In 2019, total value locked (TVL) became a key indicator of success for DeFi protocols thanks to its popularization by DeFi Pulse. However, with the market experiencing a bearish trend for much of 2022-2023, some experts have pointed out that TVL may not accurately represent the true value of a protocol. In response, others have argued for the abandonment of TVL as a metric altogether, claiming it holds little meaning in the DeFi space.
But with the growing concerns surrounding TVL, a new metric has emerged – revenue. This metric takes into account the fees collected by protocols minus the payments made out to liquidity providers (LPs). It provides a more accurate reflection of a protocol’s actual financial success and sustainability.
With that in mind, let’s take a look at the top 5 DeFi protocols of 2023 by revenue:
Despite experiencing a major blow with the collapse of its stablecoin DAI in 2022, MakerDAO has bounced back in a big way. In 2023, the protocol generated an impressive $180 million in revenue thanks to its revamped DAI savings rate (DSR) feature. This allowed investors to earn up to 8% on their locked DAI stablecoins. The success of MakerDAO’s sDAI token has also been highlighted as a successful case of asset tokenization, with Treasury bonds being the underlying asset.
The ETH 2.0 update in 2022 opened up new opportunities for DeFi protocols, and Lido was quick to capitalize on them. By allowing users to stake their ETH on the platform and earn its tokenized staked Ether (stETH), Lido saw a surge in popularity and revenue. In addition, stETH’s market cap of over $20 billion in 2023 made it the 9th largest crypto asset. However, Lido has faced criticism because of its centralized role on the network, handling over 32% of all staked Ether.
PancakeSwap took advantage of the scalability and low fees offered by the BSC in 2023 to become the No. 2 DEX by volume, behind Uniswap. Its focus on concentrated liquidity and the launch of a gaming marketplace helped drive its revenue to $52.31 million. However, some have raised concerns about PancakeSwap’s governance model and potential centralization of the BNB Smart Chain.
Convex’s revenue in 2023 was largely tied to Curve, one of the largest DEX on Ethereum behind Uniswap. The asset management protocol allowed LPs and holders of Curve’s CRV token to amplify their yield through vote-escrowed tokens. With 48% control of Curve tokens and a third of Frax tokens, Convex proved to be a major player in the DeFi space.
As perpetual swaps gained popularity in 2023 as an efficient way for DeFi traders to make trades with high leverage, GMX emerged as the largest protocol on Arbitrum. Its revenue of $37.52 million was boosted by a 12 million ARB grant from the layer-2 network, making it one of the top recipients of the October allocation.