In a fresh new report by CoinGecko, one of the premier independent crypto tracking platforms on the internet, between 2018 to 2022, centralized finance (CeFi) funding saw a major dip of nearly 73% while at the same time decentralized finance (DeFi) funding saw a jump of over 190%!
According to the 1 March report by CoinGecko, DeFi companies raised over $2.71 billion in 2022, almost tripling the earlier $0.91 billion raised in the previous year of 2021. Meanwhile, CeFi funding dropped from $4.39 billion in 2022, losing over three-quarters of the overall funding raised by the CeFi sector in 2021 of about $16.29 billion in 2021.
Additional read: How is DeFi different from Traditional Finance?
This shift in funding strategy from CeFi to DeFi occurred even as the market moved from a raging bull market in 2021 to a bear run in 2022, with overall crypto funding falling from $31.92 billion in 2021 to $18.25 billion in 2022.
This change in momentum in the funding rates in the CeFi and DeFi industries indicates a major change in the saturation and level of interest in these two respective areas. While DeFi can potentially be gearing up for a period of high growth for the crypto industry in the next couple of years, as the industry sees more participants jumping on-chain and increasing the maturity of the sector as a whole. At the same time, the decrease in the CeFi funding can be attributed to "reaching a degree of saturation" in the market amid the bear run of 2022.
Some of the major DeFi projects that managed to secure strong funding rounds last year include decentralized exchange (DEX) Uniswap's Series B round of $165 million and liquid staking protocol, Lido, which raised $94 million on the back of accelerating growth.
Read more: Uniswap vs PancakeSwap
The largest DeFi fundraising round in 2022 was the Luna Foundation Guard's (LFG) $1 billion sale of LUNA tokens back in February 2022. The amount raised amounted to nearly 37% of all the Defi funding raised in 2022. This, however, was just a few months before the tragic crash of Terra's native LUNA token post the UST stablecoin's de-pegging fiasco - where Terra's algorithmic stablecoin UST lost its peg resulting in an estimated $60 billion wipeout from the crypto market.
On the other side, in the world of CeFi, centralized crypto exchanges FTX and its US arm, FTX.US raised a combined total of $800 million in January 2022, which accounted for a part of the fallout when FTX later collapsed in 2022 in the month of November, when institutional investors wrote off their investments in the exchange. This investment represented a solid 18.6% of the overall CeFi funding last year.
Other than these, other firms operating the sectors such as Blockchain Infrastructure and Blockchain Technology or Service sectors continued to be some of the well-received for crypto funding between 2018 and 2022. According to the CoinGecko report, these two sectors had the strongest performance in the past 5 years after CeFi. Another up-and-coming sector in the crypto industry was the AI & Data sector, which raised $0.42 billion in a 65.1% year-on-year increase. On the other side, Mining and Social sectors recorded no funding rounds whatsoever that met the CoinGecko study's threshold of $20 million and above. GameFi and NFTs, which saw incredible growth in funding in 2021, also experienced a YoY decrease in funding by 43% and 36.9% in 2022 respectively, according to the CoinGecko report.