Why Gnosis Chain is defying crypto winter with an 80% surge in investments

Amid the gloom of a down market, Gnosis Chain, an Ethereum sidechain network, has become a beacon for DeFi investors.

In the last 30 days, Gnosis Chain’s total value locked, or TVL, has soared 80%, to $140 million, DefiLlama data shows. (TVL is a metric for the volume of investment committed to a DeFi protocol or blockchain.)

This move is an outlier for major DeFi-enabled blockchains in a bear market. Ethereum has suffered a 12% drop in its TVL in the same period. And other major networks such as Polygon, BNB Chain, and Optimism have also weathered steep falls in investment flows.

What gives?

Even a newer, buzzier entrant like Coinbase’s Base, which launched with much fanfare in July, has seen interest wane significantly; its TVL dropped 18% in the last 30 days, according to DefiLlama.

So what gives? Why is Gnosis Chain attracting so many investors? A confluence of several factors, said the chain’s founder, Martin Köppelmann.

“There are two things at play,” Köppelmann told DL News. “The anticipated rollout of Gnosis Pay has attracted projects like Maker’s Spark and Aave.”

Aave, of course, is a top DeFi lending protocol that is now rolling out on Gnosis. And Spark is a retail lending protocol offered by MakerDAO.

And second, the deployment of sDAI that lets users get a boosted DAI Savings Rate quickly attracted about $50 million in new capital, Köppelmann said.

Liquid DAI

On October 10, Gnosis Chain began supporting sDAI — an interest-bearing form of DAI, MakerDAO’s widely-held US dollar-pegged stablecoin. This version of DAI is a liquid token that represents an equivalent amount of the stablecoin that a user has staked in the DAI Savings Rate, or DSR, on the Spark Protocol.

The Gnosis Chain bridge is now the third largest sDAI holder, which indicates the significant level of investor activity surrounding the yield token.

This bridging frenzy has also contributed to crypto bridge Hop Protocol attracting the highest TVL growth on Gnosis in the last month.

“We onboarded [about] $1 million to Gnosis in the past month,” Hop Protocol founder Chris Whinfrey told DL News. “I know we are one of the main bridges over there so I’m guessing the majority of that must have come from mainnet over the native bridge.”

The massive bump triggered by sDAI deployment on Gnosis seems poised to attract more investment.

“Currently, sDAI is in addition [being] rapidly rolled out in the Gnosis DeFi system in protocols like Agave, Balancer, and Curve,” Köppelmann said.

Holding sDAI earns users a 5% annualised yield from MakerDAO’s revenue. They can increase the yield by deploying the liquid sDAI into protocols like Agave, a Gnosis-native lending market that has attracted over $10 million in investments.

Asset tokenisation on Gnosis

“TVL growth has come primarily from sDAI on Gnosis,” Prithvi Jhaveri, CEO of crypto portfolio management outfit Loch, told DL News.

The crypto researcher also pointed out that asset tokenisation is becoming a major market segment within Gnosis.

“Another interesting protocol that has high TVL but is still growing is RealT — a real estate tokenisation platform,” Jhaveri said.

RealT has attracted $98 million in investment thus far but this does not reflect in the TVL numbers for Gnosis. This is because DefiLlama excludes data from subprotocols like real-world asset protocols from its blockchain TVL accounting.

Gnosis is also home to a growing tokenised equities market, according to a report by 21.co, a company that provides access to institutional crypto investment products.

Significant uptick

Like the case with RealT, the figures from this market are not included in the TVL statistics for Gnosis but provide some insight into the significant uptick in activity on the blockchain.

At $140 million, Gnosis is still some ways behind blockchains like Arbitrum, BNB Chain, and Polygon in the TVL ranking of DeFi majors excluding Ethereum.

Gnosis has moved one place from 18th to 17th from 18th on the roster this month, DefiLlama data shows.

Osato Avan-Nomayo is our Nigeria-based DeFi correspondent. He covers DeFi and tech. To share tips or information about stories, please contact him at osato@dlnews.com.