When analysts try and gauge the success of Ethereum’s decentralized finance projects, they often look to the “total value locked” metric.

Just today, the metric, up around 1,000% since the start of 2020, surpassed $6 billion for the first time ever. Many Ethereum bulls hailed the achievement of this milestone as a testament to the success of ETH and its applications.

But according to a new analysis by an Ethereum-focused investor and developer, the $6 billion figure is a misnomer. Here’s why.

According to an analysis by Damir Bandalo, a founder of Encode Club and an investor through a number of investor collaboratives, there isn’t $6 billion locked in DeFi.

The issue, he explained, is that the data tracker that exist report values that are counted more than once.

“As we know DeFi is all about composability but that makes it hard to accurately count how much money is truly locked in the system. It gets very easy to count the same $ multiple times. Let me give an example: Let’s say you deposit ETH into  @MakerDAO and mint DAI. Take that DAI and go to  @CurveFinance and put it into ycurve. Your $ can actually be counted 5 times.”

By his calculations, which were accomplished by removing the double-counting errors, he found that there’s only $3.5 billion worth of value locked in DeFi.

A lot of talk these days around the total value locked in DeFI.

However all of them count the same $ many times.

So I did my own calc to find out how much is actually locked in top 15 DeFi protocols.

Answer: $3.5bil. (compared to $6.7bil on @defipulse)

cc @devops199fan

1/n

— Damir Bandalo (@damirbandalo) August 16, 2020

Ethereum’s DeFi space is still growing and set to grow even further, though, according to analysts.

Andrew Kang, the founder of Mechanism Capital, released a Twitter thread on the matter at the start of July. It suggests that due to development, market, and other trends, DeFi is just starting.

With recent DeFi token price run-ups, people have been crying "bubble!".

So is it too late to invest or not?

Here are my thoughts on where we are in the state of the DeFi market from an "inside perspective" pic.twitter.com/cDAhpc9tVN

— Andrew Kang (@Rewkang) July 1, 2020

It’s important to note that this growth may eventually come to an end.

Jacob Franek, a co-founder of blockchain data firm Coin Metrics, commented that high transaction fees will be a damper on growth:

“Gas prices will put a hard cap on this DeFi bull run. To be expected and probably a good thing… High gas likely new normal…Not yet just saying it places a natural hard cap on how far this can run. Traders will only pay that much if they’re perfoming significantly well”

There have also been some fears that the incentives being provided by DeFi protocols for growth are inherently not sustainable.

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