- What’s next for DeFi in 2025?
- We reveal the trends that we will be looking closely at next year.
A version of this article appeared in our Decentralized newsletter of December 31. Register here.
general manager, Tim here.
Happy New Year to everyone here at DL News!
Last year, I made bold predictions for 2024: that permissioned DeFi would come to life and that scalability-focused projects EigenLayer and Celestia would redefine the DeFi landscape.
EigenLayer, despite attracting billions in deposits, has yet to see much adoption of its validation services. Celestia was also hampered by the lack of demand for her services.
Development of hooks and Uniswap v4, which will make permissioned DeFi a reality, is still ongoing, but 2024 was certainly not a breakthrough year.
As 2024 draws to a close, join me in taking another stab at predicting the top DeFi trends for the year ahead.
TradFi launches into DeFi
This year, several Wall Street companies continued to move into DeFi.
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Asset manager BlackRock launched its BUIDL fund on Ethereum in March, then expanded it to five other blockchains in November.
Rival State Street has signed a partnership with cryptocurrency custody and tokenization platform Taurus, while interest in Franklin Templeton’s US government monetary fund has continued to grow.
In Europe, Deutsche Bank announced earlier in December that it was building its own layer 2 of Ethereum to address regulatory challenges related to the use of DeFi.
But these measures may be just the start of a broader push by institutions to use DeFi.
In 2025, “traditional institutions are likely to transition to on-chain faster than expected,” said Paul Frambot, CEO and co-founder of DeFi lending protocol Morpho. DL News.
Fatmire Bekiri, head of tokenization at Sygnum Bank, said she expects more traditional financial players to enter DeFi in 2025, meeting investor demand for riskier on-chain products.
Unclear crypto regulations – particularly in the United States – have prevented many financial institutions from experimenting with DeFi, for fear of violating securities laws.
But with the arrival of a pro-crypto Trump administration, that could soon change.
“People are still trying to figure out what’s compliant,” Colin Butler, Polygon’s head of institutional capital, said previously. DL News.
“Once certain things are accepted as a guarantee in big companies, I think anyone can do it. And that’s when I think you see the L-curve of adoption.
Protocols migrate to their own blockchains
This year we have seen large DeFi protocols move towards launching their own blockchains, usually in the form of Ethereum layer 2.
Leading decentralized exchange, Uniswap, announced in October the development of its own layer 2 called Unichain.
DeFi lender Aave is mulling its own Aave network as part of its v4 upgrade, and Sky founder Rune Christensen has also suggested creating a dedicated blockchain.
They have good reasons to do so. Layer 2s are a great source of revenue because those who manage them can reduce the cost difference between what they charge users and paying the Ethereum mainnet to complete transactions.
Having a dedicated blockchain for a DeFi protocol means projects can stop malicious forms of MEV affecting their users and they do not have to share resources and bandwidth with other DeFi protocols, potentially avoiding congestion.
Daniel Wang, co-founder of Taiko Labs, the company behind the Taiko layer 2 blockchain, said DL News that he sees greater fragmentation within Ethereum and projects inspired by it in 2025.
But, Wang said, increased fragmentation will also put more emphasis on interoperability between the growing number of Layer 2 blockchains.
DeFi and fintech unite
My final prediction is that 2025 will be the year fintech applications finally start bringing DeFi to the mainstream.
We are already seeing signs that some companies are gearing up. Robinhood rolled out cryptocurrency transfer services to its European customers in October, and neobank Revolut expanded its cryptocurrency exchange to 30 markets in the region a month later.
Integrating DeFi could be incredibly lucrative for the first fintech company to do so. The returns far exceed those of traditional finance, but they have always been considered too risky and difficult to exploit for many established players.
This impression could change – at least towards DeFi protocols with strong security and compliance records.
“In 2025, we will see the long-awaited adoption of the ‘DeFi mullet’ – where fintech applications directly integrate DeFi protocols like Aave or Morpho for safer and higher quality financial products,” Thomas Mattimore, CEO of ABC Labs, the team behind Reserve Protocol, says DL News.
The “DeFi mullet” refers to the idea that fintech applications will eliminate the complexity and poor user experience of current DeFi protocols and open up access to their users.
Mattimore is not alone.
Morpho’s Frambot also predicts that in 2025, access and adoption of DeFi will be driven by partnerships with fintech companies.
As with institutions, the more favorable regulatory environment under the Trump administration should give fintechs the confidence to integrate DeFi.
The bigger question is whether DeFi protocols are ready to handle a large potential influx of investors from fintech applications. Only time will tell.
Do you have a tip on DeFi? Contact us at tim@dlnews.com.
