Last week Decentralized Finance (DeFi) saw one of its biggest failures to date, when the YAM protocol, a poorly built DeFi project that quickly rocketed to over $500 million in total assets, collapsed in the blink of an eye. The YAM saga seems to be a warning that the DeFi craze is becoming similar to the initial coin offering (ICO) boom and bust of 2017-2018, where rampant speculation and massive profits was followed by a string of ICO projects collapsing and eventually a government crackdown.
In any case, the DeFi frenzy was not slowed by the YAM-Pocalypse, and the total assets locked in DeFi platforms has risen to $6.35 billion, and this number is truly rising by the hour. In just the past week there have been over $700 million of additional crypto assets invested into DeFi.
Notably, there are now three platforms with over $1 billion of total assets, including Maker, Aave, and Curve Finance. Other platforms with over $500 million of assets and quickly heading towards $1 billion include Synthetix, Compound, and Yearn Finance.
Ultimately, if an epic project collapse like YAM won’t slow down the DeFi craze, then it appears the DeFi frenzy is here to stay for at least the short to medium term. Unfortunately, more projects like YAM, which are poorly built but gain lots of investments, are likely to launch in the coming days and weeks as well.
There is a lot of good to the DeFi frenzy, and it certainly is the most exciting aspect of the crypto space right now. But the question is will poorly built and fraudulent projects take down the DeFi sector in the end? Indeed, if there are further similar cases to the YAM-Pocalypse, then the government will have no choice but to make DeFi effectively illegal.
That being said, for now the DeFi rally continues, and it is likely that the DeFi frenzy will continue to apply upward pressure to the entire crypto market.