Thanks to a strong surge since the beginning of the year, the Terra (LUNA) blockchain is now the second largest in decentralized finance (DeFi) in terms of total locked value (TVL). Let’s take a look at this meteoric rise.
Terra is the second largest network in DeFi
While the NBB Chain (formerly Binance Smart Chain), is treading water, Terra is definitely the hot blockchain in the DeFi ecosystem lately. With a steadily increasing total locked value (TVL), it has managed to take the second position in the ranking.
This TVL, now valued at nearly $22 billion, has accompanied the rise in the LUNA price, which has outperformed at the beginning of the year.
This is a healthy asset that is being driven by announcements such as the recent UST, the platform’s algorithmic stablecoin. Indeed, the Luna Foundation Guard raised $1 billion in Bitcoin (BTC) at the end of February to improve the stability of UST.
A progression to put into perspective
Of course, this progression against the competition is quite notable, but it should be put into context. First of all, even though the Terra ecosystem is in second place, Ethereum (ETH) is still far ahead with $107 billion in TVL, which is 5 times more.
We need to analyze this locked-in value increase from the perspective of cryptocurrency quantity.
With 42 million TVL ETH, we see a relatively linear progression over the course of a year. This is in contrast to the increase in the number of LUNAs locked.
In comparison, the increase in the number of LUNA is much more random, implying that its rise in the rankings is primarily due to its valuation. Although it should be kept in mind that the token can be burned to support UST, and thus become deflationary.
We can see that the deflation argument has limitations in explaining the low growth of LUNA locked to DeFi applications. Indeed, since February 10, only 9% have been burned while valuation has climbed 48%.
After peaking at 315 million on February 21, the number of LUNAs is now at 257 million, which gives a 16% increase since the same date of February 10.
Terra therefore effectively owes its second place in the DeFi ranking largely to the valuation of its token. But of course, it must be recognized that if this one sees its price increase, it is precisely because the users find an interest in the ecosystem, that does not take anything away from the merit of the progression of the blockchain.