Aave and Uniswap Show How DeFi Keeps Working Amid FTX Crisis

FTX’s complete collapse in the span of two weeks has been nothing short of astonishing.

Even Enron’s liquidator, who’s been appointed as the CEO of the crypto exchange during the bankruptcy proceedings, called the extent of the mismanagement “unprecedented.”

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And while John J. Ray III continues to sift through the smoldering remnants of Sam Bankman-Fried’s empire—mincing no words along the way—DeFi continues to hum along, attracting supply with premium interest rates, servicing non-custodial trades, and liquidating under-collateralized loans all at the speed of Ethereum.

Digging into the numbers show just how impressively distanced platforms like Aave and Uniswap have been from FTX.

On Aave, for example, a unique spike in activity occurred this past week. For roughly an hour, you could’ve earned more than 73% interest on your GUSD, Gemini’s dollar-pegged stablecoin. The reason? Simple human panic.

Gemini announced on Wednesday that withdrawals from its Earn product would be delayed. These delays were due to Gemini Earn’s lending provider, Genesis, halting withdrawals, citing ongoing FTX contagion.

Back over on Aave, users pulled their GUSD holdings and began borrowing the asset en masse, with some speculating that borrowers were looking to short the stablecoin.

Just as these two events happened (withdrawals and borrowing), lending rates skyrocketed in order to attract more liquidity back on to the platform. Remember: Pretty much all of these decentralized lending platforms operate according to supply and demand. As supply rises, interest rates drop; as supply dwindles (or borrowing rises), rates will rise.

Basically, users were being offered a real-time reward for holding an asset that the market had temporarily defined as risky.

In a chart, here’s what that looked like. Lending rates remain quite high still.

Ultimately, in the worst (rather unlikely) case…