User Network Growth of DeFi Protocols

Decentralized Finance (DeFi) protocols have gained a lot of attention this year as they've experienced substantial growth. However, there hasn't been an easy way to measure and track this growth and imperfect metrics such as amount of ETH locked have become standard.

Alethio recently released data visualizations showing how the major protocols have experienced growth as measured by users providing liquidity, opening prediction markets or participating in debt markets.

Early last year, there was little DeFi activity with users siloed to individual protocols.

In the first few months of 2019, the automated market making function of Uniswap proved to be an integral part of the ecosystem attracting liquidity providers looking to earn fees. Compound also gained a large user base likely as a result of lower interest rates compared to Maker. This would explain the large number of shared connections between the protocols as borrowers switch between the two.

Recently, we've seen an explosion in the number of users, particularly from those leveraging multiple protocols. Interfaces like InstaDapp allow for seamless interactions such as Maker CDP holders instantly transferring their debt to Compound to take advantage of a lower interest rates. As these protocols continue to evolve, they will likely find new ways to interoperate, creating new financial primitives that will shape the future of DeFi.