DeFi Web Grows Amid Exploits and Market Turmoil

Alethio goes deeper into the findings of its DeFi ecosystem map.

Hello Defiers. Alethio is a ConsenSys backed data analytics firm which has mapped the DeFi ecosystem since it just started to emerge in 2018. Its latest update shows a growing, interconnected web of users in a galaxy that’s lighting up with new platforms. In the following post, Alethio digs into its findings from the most recent map, and how it found that the ecosystem has grown in three key aspects: scale, diversity and connectivity.

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The Expanding Universe of DeFi Users

By: Alethio data scientists Danning Sui, Bogdan Gheorghe

In this piece, we dive into the updated DeFi network graph & explain some pretty compelling findings about the ecosystem’s evolution.

Interpretations & Takeaways

  1. MakerDAO -- The “Tower Bridge”

Since the successful MCD (multi-collateral DAI) migration in November, Maker’s user base also migrated from the SaiTub contract (labeled as “Maker SCD” ) to the new CDP manager contract (labeled as “Maker MCD”) -- therefore we see this interesting structure of a ‘Tower Bridge’.

The smooth migration flow we witnessed so far - noticeable on the graph as well - was possible due to the implementation of a migration contract, which holds migrated SAI and makes it available for SCD CDPs to utilize it and perform a fast migration of their SCD debt position to multi-collateral DAI.

MakerDAO’s migration isn’t complete yet. An important governance decision of when to terminate the SCD platform is impending. The closure of the former platform is necessary for the DeFi ecosystem to decidedly shift to the versatile platform. However, a very large amount of funds remains locked in the SCD platform

Compared to older snapshot of user graph, we noticed that MakerDAO shares less common users with Uniswap, as captured by the methodology defined below.

Shortly after we collected and published this graph, on March 13th, as ETH price went down below $160, a large number of loans went under-collateralized and were being liquidated on DeFi platforms. As the outstanding debt amount reached $4 million, MakerDAO’s debt auction was triggered to raise DAI to cover those outstanding obligations, in which we saw ETH sold for 0 DAI due to lack of bids.

  1. Uniswap -- The Liquidity Pool for All

We found ~237k unique addresses by only counting the liquidity providers on Uniswap. Note that the pink cluster in the graph doesn’t include any information from trading records yet. We see most platforms shared a good portion of their own users with Uniswap, Compound being top 1. 

  1. Compound

Compound had the largest group of distinct active users among all lending platforms. We see ~147k addresses interacting with their main contract in the past 3 months. 

It’s also unique that they share a relatively considerable portion of all other lending protocols’ users. We see this from the way that it tends to fall closer towards the main group of nodes. That is to say, an amount of DeFi lending participants are actively using both Compound and one or more other platforms. This shows the leading and influential role of Compound in terms of liquidity and adoption.

  1. AAVE, bZx, dYdX, InstaDapp, Lendf.me

All the other lending platforms show similar scale of active user addresses captured and are closely clustered due to their shared users with Uniswap and Compound. Among them, NUO network shows the largest exclusive user group (who were not seen on other platforms), while AAVE had the largest common group shared with Uniswap.

Lendf.me has a weaker bound with Uniswap, compared to other lending platforms, and thus is pushed closer to Compound, who shared the most common users with them. This may also be due to the fact that the 2 platforms show a lot of similarities when it comes to the way they operate.

Evolution: Road to Prosperity

In the past year, we have been dedicated in building the user network graph, roughly every 6 months. Collaged above are the historic views of this DeFi galaxy. Now let’s take a look back at then and see what our DeFi community has achieved today.

In each graph, a node represents a unique Ethereum address we detected who interacted with the platform (the logos it connects to). We attached platforms’ logos and names aside the platform node. Colormaps are according to their brand color associated with logos. Between them, yellow nodes are users who are found to be on 2 platforms, while red nodes are shared by 3 or more platforms.

Note that we learnt and improved along the path to include more and more protocols, but some may be missed in earlier versions when they hadn’t gained massive adoption. 

We conclude the growth of this space in 3 major aspects, as follows:

  1. Growth in Scale

Back in late 2018, we see MakerDAO and Compound are the earliest who started and still dominate today. However by then, it was only a few hundreds of active users every month, and nowadays they both have averagely ~10k active users per month.

The liquidity provider group for Uniswap was also relatively small until late 2019, while today it rockets to ~237k for a 3-month range. Its dramatic growth benefits from both its own design and also the recent blowout of various DeFi projects.

  1. Growth in Diversity

MakerDAO and Compound led the race in early times back in 2018, and then we see NUO Network, InstaDapp, bZx and dYdX started to shine in mid 2019. Until today, we have a lot more colors arisen. AAVE and Lendf.me have grown steadily in volume in the past few months.

  1. Growth in Connectivity

With the diversity of both protocols and the number of supported tokens growing, there are more and more options for individuals to manage their assets - the bZx exploit is a typical example - a DeFi user can easily hop between bZx, Compound, Uniswap to leverage their specifics. Thus we see a much more complicated “spider web” structure in the center of cluster. It shows the connectivity, or interoperability of all DeFi platforms.

Data & Methodology

Note that in this graph, we are only showing 16 protocols that we believe fall more into the lending, derivatives, prediction market types, with Uniswap as an exception from DEX category. We acknowledge that there are a quite number of DEXes providing liquidity in the DeFi system, like Kyber, Oasis and Bancor, etc. We hold the view that a lot of DEXes and other DeFi platforms are playing crucial roles altogether in this interoperable universe, but due to tooling limits in front of the huge scale of trading data, we decide to publish a dedicated DEX version apart from the current one. 

Data collected for this graph are only for the 16 selected protocols within the past 3 months range (precisely, Dec1, 2019 to Mar1, 2020), rather than total cumulative users. The current graph consists of ~59.4k nodes and ~74.8k edges, which means in the last 3 months, there are more than 59.4k active users who have been using these platforms. The cumulative number will be much larger, with an estimate of over 220k unique addresses interacted on just these 16 platforms.  

  1. NUO

For NUO lending protocol we included all lending related interactions.

  1. Maker MCD

For the multi collateral version of the MakerDAO platform we included all interactions with the platform. 

  1. Compound

We defined Compound’s users as those that did one of the following interactions on the current set of 8 cToken - minting them (via providing the underlying asset to the specific market), redeeming them for the underlying asset (effectively withdrawing the supply they provided), borrowing tokens, repaying or liquidating borrows. These users are the nodes that we see having edges that lead to the Compound logo in the graph below.

  1. DDEX

For DDEX, we used the initiators of supply, borrow, withdraw, liquidate and repay actions as the users of the platform.

  1. lendf.me

Same as Compound, lendf users were defined as those that supplied, borrowed, withdrew, liquidated and repaid assets on the platform.

  1. Uniswap

Uniswap users were defined as all traders and exchange creators.

  1. bZx Fulcrum

bZx Fulcrum users, similarly to Compound - were those that participated in the 5 main types of lending interactions. A pair on the supply side (supply vs. withdraw collateral), one on the borrow side (borrow vs. repay borrow) and liquidations.

  1. SET

The Token SET platform built on the SET protocol had its users defined as all the traders of the current existing sets (a set is an automated trading management strategy)

  1. Synthetix

Synthetix users were defined as all traders of the Synthetix assets.

  1. Moloch DAO

For the Moloch DAO organisation experiment we also included all of those who interacted with the main smart contract.

  1. dYdX

For the dYdX platform we included all interactions with the lending aspect of the platform (not including trades). 

  1. Augur

Augur’s users are those that participated in doing one of the following actions - creating prediction markets, transferring tokens, selling complete sets, cancelling orders or claiming proceeds.

  1. InstaDApp

Here, users are defined as those that used InstaDApp’s registry contract to open up new accounts.

  1. Veil

For the Veil predictions and derivatives protocol we included all interactions with the protocol.

  1. AAVE

Similarly to the previous lending protocols mentioned - AAVE users were taken from those addresses that participated in the 5 main types of lending interactions - supply, withdraw, borrow, repay, liquidate.

  1. Maker SCD

For the legacy version of the MakerDAO platform, in SAI (single collateral DAI) we counted the users that interacted with the main contract through one of the following action: 

  • lock - locking up PETH collateral

  • free - withdrawing some of the locked PETH collateral

  • draw - borrowing SAI against the locked collateral

  • wipe - repaying some of the SAI debt accrued

  • bite - liquidating undercollateralized CDPs

  • open - opening up new CDPs - including those opened through proxies


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About the author: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. (Pre-order The Infinite Machine here). I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.