Blast and Base: Surging TVL Driven by DEXs and Lending Protocols
As the decentralized finance (DeFi) ecosystem continues to evolve, two Ethereum Layer 2 solutions, Blast and Base, have steadily grown, attracting significant total value locked (TVL) and user adoption.
TL;DR
Growth and Drivers of TVL: In May 2024, both Blast and Base, two Ethereum Layer 2 solutions, saw significant increases in Total Value Locked (TVL), driven primarily by decentralized exchanges (DEXs) and lending protocols.
Blast Network Highlights: Blast experienced a 22.3% rise in TVL, with key contributors being the Thruster DEX, Blitz DEX, and the Juice Finance lending protocol, alongside the integration of the Renzo liquid restaking platform.
Base Network Highlights: Base saw a 27.2% increase in TVL, surpassing Optimism's mainnet. Major contributors include Aerodrome DEX, Uniswap V3, and the lending protocols SeamlessFi and Moonwell.
Context
As the decentralized finance (DeFi) ecosystem continues to evolve, two Ethereum Layer 2 solutions, Blast and Base, have steadily grown, attracting significant total value locked (TVL) and user adoption.
In May 2024, both networks witnessed remarkable growth in their respective TVLs, fueled by the success of various decentralized exchanges (DEXs) and lending protocols.
What does TVL tell us?
Total Value Locked (TVL) serves as a valuable metric for assessing the growth and adoption of a decentralized finance (DeFi) ecosystem. A rising TVL can increase user confidence and capital inflows into the ecosystem's protocols and applications. It reflects the aggregate value of crypto assets deposited or locked by users to participate in various DeFi services like lending, borrowing, liquidity provision, and yield farming.
A high and growing TVL suggests that more users are actively utilizing the ecosystem's offerings, which can drive further development, innovation, and network effects. Additionally, a substantial TVL demonstrates the ecosystem's ability to attract and retain liquidity, enabling efficient trading, lending, and borrowing activities. However, it's crucial to analyze TVL in conjunction with other metrics, such as active users, transaction volumes, and protocol revenues, to gain a comprehensive understanding of an ecosystem's growth and sustainability.
What's the difference between Native and Canonical TVL?
Canonical TVL refers to the value of assets that use Ethereum Layer 1 (L1) as their main ledger and are bridged to a Layer 2 (L2) network via a canonical bridge. This process involves locking the tokens in an L1 escrow and minting an IOU (I-Owe-You) representation of those tokens on the L2 network.
In contrast, native TVL represents the value of assets that are minted directly on the L2 network and use that L2 as their primary ledger. These are typically L2-native assets like governance tokens (e.g., ARB for Arbitrum, OP for Optimism) or other tokens created and existing solely on the L2 chain.
To summarize:
Canonical TVL: Value of assets bridged from Ethereum L1 to an L2 using a canonical bridge, where the assets are locked on L1 and IOUs are minted on L2.
Native TVL: Value of assets that are minted directly on the L2 network and use that L2 as their primary ledger, without being bridged from L1.
Blast's Impressive TVL Growth
Blast experienced a 22.3% increase in Canonical TVL during May 2024, solidifying its position as a leading Layer 2 solution. This growth can be attributed to the thriving ecosystem of DeFi protocols and applications built on the Blast network.
DEXs Driving Blast’s TVL
One of the key drivers of Blast's TVL growth is its native decentralized exchange, Thruster. As of April 15, 2024, Thruster had a TVL of $321.54 million, making it the second-largest DApp on the Blast network by TVL. Additionally, Blitz, an order book DEX for spot and perpetual trading, contributed $20.66 million to Blast's TVL, with its associated addresses being among the top gas spenders and consumers on the network.
Lending Protocols Fueling Blast's Growth
Lending protocols have also played a crucial role in Blast's TVL surge. Juice Finance, described as the biggest DApp on Blast by TVL as of April 15, 2024, had a staggering $363.16 million in locked funds. The integration of Renzo, a liquid restaking platform, with Juice Finance further boosted the lending ecosystem by enabling the staking of ezETH (representing staked ETH positions) as collateral.
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Base's Ascent to the Top
On the other hand, Base, another prominent Layer 2 solution, has experienced a remarkable 27.2% rise in Canonical TVL during May 2024. This growth has propelled Base to surpass Optimism's mainnet, becoming the largest Layer 2 network within the Optimism Superchain ecosystem.
DEXs Contributing to Base's TVL
Decentralized exchanges have been instrumental in driving Base's TVL growth. Aerodrome, a key contributor, has attracted over $714 million in deposits, making it the most valued DeFi protocol on Base. Additionally, Uniswap V3, the leading Ethereum DEX, has been deployed on Base with boosted incentives, holding around $312 million in TVL as of June 2024.
Lending Protocols Fueling Base's Ecosystem
Lending protocols have also played a significant role in Base's TVL surge. SeamlessFi (SEAM), a native DeFi lending/borrowing protocol, boasts over $511 million in TVL, supporting both over and under-collateralized loans. Moonwell, another top lending protocol on Base, ranks among the DeFi platforms with the highest TVL on the network.
The growth of Blast and Base's TVLs highlights the increasing adoption and maturity of the Layer 2 ecosystem. Both networks have successfully attracted users, but more specifically capital, by creating incentives for DeFi ecosystems, with DEXs like Thruster, Blitz, Aerodrome, and Uniswap V3, as well as lending protocols such as Juice Finance, SeamlessFi, and Moonwell, playing pivotal roles in driving this growth.
