The State of Early DeFi Projects Two Years After Yield Farming's Rise

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The concept of "yield farming" — or liquidity mining — ignited the decentralized finance (DeFi) boom in mid-2020, starting with Compound’s launch of its COMP token distribution model in June 2020. Since then, the DeFi ecosystem has undergone dramatic shifts: explosive growth, record-high gas fees, massive speculative bubbles, and now a cooling-off phase amid a prolonged crypto bear market.

Yet despite the downturn, DeFi has matured significantly. Total Value Locked (TVL) across DeFi protocols reached $128.65 billion by May 31, 2022 — a staggering 116x increase from just $1.1 billion two years earlier on May 31, 2020. While this is down 53.7% from the all-time high of $277.98 billion in December 2021, it underscores the lasting impact of early DeFi pioneers.

With liquidity mining now more sustainable and less speculative, let’s examine how ten foundational DeFi projects have evolved since their early days.

Uniswap: Leading the DEX Revolution

Uniswap, first launched in November 2018, remains the dominant decentralized exchange (DEX). Its evolution from V1 to V3 reflects continuous innovation:

This last upgrade significantly boosted capital efficiency. By allowing liquidity providers (LPs) to concentrate funds around specific price ranges, Uniswap V3 enables lower slippage and reduced fees for traders — critical for competing with centralized exchanges.

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As of May 2022, Uniswap recorded approximately $62.6 billion in trading volume — up 220x from May 2020, though down 26.1% from its August 2021 peak. Its TVL stood at $5.97 billion, down 43.1% from its December 2021 high.

Notably, V3 now commands about 74% of Uniswap’s total trading volume, with the 0.05% fee tier outperforming the traditional 0.3% tier due to higher trade density and better LP returns.

Core Keywords: DeFi, liquidity mining, decentralized exchange, TVL, yield farming, Uniswap V3, automated market maker

SushiSwap: The Fork That Faded

Launched in August 2020 as a fork of Uniswap, SushiSwap aimed to capture market share through "vampire attacks" — incentivizing users to migrate their LP tokens from Uniswap in exchange for SUSHI rewards. At its peak, some pools offered APRs over 1,000%.

However, after Uniswap launched its own governance token (UNI), SushiSwap lost momentum. Despite expanding to over a dozen blockchains and adding features like Kashi lending and Miso launchpad, it lacks a clear competitive edge.

Leadership instability further weakened trust: founder Chef Nomi stepped down in September 2020, and long-time leader 0xMaki exited in 2021.

By May 2022:

SushiSwap remains active but struggles to differentiate itself in an increasingly crowded DEX landscape.

Curve Finance: Dominating Stablecoin Swaps

Curve launched in January 2020 and quickly became the go-to platform for low-slippage stablecoin swaps. Its success fueled the so-called "Curve Wars", where protocols like Convex compete to control voting rights over CRV emissions to boost liquidity for their native stablecoins.

While Uniswap V3 now offers a 0.01% fee tier targeting stablecoin traders, Curve continues innovating:

The tricrypto2 pool alone holds over $470 million in liquidity with a 0.069% fee rate — ideal for large-cap asset swaps.

Curve’s multi-chain expansion has paid off:

Its deep moat in stableswap markets keeps it central to DeFi infrastructure.

Bancor: Pioneering Single-Sided Liquidity

Bancor’s white paper dates back to February 2017, making it one of the earliest automated market makers (AMMs). Unlike others, Bancor introduced single-sided liquidity provision and impermanent loss protection — key innovations that reduce risk for LPs.

Bancor 3, launched in May 2022, replaced the old BNT-centric model with an Omnipool architecture, eliminating the need for BNT as an intermediary token and improving routing efficiency.

Despite these upgrades:

Bancor remains a niche player but continues to innovate in risk mitigation for liquidity providers.

Synthetix & Yearn: Niche But Influential

Synthetix

Originally a stablecoin project (Havven), Synthetix pivoted in early 2019 to become a synthetic asset protocol. Users mint synthetic assets (like sBTC or sETH) by staking SNX as collateral.

Key metrics:

Though overshadowed by newer derivatives platforms, Synthetix played a foundational role in popularizing liquidity mining concepts.

Yearn Finance

Launched in July 2020, Yearn pioneered the yield aggregator model — optimizing returns by automatically shifting user funds across protocols like Curve and Aave.

However:

With DeFi’s “risk-free rate” near 1%, Yearn’s value proposition has diminished — though it remains influential in yield optimization strategies.

MakerDAO & Aave: Stability and Scale

MakerDAO

One of the oldest DeFi projects, MakerDAO launched DAI in 2017 (initially single-collateral SAI). Today’s multi-collateral DAI supports four minting methods:

DAI supply: 6.76 billion (up 51x from two years ago), though down 34.9% from its February 2022 peak.

Its resilience during market crashes and minimal depegging events solidify DAI as the leading decentralized stablecoin.

Aave

Originally EthLend, rebranded to Aave in 2018. Known for flash loans and robust lending mechanics.

Aave V3 enhances cross-chain asset mobility and capital efficiency, deployed across Polygon, Avalanche, Arbitrum, and others.

Current stats:

Aave leads in institutional-grade lending infrastructure.

Compound & dYdX: Falling Behind?

Compound

Pioneer of liquidity mining via “borrow/lend-to-mine” COMP distribution. However:

Operational missteps — like a $80M liquidation event due to oracle failure — damaged confidence.

dYdX

Leading decentralized perpetuals exchange, built on StarkEx. After launching its DYDX token:

Centralization concerns and tokenomics pressure challenge long-term sustainability.

Frequently Asked Questions

Q: What caused the decline in DeFi TVL after 2021?
A: A combination of macroeconomic factors (bear market), declining yields from liquidity mining, reduced speculative activity, and migration to newer ecosystems contributed to the drop in TVL.

Q: Is liquidity mining still profitable in 2025?
A: While early hyper-yields are gone, sustainable yield opportunities remain — especially in established protocols offering real utility and lower impermanent loss risks.

Q: Why did some early DeFi projects lose market share?
A: Lack of innovation, poor governance decisions, leadership instability, and failure to adapt to multi-chain trends caused many early players to fall behind more agile competitors.

Q: How important is multi-chain expansion for DeFi success?
A: Critical. Projects like Aave and Curve that expanded early across L2s and sidechains captured broader user bases and maintained relevance amid Ethereum’s scalability challenges.

Q: Can forks like SushiSwap compete with originals like Uniswap?
A: Only if they offer meaningful differentiation — better incentives, unique features, or superior UX. Most forks fail to build lasting brand loyalty or technical advantage.

👉 See how top-tier protocols maintain dominance through innovation and scalability.

Final Thoughts

Two years after the yield farming craze began, the DeFi landscape is leaner but stronger. The survivors — Uniswap, MakerDAO, Aave, Curve — have built durable ecosystems through consistent innovation and multi-chain expansion.

While speculative froth has cleared, the foundational protocols continue to evolve — setting the stage for broader adoption when market conditions improve.

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