Dreary DeFi outlook shown by Hyped-Blockchain Canto’s plight

The blockchain platform Canto, which operates on layer 1, has experienced a 35% decrease in total value locked (TVL) in the past month due to a decrease in liquidity in the decentralized finance (DeFi) sector.

After launching in August last year, Canto experienced a familiar pattern of hype followed by a surge in TVL from under $1 million to over $110 million in the first couple of months. Since then, it has undergone multiple 60% corrections and periods of consolidation.

The blockchain’s native token, CANTO, has also dropped significantly, including a 55% fall over the past six weeks to $0.16, according to Cryptowatch data.

Canto was designed to provide DeFi services such as lending, staking, and liquidity provision. Since its launch, it has bridged a total of $591 million from Ethereum’s mainnet, but this figure has stagnated in the past month as daily inflows have struggled to reach over $3 million, compared to over $20 million earlier this year, according to data from Dune Analytics.

Canto’s challenges are not necessarily related to its products and services, as it has a capable decentralized exchange (DEX) and several decentralized apps (dapps) that generate a yield. The issue may instead be the unpredictable nature of crypto investors, who tend to lose interest as hype fades.

The total value locked on DeFi protocols has decreased from $53 billion to $48 billion since April 15, according to DefiLlama, with liquidity continuing to be absorbed by meme coin rug pulls and derivatives markets.

As we saw during DeFi Summer a few years ago, innovation will be crucial for DeFi to make a comeback.

The recent lack of innovation has resulted in a series of copycat lending protocols that differ only in branding and user interface. As the narrative of traditional finance using DeFi to generate a yield continues to fade, DeFi developers need to come up with unique offerings that will attract fragile crypto liquidity back from “get rich quick” schemes like meme coins.

Edited by Stephen Alpher.

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