Close to $320 million eth is currently locked in various smart contracts that provide numerous functions like collateralized crypto lending, decentralized betting, or more scalable crypto payment systems.
According to a new stats website, MakerDAO’s DAI dominates by far with some $288 million worth of eth currently locked in their smart contracts.
Total locked crypto value, Feb 2019.
Compound seems to have made a comeback, with $23 million eth stored there. They’re kind of similar to DAI, but instead of collateralizing for a stablecoin, you collateralize eth for another token or indeed tokens for eth.
They had a bug last year which didn’t affect funds, with confidence now seemingly restored as it comfortably maintains second position.
The Lightning Network comes in fourth position, but Elizabeth Stark of Lightning Labs highlights that’s not the value locked, but the value available to route around, otherwise called network capacity.
To find how much bitcoin has been locked in LN you’d have to analyze UTXOs. A rule of thumb here might be network capacity times two, which would put it neck and neck with Uniswap, the decentralized exchange.
Augur is finding some usage with WBTC’s $300,000 perhaps more interesting as that is tokenized bitcoin through a centralized peg.
Dai’s dominance is so considerable they even have xDai, which is a sidechain trying to facilitate higher payment volumes due to its trusted set-up use of Proof of Authority.
Making eth a reserve currency of sorts that acts as base collateral for some dapps which thus take out some of the supply from the market at least temporarily.
Locked eth in Dai, Feb 2019.
That defered supply can then flood the market in a cascading manner if price turns in the case of MakerDAO’s DAI dependent on just how much is used as collateral.
The collateralization ratio is currently at 330%, so price would have to fall by more than 2/3rds for effectively all the $280 million eth to be sold.
That might perhaps not be likely at this stage with Dai having a cap at $100 million which might be lifted as it currently stands at close to $90 million.
If there is a bull run, however, and measures get lax, it might be followed by a mass collateralization default cascade that could cause some headache.
So rather than locked, these assets are more a temporary withdrawal of supply which could then potentially flood the market at once at least as far as Dai is concerned.
The other dapps are less systemic as in Augur, for example, it is far more isolated to some bet. While in Dai, if you can imagine this getting to say 20 million eth or a billion Dai dollars, which is just 10x from here, a calls cascade might have considerable ripple effects.