Interpreting the current status and future trends of DeFi development

Author: @0xCheeezzyyyy Compiler: Vernacular Blockchain

We have come a long way since the DeFi Summer of 2021. Today, DeFi has formed multiple mature areas with the ability to sustain self-growth and activity.

However, in comparison, it is still in its early stages, as the market capitalization of the crypto market is approximately $3.3 trillion, while the traditional financial market is as high as $133 trillion. This article reviews some observations about the industry's dominant platforms.

The core idea of ​​DeFi is to provide a more innovative and efficient system that solves the main inefficiencies of traditional finance through proven product-market fit (PMF). Similarly, DeFi is also composed of multiple key areas, which usually present an oligopolistic structure.

So, what is the situation today?

1. DEX

First, let's look at decentralized trading platforms (DEXs): In the fourth quarter of 2024, @RaydiumProtocol surpassed @Uniswap with a market share of about 61%, becoming the leader in this field.

Although its total value locked (TVL) is only about 39% of Uniswap. While this may be related to the memecoin craze of @solana, its long-term performance remains uncertain.

In the perpetual DEX space, we have a clear winner.

Since Q3 2024, @HyperliquidX's market share has climbed from 24% to 73% (a 3x increase). Since Q4 2024, overall perpetual DEX volume has continued to grow, currently trading ~$8 billion per day, compared to $4 billion back then.

HL (Hyperliquid) is gradually challenging centralized exchanges in an attempt to become the primary platform for price determination in the crypto market.

2. Borrowing

The same is true in the field of borrowing. Since 2024, @aave's industry dominance in the field of borrowing and lending has become increasingly obvious:

Deposits: from 42.1% to 65.78%

Borrowing: from 31% to 61%

Even without the most attractive yields, Aave is still the preferred platform because of its long-established reputation and the credibility of the protocol.

@pendle_fi is leading the revenue space, having achieved the highest TVL in history on Ethereum (~1.59M ETH).

Its unique value proposition is being a key driver of value discovery in the space, and it has maintained the highest TVL in history despite the DeFi market slowdown and bearish sentiment.

This is a clear testament to its strong product-market fit (PMF).

3. Liquidity Staking Platform

Liquid Staking is undoubtedly the area with the largest TVL (about $35 billion) in DeFi.

@LidoFinance is the undisputed leader, controlling about 70% of the market share and almost monopolizing the LST market. Its TVL ($24.8 billion) is 5.17 times that of the second largest competitor @binance's $bETH ($4.8 billion).

This dominance is not driven by staking returns, but by the asset value of $stETH:

• Best asset utilization: As the most integrated asset in DeFi.

• Most trusted service: Become the preferred staking solution for funds and institutions.

Here, credibility and trust are key to driving widespread adoption.

For liquid restaking, we see similar crowd trends.

Notably, @ether_fi's market dominance increased significantly (from 35.3% to 63%), and its TVL increased by ~770% in 2024, even after the S1 and S2 stakedrops ended.

This growth is mainly due to:

• First-mover advantage in ecosystems such as @eigenlayer, @symbioticfi and @Karak_Network.

• Broad DeFi integration

• Trust in product suite

@Lombard_Finance’s performance in the BTC-Fi space is highly similar to the trend in the LST/LRT space, rising steadily to 49.5%.

As @babylonlabs_io matures (currently at $5.5B market cap), demand for $BTC as the crypto security of choice is expected to grow exponentially, with a market opportunity of $2T.

@Lombard_Finance has mastered an industry-leading strategy. With $LBTC as the most widely integrated, used, and security-focused LRT in DeFi, Lombard is positioning it as the asset of choice for institutional trust and widespread adoption, similar to the role of $stETH. Details: https://x.com/0xCheeezzyyyy/status/1886623732770463885

4. Summary

In summary, each field of DeFi has found its own position, complementing each other and forming a complete ecosystem. This marks the rise of a new native financial model that is destined to subvert centralized finance (CeFi), and we are fortunate to witness this process.

As we enter the next phase of expansion, there will be more efforts to expand into new verticals, enter untapped markets, and even integrate with CeFi:

• @ethena_labs plans to integrate traditional financial payment systems

• @Mantle_Official's Mantle Index Fund and Mantle Bank plan to combine crypto with traditional finance

With more institutional attention, such as @BlackRock's participation in DeFi's $BUIDL, and @worldlibertyfi's DeFi portfolio and spot ETF, the future potential looks very promising.