markets
27
Centrifuge
16
Parcl
11
Opyn
9
Swarm Fund
6
Alta Finance
Unknown
RealT
Unknown
Watchlist
?
Arch
Opium Network
Uno Re

DeFi Marketplaces

?

Disruptors

?
Funding in USD Millions
BlockFi
1406
Celsius Network
904
Anchorage Digital
487
Unizen
200
1inch Network
190
KuCoin
180
Bancor
152
Serum
120
Phantom Wallet
118
dYdX
87
Loopring
87
Mango Markets
70
Xion Finance
51
GRNGrid
50
Balancer Labs
32
Hashflow
28
Eidoo
28
Orderly
20
BitKeep
15
Uniswap
11
Onomy
10
iZUMI Finance
6
SushiSwap
5
ZKX
5
Alpaca Finance
Unknown
Wellfield Technologies
Unknown
Curve
Unknown
Watchlist
?
Nibiru
Ultrade
DEFYCA
ChangeX
Volare Finance
FNDZ

DeFi Wallets

?

Disruptors

?
Funding in USD Millions
BlockFi
1406
Celsius Network
904
1inch Network
190
KuCoin
180
Phantom Wallet
118
Argent
56
Eidoo
28
Unstoppable Finance
18
Fordefi
18
BitKeep
15
Onomy
10
Braavos
10
XDEFI Wallet
7
Moonstake
Unknown
Wellfield Technologies
Unknown
Safe
Unknown
Watchlist
?
Giddy
Sender Wallet
Cashmere
ChangeX

Financial NFTs

?

Disruptors

?
Funding in USD Millions
Centrifuge
16
Solv Protocol
7
Watchlist
?
JellyFi
Drops
Zefi

Infrastructure

?

Disruptors

?
Funding in USD Millions
Near Protocol
534
Aptos Labs
400
Solana
316
Polkadot
294
Starkware
273
KuCoin
180
Waves Platform
142
Algorand
132
0x Labs
109
bloXroute Labs
91
Loopring
87
Compound
71
Celo
67
Injective
57
Reltime
50
GRNGrid
50
XDC Network
50
QuickNode
42
Fantom
40
Chainlink
32
Kiln
23
Orderly
20
Ownera
20
Skolem Technologies
20
Connext
16
Magna
15
Instadapp
12
Uniswap
11
Tezos
10
Onomy
10
District0x
9
LI.FI
6
Vybe Network
3
Elrond
2
Tron Foundation
Unknown
Watchlist
?
Redstone
Nibiru
Sei Labs
Ultrade
Idle DAO
Etherisc
SSV Network

BlockFi

BlockFi offers a US-regulated borrowing and lending platform that allows users to take out USD loans collateralized by cryptoassets. In addition, the company also offers personalized yield aggregation solutions for users that commit at least USD 3 million in loaned cryptoassets on the platform as well as a dedicated wallet for users to buy, sell, and store crypto. Notably, its yield aggregation product offers a designated client relationship manager that provides users access to negotiated crypto interest rates, competitive trading costs, term or open loan structure, and customizable term length. 

As of June 2022, the company served over a million users from over 350 institutions around the globe. 

Funding and financials

In August 2021, the company was in talks to raise USD 500 million in Series E funding at a valuation of USD 5 billion. As a result of the crypto market crash in June 2022, The company was reportedly looking to raise funding in June 2022 with Bain Capital Ventures being tipped to lead the round. The expected valuation for this round was around USD 1 billion, which was only 20% of the expected valuation from an earlier Series E negotiation in August 2021. This was largely due to the drop in the crypto market during the first half of 2022 and overall depressed markets during the same period.

In July 2022, FTX signed a deal that includes an option to buy BlockFi , a DeFi borrowing and lending platform, for up to USD 240 million. Additionally, FTX also provided BlockFi with a USD 400 million revolving credit facility, which will be subordinate to all client funds. In November 2022, subsequent to the collapse of FTX, BlockFi filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of New Jersey. The company stated that it made the filing to “stabilize its business” and enable it to come up with a comprehensive restructuring process for its clients and stakeholders. Blockfi went on to state that it had USD 256.9 million in cash on hand which will be used to provide liquidity for selected operations during the restructuring process.

Segment:
Borrowing and Lending
Total funding:
USD 1.4 billion
Competitors:
Anchorage, Celsius, 1inch, Fordefi
Disruptor Funding History

Borrowing and Lending:

BlockFi
Celsius Network
Anchorage Digital
1inch Network
KuCoin
Lido Finance
dYdX
MakerDAO
Compound
Mango Markets
Nexo
Xion Finance
Reltime
Aave
Euler XYZ
Ondo Finance
Solend
Balancer Labs
Grizzly.fi
Kiln
Badger DAO
Anchor Protocol
Hubble Protocol
Morpho Labs
Exponential
Aurigami
Onomy
Liquity
iZUMI Finance
SushiSwap
Apricot Finance
Maple Finance
Delta One
Astaria
Giddy
Sovryn
Texture
Rigor
Sender Wallet
JellyFi
Infinity Exchange
Precog Finance
Backd
Moon Mortgage
Masa Finance
Opium Network
PennyWorks
XCarnival
Idle DAO
Drops

Decentralized Insurance:

Re
Neptune Mutual
InsurAce Protocol
Nexus Mutual
Amulet
Opium Network
Carapace
Black Insurance
Etherisc

Investment Platforms:

Securitize
MakerDAO
Polymath Network
Synthetix
Oasis Pro Markets
Centrifuge
Parcl
Opyn
Swarm Fund
Arch
Opium Network

Incumbents


Cryptocurrency exchanges see DeFi as a natural extension of their offerings; traditional banks still testing the waters 

As most DeFi projects are based on the same blockchain as popular cryptocurrencies (such as Ethereum), established cryptocurrency exchanges such as Coinbase and Binance can expand their offerings to cover DeFi-related projects with relative ease. These exchanges are using their existing marketplace offerings to allow users to swap DeFi-related tokens, hold them using the same wallets as their crypto, and even provide direct access to deposit their tokens into yield-generating tokens like DAI from MakerDAO.

Traditional banks are yet to fully break into this space, as they are restricted by their internal compliance measures and an overall risk-averse approach to innovation. However, large international banks (such as JPMorgan and ING) are taking steps like experimenting with blockchain in their internal processes, working on building the infrastructure to develop apps on top of it, and testing peer-to-peer DeFi protocols in regulatory sandboxes.

Borrowing and Lending
Decentralized Insurance
Investment Platforms
DeFi Marketplaces
DeFi Wallets
Financial NFTs
Infrastructure
In House Development
M&A
Partnership
Investment
JPMorgan
Coinbase
Crypto.com
FTX
Kraken
Ethereum Foundation
ING
Robinhood
ConsenSys

Notable Investors


No investor data is available

Funding data are powered by Crunchbase
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