Hedera Hashgraph ($HBAR ) entered 2025 with an established presence among enterprise blockchains, a wave of optimism powered by its council-governed structure, and a series of high-profile technical upgrades.

 Its permissionless services and reliable throughput positioned it as a strong infrastructure layer. Yet, despite continued user and network activity, the protocol is underperforming on key growth metrics and is grappling with both competitive pressure and structural limitations.

This deep dive report explores the latest developments across Hedera’s ecosystem, network, and financial performance. It unpacks why the network is falling short in critical areas and spotlights a few standout protocols that still represent Hedera’s long-term potential.

Current State of Hedera in 2025

Key Numbers (as of Q1 2025)

  • Market Cap: $6.9 billion, ranking #18 among all cryptocurrencies — a 32.9% quarter-over-quarter drop.

  • Average Daily Transactions: 708,500 (up 25.8% QoQ, driven mainly by increased Crypto Service activity).

  • DeFi TVL: $97.1 million (down 41.7% QoQ, primarily due to HBAR price depreciation rather than capital flight).

  • DEX Activity: Average daily DEX volume of $10.8 million; SaucerSwap remains dominant with over $10.6 million daily volume.

  • Stablecoins: USDC issuance on Hedera nearly doubled in Q1, now at a market cap of around $132 million. Which is one of the fewer good things happened in Hedera.

  • Wallet Activity: Active wallets rose 40.5% in the past 30 days, reflecting strong ongoing user engagement.

  • DeFi Diversity: Just two protocols — SaucerSwap and Bonzo Finance — account for 90% of the network’s DeFi TVL, unchanged QoQ.

Service Revenue (Q1 2025)

Hedera generated $232,700 in protocol revenue during Q1 2025 . A 5.1% decline compared to the previous quarter. All major service categories saw revenue decreases:

  • Smart Contract Service: 417,800 HBAR earned (down 57.4% QoQ).

  • Crypto Service: 246,200 HBAR earned (down 59.2% QoQ).

  • Token Service: 270,300 HBAR earned (down 41.7% QoQ).

  • Consensus Service: 4,300 HBAR earned (down 87.1% QoQ).

This decline in dollar-denominated revenue is closely tied to the falling price of HBAR. In addition, slowing transaction and transfer volumes contributed to the downturn. However, service-level transaction activity became more evenly distributed: Crypto Service made up 68.4% of transactions, Smart Contracts 19.7%, Consensus 8.6%, and Token Service 2.9%.

Ecosystem and dApp Landscape

  • Top dApps/Protocols: SaucerSwap and Bonzo Finance continue to dominate DeFi activity. Meanwhile, Karate Combat,  a non-financial dApp which saw 35% quarter-over-quarter growth in activity.

  • Interoperability: Integration with Chainlink’s Cross-Chain Interoperability Protocol (CCIP) signals Hedera’s push to enhance liquidity and cross-chain utility for dApps.

  • Community and Developer Events: 2025 saw the return of HederaCon and Hedera’s presence at Consensus, where discussions focused on AI, DeFi, and real-world asset tokenization.

Network Upgrades and Governance

  • Major Upgrades: HIP-755 and HIP-756 delivered significant improvements in smart contract functionality and user experience. Simultaneously, the Hedera Council and Foundation underwent a major rebrand to reflect a stronger emphasis on enterprise, DeFi, and AI initiatives.

  • Governance: While efforts to decentralize continue, control remains concentrated among the 30-member Hedera Council. Community governance still plays a minimal role in shaping protocol decisions.

Why Hedera Is Falling Short in 2025

1. DeFi Stagnation and Ecosystem Concentration

Despite growth in active wallets and surging USDC issuance, Hedera’s DeFi remains dangerously undiversified. SaucerSwap and Bonzo Finance collectively account for nearly the entire TVL. The lack of new protocols gaining traction limits composability, developer excitement, and user stickiness. With a DeFi Diversity Score of just 2, the network shows signs of ecosystem stagnation.

2. Market and Revenue Vulnerability

The sharp decline in TVL is primarily due to HBAR’s falling price, not capital outflows. This underlines how closely the health of Hedera’s ecosystem is tied to token valuation. Worse still, core service revenues and network activity have dropped, reinforcing concerns that usage isn’t growing independently of speculative cycles.

3. Governance and Scaling Friction

Despite improved transparency under open-source governance and Linux Foundation stewardship, meaningful protocol decisions remain concentrated in the hands of the Council. Community input remains largely superficial. Meanwhile, competitor chains are luring away developers with larger grants, more aggressive onboarding, and better tooling.

4. Competitive Pressure

Competing L1s with native EVM compatibility, composable ecosystems, and strong incentive programs are increasingly attracting cross-chain flows and developer mindshare. While Hedera's CCIP integration and EVM upgrades are steps in the right direction, onboarding remains clunky, and the developer pipeline is shallow compared to rivals.

Three Promising Protocols on Hedera

  • SaucerSwap – The network’s dominant DEX with $10.6 million in daily volume, anchoring Hedera’s liquidity layer. It continues to roll out meaningful upgrades, reinforcing its centrality to the ecosystem.

  • Bonzo Finance – A non-custodial lending and borrowing protocol modeled after Aave V2 and optimized for Hedera’s EVM. It holds potential to become a pillar of future DeFi diversity, if user adoption picks up.

  • Karate Combat – A sports entertainment protocol leveraging tokenized fan engagement. It recorded a 35% QoQ usage increase, with 90% of KARATE token activity now occurring on Hedera.

Hedera Hashgraph is undoubtedly one of the most innovative projects out there. With its unique mechanism and interesting dApps, it was once among the top 5 blockchains. However, competition and its distinct presence-different from the usual EVM ecosystem-cost it the limelight, and it became a fading star.

In 2025, HBAR's performance has been truly disappointing, but we hope it will bounce back and surpass $100m figures in TVL and diversity among other protocols than top 3, which itself sums up the current situation.