Mar 4
How many people really use DeFi?
Hype or HODL? SWIFT is not what you think it is. Plus! Off-topic: Catch the Wave
Howdy, it’s Pinotio from Pinotio.com!
This week I spent some time digging into how many users actually make use of DeFi — and I’ll share some cool charts right here in this post. I also dug in on the most used cryptos for transactions — but I’m saving that for next week.
On the agenda for today:
- 🤪 Hype or HODL — How many people really use DeFi?
- 🦅 SWIFT is not what you think it is
- 🌊 P.S. Off-topic: Catch the Wave
Hype or HODL: How many people really use DeFi?
Before you read on, take a pen or make a mental note of how many daily users you think there are of Uniswap — the automated exchange on Ethereum and a few other networks.
My initial guess… > 500,000 daily users… WRONG… by an order of magnitude!
Here’s a list of the top eleven dApps from Dapp.com, by user count:
The DeFi market of users is small. I bet if you looked at daily users of Coinbase and Binance the numbers would be much higher. In short, user experience matters and DeFi is quite technical. Some other interesting tit-bits:
- Games account for quite a few of the top use cases — makes sense.
- Interesting Uniswap v2 (an older algorithm) accounts for more volume than v3 (which, technically, should be more efficient) — I guess, in practise, it’s not — perhaps because it’s too complicated to understand for liquidity providers.
So, is DeFi hype or HODL?
Supporting the HODL thesis we have:
- DeFi provides (somewhat) censorship-resistant access to tokens and games. There is no KYC like Coinbase and other centralised services.
- DeFi provides an interoperable layer for tokens/information — boosting competition. If people stop trusting a centralised service, they have the option to transfer their assets to another (in principle).
- DeFi can be used in the background of an app, but the consumer doesn’t need to understand the details. This is the DeFi Mullet (e.g. Coinbase in the front and DeFi in the back) type of approach. I think “DeFi Mullet” sounds good, but it’s still early to see whether companies will stick with using DeFi in the back end or tend to move towards more closed back-ends.
On the hype side:
- DeFi lacks the size of liquidity of many CEXes (although can have more liquidity on specific and more obscure tokens). This makes DeFi less efficient for exchanges (on top of the fact that CEXs can avoid gas fees since transactions only occur on their internal ledger).
- DeFi lacks high quality user experience like Venmo or Revolut or OpenSea.
Overall, I lean towards HODL (and I do HODL Eth) because I see a meaningful chance that DeFi will offer at least some useful tools — primarily due to being open source and censorship-resistant.
SWIFT is not what you think it is
Over the past week, certain Russian banks have been cut off from SWIFT international payments. At first glance, it would seem SWIFT is some kind of payment network, perhaps like Mastercard. Not quite.
Patrick McKenzie explains swift very nicely in this post, but let me give you the quick summary here:
- Swift doesn’t move money. Instead, it is a secure messaging system between banks allowing them to make agreements to debit certain accounts and credit others.
- International payments typically don’t involve money actually moving internationally. Instead, a Japanese bank might hold dollars in a US account at, say, JP Morgan. The Japanese bank “moves” money by asking JP Morgan to debit or credit their US bank account. This “ask” is done over a messaging system such as SWIFT).
- In short, blocking Russian banks from SWIFT doesn’t stop them from communicating with foreign banks, but it stops them from using the SWIFT messaging system.
Bits about MoneyPatrick McKenzie (patio11)
That’s it for this week folks! Pinotio
P.S. Off-Topic: Catch the Wave
Very cool surfing video on Instagram.
