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🤩 Show Me The Money!

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Room Service
🤩 Show Me The Money!
By Late Checkout • Issue #18 • View online
Knock knock: Room Service is here! This week, we have Part 1 of a 2-part series on the Top 10 blockchains ranked by Total Value Locked (TVL). We’ll be covering the basics about TVL, and how it relates to the quality of products on a blockchain.

TOP 10 BLOCKCHAINS BY TVL (PART 1)
When we follow the money, we can learn a lot about a blockchain.
When you hear investors, developers, and web3 enthusiasts refer to “top blockchains”, it is often a measure of the most popular or most expensive. For many people, market capitalization serves as an indicator for the value or quality of a blockchain. But when it comes to quality products in the world of DeFi, there is more to the story.
To go beyond just the market cap and understand the true utility of a blockchain, it is important to consider Total Value Locked (TVL).
TVL is a metric that represents the amount of money being held in blockchain applications or “protocols”. There are many types of  apps on the blockchain, ranging from decentralized exchanges and financial products to DAOs and NFT projects. At its core, TVL is a financial measure, but it’s also a metric which speaks to the quality of products on a blockchain.
In the case of Ethereum, the blockchain with the greatest TVL, there are more than 570 protocols. Each of these protocols are built by teams who have invested time, energy, and money to build strong decentralized products. High quality projects don’t only solve a problem, but they are also well-designed, optimized for different platforms, secure, and facilitated by engaged communities. 
That’s why 570 protocols on a single chain is such a strong indicator of value. The amount of time, money, and effort invested in these protocols are a signal that the blockchain in question is not only worthy, but also primed for serious development moving forward.
To better understand which blockchains are the focus of this investment, and why, we will consider the following metrics:
  • Total Value Locked (incl. Staked Coins): We’ll consider TVL to be the total value of all money locked in decentralized finance (DeFi) applications, including staking applications. We won’t count double counted assets, LP tokens, or borrowed assets in this indicator.
  • Market Capitalization: A fickle, constantly-changing figure which captures how investors are valuing a cryptocurrency’s blockchain (market cap = price per coin * number of coins.) It’s often used as a conventional method to value a network.
The figures used to rank blockchains will reflect their current value as of Mar. 22, 2022, with data sourced by DeFi Llama, a trusted aggregator for blockchain data.
#1: Ethereum ($ETH)
Total Value Locked (TVL): $97.27 billion 
Market Capitalization: $354 billion
The top blockchain by assets probably comes as no surprise – it’s Ethereum, the home of dapps, DeFi, NFTs, and much of web3 as we know it today. By all measures, it is a monster compared to other chains. More than 55% of all the value circulating in dapps on the Ethereum network. And though that figure has fallen from 97% at the start of 2021, that’s to be expected from a first-mover starting to see its first viable competition.
Right now, Ethereum is leading the way, and the margin isn’t particularly close. At its current TVL of $97.27 billion, it is a vehicle for nearly five times more money than its closest competition. Whereas some blockchains have relied on one or two protocols to sustain its relevance, Ethereum is hyper-diversified, with products ranging across industries and functions. Five protocols on Ethereum have TVLs greater than $10 billion. 20 protocols have TVLs greater than $1 billion. 
Some protocols even boast greater TVL values than entire blockchains – one testament to the confidence that investors have in certain dapps and protocols. That’s why, by most measures, Ethereum’s dapps boast some of the strongest product design, security, and confidence among investors.
#2: Terra ($LUNA)
Total Value Locked: $18.56 billion 
Market Capitalization: $33.6 billion (Ranked #7)
Terra might be a surprising contestant, especially given the vast discrepancy between its value on chain and its value as a chain. However, it starts to make a little more sense when you consider Terra’s high-yield applications.
The Terra chain is the only “non-EVM chain” in our list. EVM (Ethereum Virtual Machine) chains take after the core architecture and technology of Ethereum, and they’re also the basis of many of the leading non-Ethereum blockchains (e.g: Binance Smart Chain, Avalanche, Fantom, Polygon, etc.) 
However, Terra is renowned for its stablecoin, Terra USD, or $UST for short. $UST is an algorithmic stablecoin, which means that its price is pegged at $1.00 by using the value of other digital assets. $UST is backed by $LUNA, the native token of the Terra blockchain. Investors can burn $LUNA to mint UST
$UST has become the most popular algorithmic stablecoin in the cryptoverse because of applications in DeFi. Investors can bridge $UST off of the Terra blockchain to other chains,then use $UST in DeFi protocols on Solana, Ethereum, Avalanche, and the like.
Users can always keep their money on Terra, and watch as the value grows. The chain’s most popular app, Anchor Protocol, was offering an interest rate of 19.49% APY as of March 2022, meaning that deposits in Anchor would double in roughly five years.
That has been a sufficiently meaningful value proposition for investors, as more than 75% of all money on Terra is staked in Anchor Protocol ($ANC) as of this writing. Other apps such as Lido, a liquid staking solution for $LUNA, are a far cry from Anchor’s outsized dominance in the ecosystem.
The short of it is: when you think Terra, think $UST.
#3: Binance Smart Chain ($BNB)
Total Value Locked: $12.06 billion 
Market Capitalization: $80.8 billion (Ranked #4)
Binance Smart Chain (BSC) is often underrated in its efforts to diversify across different blockchains, but it has been extremely effective. Ethereum’s high gas fees opened up the opportunity for other blockchains to shine, and BSC took advantage. From January 2021 to May 2021, BSC’s TVL went from less than 1% to an all-time high of 21%.
Today, it has fallen to #3 in the ranks of blockchains. It can thank its hyper-diverse DeFi ecosystem, which boasts more than 340 protocols and more than $12 billion dollars in TVL. However, this bronze medal position is hotly contested – in recent months, the BSC’s rising star has been falling. It has conceded ground to other blockchains and has even fallen out of its silver medal position in recent months.
However, Binance’s outsized impact on DeFi (and crypto at large) cannot be understated. It’s hard to imagine where non-Ethereum chains, and non-Ethereum dapps, would be without the competition they were instrumental in drumming up.
#4: Avalanche ($AVAX)
Total Value Locked: $11.83 billion 
Market Capitalization: $22.8 billion (Ranked #9)
Avalanche launched in September 2020, with the promise of offering blazing fast transaction speeds. For context, Ethereum can handle 14 transactions per second (TPS). Avalanche on the other hand, claims to support a whopping 4,500 TPS. This pitch alone has brought billions of dollars of investment to the blockchain, capturing the attention of the crypto community.
Avalanche’s most popular DeFi app is Aave, which also has outsized influence on Ethereum and Polygon. It comprises over $3 billion of the chain’s value. Trader Joe, an Avalanche-exclusive decentralized exchange, is in a close second with more than $1.46 billion in TVL. Not far behind is Avalanche’s “liquid staking” solution, Benqi, which captured $1.3 billion. Curve, Wonderland, Platypus, and Multichain made up other top names.
#5: Fantom ($FTM)
Total Value Locked (ex-factors): $9.17 billion 
Total Value Locked: $10.88 billion 
Market Capitalization: $6.55 billion (Rank #32)
Fantom is perhaps one of the fastest-growing chains of all time. It is also most likely to be the chain on this list you have never heard of. However, its brief (and meteoric) growth has been marred in controversy.
The chain launched in December 2019, but didn’t capture much of the spotlight until September 2021. It slowly but surely accumulated a quaint following, growing from virtually no dominance in the TVL competition to 3.9% dominance as of February 2022. 
Almost all of that growth came thanks to the “Fantom Wars” – an event which arose from a tweet by Andrew Cronje, the creator of Ethereum-famous DeFi protocol Yearn Finance. Cronje’s tweet – that he would launch a “new experiment on Fantom” – brought newfound interest to the chain. 
Thanks to Multichain, a dapp which helps investors bridge assets between numerous chains, investors began to transfer assets onto Fantom at rapid pace. They began betting on DAOs and products built in the ecosystem such as SpookySwap, Geist Finance, and Scream. In due time, Ethereum-popular DeFi apps Yearn Finance and Curve also added support for the chain.
Throughout February and March 2022, the Fantom Wars subsided. The end of the wars is credited to Cronje, and his associate Anton Nell, leaving the DeFi/crypto space. Within a month of this announcement, the Fantom chain lost more than 21% of its TVL.
Multichain is Fantom’s biggest dapp, which more than $4.97 billion in TVL.
In such a dynamic and fast-paced space like crypto and DeFi, it can be difficult to stay up to date on what is important, why things are happening, and what it all means. Hopefully this provided a bit of context to some popular financial terms and how they relate to the variety of blockchains and products out there. Stay tuned as we continue this discussion next week!
Written by the Late Checkout team.
FROM AROUND THE WEB
There are lots of factors to consider when assessing the variety of blockchains out there, and this guide from Coin Telegraph breaks down the process for doing so.
For those who are new to the world of DeFi, this primer from Coindesk is a great way to get a basic understanding before jumping in.
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