DeFi (Decentralized Finance) is an open financial system based on blockchain technology, eliminating traditional financial intermediaries (like banks) through smart contracts, enabling peer-to-peer lending, trading, wealth management, and other financial services. Its core features include transparency, permissionless access, composability (seamless interaction between protocols), and full user control over assets.
I. Core Features and Key Components of DeFi
1. Core Technologies
- Smart Contracts: Code that automatically executes transactions, replacing manual reviews (like automatic loan liquidations).
- Liquidity Pools: Users provide assets to form trading pairs (like ETH/USDC), with pricing determined by automated market makers (AMM), supporting DEX operations (like Uniswap).
2. Major Application Scenarios
- Lending: Aave and Compound allow users to collateralize crypto assets to borrow funds.
- Trading: DEXs (like Uniswap and Raydium) enable token swaps without KYC.
- Derivatives and Yield Optimization: Perpetual contract trading platforms (like Hyperliquid), yield aggregators (like Yearn Finance) automate investment strategies.
- II. DeFi Development Trends (2024–2025)
1. Tokenization of Real World Assets (RWA)
- Progress: Traditional assets like real estate and U.S. Treasuries are being tokenized (like Ondo Finance, BlackRock's BUIDL fund), addressing liquidity issues for non-standard assets and attracting institutional funds.
- Challenges: Regulatory compliance remains a bottleneck, and on-chain liquidity for non-standard assets (such as artworks) is still insufficient.
2. Yield Strategy Innovation and Capital Efficiency Improvement
- Yield Separation Trading: Protocols like Pendle Finance allow users to trade future yield rights (such as interest from staked ETH), unlocking multiple utilities for assets.
- Liquid Staking Derivatives (LSD): Lido Finance dominates the market, users stake ETH to receive stETH (liquidity token), allowing participation in lending, trading, and other DeFi activities simultaneously.
- Restaking: EtherFi allows users to restake liquid staking tokens (LST) to earn additional rewards from protocols like EigenLayer, with annual TVL growth of 770%.
3. User Experience and Institutional Adoption
- Intent-Driven Architecture: Users declare their goals (e.g., 'exchange ETH at the best price'), and the protocol automatically splits and executes steps, lowering operational thresholds.
- Institutional Entry: Traditional financial companies enter DeFi through RWA and compliant stablecoins (like Paxos USDG), driving TVL growth and improving regulatory frameworks.
4. Cross-Chain Interoperability and Scalability
- Cross-Chain Bridging: Technologies like Polkadot and Cosmos facilitate multi-chain asset flow, addressing congestion issues on single chains (such as Solana's DEX Orca attracting funds due to high capital efficiency).
- Bitcoin DeFi (BTCFi): Protocols like Babylon extend Bitcoin's functionalities via Layer 2, incorporating its security into the DeFi ecosystem.
5. Exploration of New Financial Paradigms
- Prediction Markets and Derivatives: Limitless Exchange launches on-chain 0DTE (zero-day options) derivatives, combining AI validation results (like Truemarkets) to enhance the usability of complex financial instruments.
- Decentralized Credit Systems: Credit assessments based on on-chain data (transaction history, governance participation) provide low collateral options for unbanked populations.
III. Current Challenges and Future Directions
- Security and Compliance: Hacker attacks remain frequent in 2024, requiring strengthened smart contract audits; regulatory uncertainties (like U.S. SEC policies) impact the pace of innovation.
- Sustainability: High-energy public chains are shifting to PoS mechanisms (like Ethereum's merge), exploring green finance solutions.
- Value Capture Shift: Front-end gateways (like Phantom wallet, Jupiter aggregator) monetize through order flow, intensifying competition at the protocol layer.
Here is an overview of the current leaders in various segments of DeFi:
| Sector | Leading Protocol | Market Share | Key Innovations/Advantages |
| DEX Spot | Raydium | 61% | High capital efficiency, integrated with the Solana ecosystem |
| Perpetual Contract DEX | Hyperliquid | 73% | Order book optimization, challenging centralized exchanges |
| Lending | Aave | 65% | Multi-chain expansion, brand credibility |
| Liquid Staking | Lido Finance | 70% | Extensive integration of stETH |
| Liquidity Restaking | EtherFi | 63% | Integrated with EigenLayer, annual TVL growth of 770% |
- Conclusion
DeFi is evolving from experimental financial tools to a key component of global financial infrastructure. In the short term, RWA tokenization, yield innovation, and institutional compliance are core drivers; in the long term, breakthroughs in cross-chain interoperability, privacy protection (like zero-knowledge proofs), and user entry simplification are needed. As traditional finance and DeFi increasingly converge (as seen with BlackRock's positioning), its potential may reconstruct the capital allocation logic of trillion-dollar markets.