Opinion: Incentive-driven DeFi will disappear in 2026.

Eli5DeFi, in an article published on the X platform, stated that incentive-driven DeFi models will disappear by 2026. The reason DeFi protocols lose users when incentives end is essentially because risk-adjusted returns revert to their true value. The growth in TVL (Total Value Locked) during the incentive phase often reflects subsidized participation rather than sustained usage demand or fee revenue. It points out that the "rented liquidity" model has three phases: the incentive period attracts funds by compensating for risk through high emissions; the normalization period sees reduced incentives and real returns emerge; and the withdrawal period sees funds recalculate costs and exit after returns normalize. The collapse in retention rates is due to incentives temporarily masking structural weaknesses, including the risk of impermanent loss due to subsidies, returns being essentially marketing expenses rather than revenue, highly internalized demand, and high friction costs. Eli5DeFi believes that retention rates can only improve if the economic model remains effective after incentives normalize. Protocols must address impermanent loss and principal risk, anchoring returns to real demand rather than token inflation, and increasing revenue streams by expanding the ecosystem. The future of DeFi should be evaluated based on sustainable revenue, capital efficiency, and risk-adjusted returns.