Rising from the Depths: Resurgence of First-Gen Lending Protocols

Sun Lee
Research Analyst/
Aug 03, 2023

Translated by Lani Oh

Image source: The Powerpuff Girls


Table of Contents

1. DeFi Lending Sector Attempting to Move Up From the Bottom

2. MakerDAO - Linking Real World Assets to DeFi

3. Aave - Solid Revenue and Strong Fundamentals

4. Compound - Constant Product Innovation

5. Increased Interest from TradFi Institutions: A New Momentum



1. DeFi Lending Sector Attempting to Move Up From the Bottom

The first-generation DeFi projects that burst onto the scene around June 2020 marked the beginning of the DeFi Summer. But the boom in DeFi was rather short-lived as their prices began to plummet by more than 80 percent since a blazing streak of all-time highs in the first half of 2021. In an unexpected turn of events, however, prices of major first-generation DeFi projects have been rising sharply in recent months. Lending protocols have been the fastest-growing sector, with MakerDAO up 36.93% in the last 30 days, and Compound up 151.79% over the same period. Since June, 2023, the price of the main first-generation lending protocols in ETH terms has also been rising, indicating even faster price growth compared to Ethereum.

So what’s driving the attention towards first-gen DeFi lending protocols? In 2021, the crypto market was on fire, and many DeFi projects promised high APRs, only to fade away in less than a year. Since their APRs were tied to governance tokens issued by the protocols, rather than interest rates or transaction fees, falling governance token prices meant falling interest rates. These governance tokens had no other utility, the arrival of the bear market sent the token prices tumbling, leading to a steep decline in both interest rates and TVL.

Given that the total TVL of DeFi sits at $44.4 billion as of July 17, 2023, about one-third of its peak in May 2022, it may be premature to predict a full-fledged recovery of the market. Yet, the TVL ranking of major DeFi projects reveals that eight of the top 10 protocols with the most locked-up assets were launched before 2021, and four of the top 10 were launched before 2019. This suggests that first-generation DeFi protocols that have stood the test of time are still very much alive and well in the DeFi market.