Q3 2020 DeFi Review: DeFi Reaches Peak Exuberance Before Coming Back Down to Earth

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It was the best of times, it was the worst of times.

In Q3, liquidity mining drove both DeFi usage and token prices to all-time highs as the space was flooded with increased capital and attention. DEXs that were trading in the single-digit millions at the start of the year surpassed $1 billion in a single day.

Projects with names like Yam.Finance and Spaghetti Money were spun up in a matter of days and managed to lock up nine figures of value as mercenary capital flowed from one yield farm to the next. AMMs shined and we saw the emergence of Andre Cronje’s yearn.finance. Fast follower forks were coming out of the woodwork and the sheer variety of profitable on-chain opportunities sent Ethereum gas fees and congestion to unprecedented levels.

Eventually the music stopped, sending most DeFi tokens down over 50%. Fast follower forks faded into irrelevance, while Uniswap maintained its dominance following a brazen vampire attack. Throughout it all, Maker and Aave loan activity gained steam while VCs placed bets on the next wave of DeFi derivatives platforms, and Bitcoin’s migration to Ethereum accelerated.

For all the nonsensical food tokens that came and went, Q3 saw an equal number of innovative experiments play out in real time. Experiments that could fundamentally alter how early stage networks are bootstrapped, how users are rewarded for their time and money, and most importantly, how our financial system could look one day if it were built on open, permissionless, censorship-free infrastructure that prioritizes inclusion, transparency, and fairness.

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