In the last decade, not only have cryptocurrencies gained legitimacy as an asset class, but novel use cases of the technology have created entirely new markets. One such market is decentralized finance, better known as DeFi, and it is brimming with potential.
As one of the primary use cases of cryptocurrencies today, exposure to DeFi is more of a necessity than a choice due to the enormous potential. DeFi has the power to revolutionize traditional financial systems, transcend borders, eliminate intermediaries, and democratize access to financial services with innovative applications built on top of blockchains.
For those looking for exposure to DeFi, the choice is relatively simple. With minimal analysis, it's abundantly clear that Ethereum (CRYPTO: ETH) provides investors with the best chances to capitalize on this burgeoning market.
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The champion of DeFi
At the core of Ethereum's appeal is its smart-contract functionality. Ethereum was the first blockchain to unveil this groundbreaking feature in 2015. It allows developers to build decentralized applications (dApps) on the blockchain. Once deployed, these applications operate autonomously, eliminating the need for intermediaries to ensure contract fulfillment.
As the first blockchain to support smart-contract capabilities, Ethereum has become home to an expansive ecosystem of innovative applications, such as decentralized exchanges, wallets, non-fungible tokens, automated market makers, and much more.
Since 2020, the DeFi landscape has undergone explosive growth, and Ethereum has led the charge. To quantify how Ethereum has become the leader of this market, we need to look at a metric known as total value locked (TVL). TVL represents the total amount of money a blockchain supports in DeFi and serves as a measure of its popularity and adoption.
Today the total TVL of the entire DeFi market is just shy of $48 billion; at one point, it was worth $172 billion amid the crypto bull market. Of the current $48 billion, $27 billion is supported by Ethereum, making up more than 57% of all of the value in DeFi.
While Ethereum faces competition from newer smart-contract blockchains claiming to offer faster speeds and lower fees, its stronghold of DeFi remains unparalleled. The next closest blockchain in TVL is Tron, accounting for a measly $5.6 billion.
Barely halfway there
Ethereum's strong community, proven technology, and reliability make it the ideal choice for developers looking to launch decentralized applications. In addition, and perhaps most importantly, even though new blockchains claim to be attractive alternatives, Ethereum has a team of dedicated developers helping to increase its functionality even further and "grow Ethereum until it's powerful enough to help all of humanity."
Over the course of the past few years, these Ethereum developers unveiled multiple upgrades, most notably The Merge, that help to foster more growth of the blockchain and create a robust environment to support more use cases.
With more upgrades on the horizon, it's plausible that Ethereum's dominance of DeFi could increase even further. In fact, one of Ethereum's co-founders believes the blockchain has only reached 55% of its full potential.
In other words, Ethereum has barely reached the halfway point of its full potential yet still makes up nearly 60% of all the value in DeFi. That makes Ethereum the clear-cut choice for investors looking to gain exposure to DeFi and its lucrative future potential.
With its established position as the go-to blockchain platform for DeFi applications, widespread adoption, robust infrastructure, and vibrant developer community, Ethereum should be the preferred choice for those seeking to reap the rewards DeFi has to offer.
