Opinion by: Rachel Lin, Co-Founder and CEO of SynFutures
DeFi has come a long way since the boom and bust cycle of 2020’s DeFi Summer. Much of the early boom was fueled by experimentation, hype, and unsustainable incentives.
Five years later, the foundations of DeFi are very different. Last year’s experiment is a quiet consolidation phase, leading the way. 2025 may be remembered as the year DeFi overtook centralized exchanges (CEX).
The bear market of 2023 and 2024 eliminated many DeFi projects that lacked product-market fit and forced other DeFi platforms to mature, focusing on infrastructure and achieving true adoption.
Decentralized exchanges have evolved
While the collapse of Celsius and BlockFi and the bankruptcy of FTX exposed the inherent weaknesses of many centralized platforms, decentralized exchanges (DEXs) have sought to offer similar speed and user experience, operating high-performance chains and building their own infrastructure.
Just as importantly, as blockchain latency has improved, fully on-chain order books have become viable, allowing DeFi protocols to begin to address previous issues with capital and liquidity efficiency.
Beyond the pool-based models of early perpetual DEXs like GMX, new hybrid designs combine automated market makers (AMMs) with order book trade execution, or support only outright order books, enabling much more efficient liquidity provisioning for traders by mitigating slippage and depth issues.
DeFi captures market share
From a digital perspective alone, Q2 saw the market’s top 10 DEXs facilitate $876 billion in spot transactions (up 25% from the previous quarter). In contrast, CEXs saw their spot volumes decline 28% to $3.9 trillion, pushing the volume ratio between the two to a record high of 0.23 in the second quarter.
The resurgence of DeFi can be attributed to the growth of trading. Lending protocols, for example, have eclipsed their centralized peers, seeing a whopping 959% jump in activity since bottoming out in late 2022. Aave now holds enough deposits to rank among the 40 largest banks in the United States, a testament to DeFi’s growing scale and credibility. Meanwhile, Coinbase’s partnership with Morpho to launch Bitcoin-backed loans via cbBTC, routed directly through Morpho’s on-chain infrastructure and liquidity, signals a broader shift toward DeFi-native infrastructure.
People clearly seem to prefer the transparency and automation of on-chain lending after seeing a series of CeFi lenders go bankrupt. Whether in terms of trading volume or credit supply, DeFi has established a growth lead that cannot be ignored.
Regulation and renewed confidence
The flip side of DeFi’s growth is that the broader crypto market is finally providing more regulatory clarity. Rather than pushing innovation overseas, this change encourages major DeFi protocols to collaborate with regulators and operate within clearer frameworks. Uniswap, for example, has taken a leading role in advocating for sensible policy discussions that would legitimize the transparency and self-preservation of DeFi.
Coincidentally, user preference for on-chain systems is particularly evident at times of regulatory tension, such as during the SEC lawsuits against Binance and Coinbase, when traders quickly migrated to decentralized exchanges, with volumes surging 444% within hours of the announcements. The message was clear: when regulation strengthens, activity does not disappear. It simply evolves in chain.
Security and custody risks have only reinforced this shift. Between 2012 and 2023, centralized exchanges lost nearly $11 billion to hacking and mismanagement.
This is more than 11 times what has been stolen directly from decentralized protocols or wallets. For many users, holding assets on a large exchange has proven to be far more dangerous than using self-custody and DeFi smart contracts.
CeFi imitates DeFi and still lags behind
Unable to ignore the momentum of DeFi, some CEXs have started integrating onchain infrastructure directly into their platforms. Coinbase, for example, has integrated Aerodrome, the main DEX built on Base, Coinbase’s own layer 2 network, allowing users to access decentralized liquidity while remaining within a familiar interface – a notable step, but one that still maintains Coinbase as a distribution point.
The Binance ecosystem offers another telling example. BNB Chain reached all-time highs in October and attracted millions of active users. Much of this increase is due to Aster, the perpetual DEX on the BNB chain, which has sparked speculation about direct ties to Changpeng “CZ” Zhao. If many of the founders of CEXs are now building in the decentralized space, one might wonder how decentralized these new ecosystems and products truly are.
Basic measurements tell the same truth. By the end of 2024, TVL figures had rebounded to around $130 billion, approaching all-time highs and continuing to rise. In sectors such as derivatives, asset management and payments, DeFi capabilities have surpassed traditional platforms, providing increased transparency and permissionless access.
Centralized exchanges, with their onerous compliance constraints and multi-jurisdictional footprint, are finding it increasingly difficult to scale quickly. Many CEXs are withdrawing. Crypto.com recently scaled back its operations in the United States, delisted several tokens, and even delayed the launch of new products pending regulatory clarity. OKX has also been cautious about expanding its decentralized initiatives amid changing compliance expectations.
In contrast, DEXs operate with lighter, code-based structures that allow them to deliver updates and innovate at a fraction of the time and cost. They can roll out new features at the speed of software, whether it’s support for real-world tokenized assets, inventive yield strategies, or integrations with AI-powered trading agents.
A glimpse of the future
Unless CEXs fundamentally reinvent their models, they risk losing their relevance, especially since simply copying a few DeFi features or offering self-custody options might no longer be enough for customers.
The crypto community’s trust has shifted toward “built-in-code” systems rather than those built on company promises. It is telling that when liquidity and trading volumes have recently flooded into the market, decentralized entities have captured a disproportionate share of these funds.
The dawn of DeFi primacy is upon us, signaling a more resilient and user-empowering financial ecosystem.
Opinion by: Rachel Lin, co-founder and CEO of SynFutures.
This article is intended for general information purposes and is not intended to be and should not be considered legal or investment advice. The views, thoughts and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
