Decentralized finance (DeFi) has become the most core application of Web3, but its development still faces some practical challenges: the high gas fees of Ethereum, fragmented experiences between L2s, security risks of cross-chain bridges, and difficulties in concentrating liquidity. According to DeFiLama data, nearly all of the top ten protocols by TVL are based on EVM, indicating that EVM has become the de facto industry standard.
In this context, Polkadot Hub has chosen a more pragmatic roadmap for 2025: first launching a 100% EVM-compatible execution environment (RustEVM) to allow seamless migration of applications from Ethereum, while continuing to develop the RISC-V-based PolkaVM to prepare for more complex and high-performance applications in the future.
This is not a simple compromise, but a strategic choice that combines its own conditions. Polkadot has shared security, XCM cross-chain, and a large validator network, enabling it to provide stronger security and liquidity aggregation capabilities while being compatible with EVM. In the short term, it inherits Ethereum's ecological achievements, while in the long term, it explores new execution environments, thus giving Polkadot Hub the opportunity to become an ideal landing platform for DeFi projects.
Current DeFi ecosystem
The DeFi ecosystem of 2025 is a thriving multi-chain landscape, with total locked value (TVL) exceeding $150 billion.
Ethereum, with its strong first-mover advantage and developer community, still dominates core areas such as lending and DEX. However, even after successfully transitioning to PoS, high gas fees and scalability limitations remain its major challenges.
At the same time, Layer-1 platforms like Solana, Binance Smart Chain, and Avalanche have attracted a large number of users with faster speeds and lower costs, but they operate independently, severely restricting cross-chain liquidity and interoperability.
Current system issues
The current DeFi system mainly faces the following issues, which collectively limit its potential for further release:
1. Efficiency and cost dilemma
High gas fees and network congestion on Ethereum severely hinder high-frequency trading. Although Layer-2 solutions can alleviate this issue, they rely on the security of Layer-1, and there are still potential risks when assets transfer between different layers.
2. Centralized bridging risk
To aggregate assets from various chains to increase liquidity, many DeFi applications rely on centralized cross-chain bridges. This model brings dual risks:
Security vulnerabilities: Centralized bridges are primary targets for hackers, and once private keys or passwords are compromised, a large amount of assets face the risk of being stolen.
Trust crisis: Centralized operators have privileges and may act maliciously for profit, making it difficult to establish community trust.
3. Inefficient smart contract execution
Most blockchains face execution efficiency bottlenecks in supporting EVM. To break this limitation, various platforms are actively exploring new contract execution environments, such as Rust-based CosmWasm and Ink, as well as new proposals based on RISC-V being suggested by the Ethereum community.
4. Limited underlying functionality expansion
Some special applications requiring support for underlying cryptographic primitives (such as ZK technology) are difficult to implement on general-purpose blockchains. The upgrade and expansion processes of existing systems are often lengthy and difficult. This hinders deeper innovations in the DeFi field.
Why Polkadot Hub is particularly suitable for DeFi
100% EVM fully compatible: Rapidly initiating network effects to attract high-value ecosystems.
Polkadot Hub has decided to prioritize the development of a 100% EVM-compatible solution (based on the REVM engine), which is a crucial strategic choice. In the past, Substrate projects faced cumbersome customization integration processes when launching on mainstream exchanges or attracting top applications. Now, this bottleneck has been completely broken.
For developers: they can directly port unmodified Ethereum dApps, including popular protocols that rely on older versions of Solidity, greatly reducing migration costs and allowing top Ethereum projects to quickly access the Polkadot ecosystem.
For exchanges: exchanges do not need additional adjustments and can directly use their existing Ethereum integration processes, simplifying the onboarding process for new projects, thereby bringing more liquidity into the ecosystem.
For the ecosystem: this initiative accelerates the onboarding of high-value applications and third-party service providers, rapidly generating strong network effects. Infrastructure service providers like Chainlink and The Graph, as well as compliance solution providers like Elliptic and Chainalysis, can almost zero-cost extend their services to Polkadot, providing reliable oracles, data indexing, and compliance guarantees for all DeFi projects. This 'Lego block' style of combination effect is the core driving force of DeFi innovation.
PolkaVM: An innovative engine for the future
Although REVM addresses the current access issues, PolkaVM (PVM) remains Polkadot's long-term vision and innovation core. PVM is based on RISC-V architecture, capable of providing performance beyond EVM and supporting more complex applications.
Performance and cost advantages: PVM will offer more powerful on-chain computing capabilities than EVM through technologies like JIT (Just-In-Time compilation), thus supporting more complex computationally intensive tasks, such as on-chain ZK primitives.
Language flexibility: PVM is not only compatible with Solidity and Vyper but also supports various languages such as Rust, C++, etc., providing developers greater flexibility and unlocking more innovative use cases.
Native support: PVM can natively support more complex cryptographic logic and next-generation DeFi protocols such as cross-chain derivatives, reserving unlimited innovative space for future high-performance, high-complexity DeFi applications.
XCM: Trustless, native cross-chain interoperability
Polkadot's unique XCM (Cross-Consensus Messaging Format) protocol is its most significant distinction from other ecosystems. It allows for the secure transfer of assets and logic between parachains without relying on centralized bridges.
This means that DeFi protocols can truly achieve 'cross-chain composability', allowing developers to build complex cross-chain yield farms spanning different parachains, maximizing capital efficiency.
Snowbridge: Opening up the liquidity entry to Ethereum
The lifeline of DeFi lies in the adequate flow of funds. Snowbridge, as a fully audited trustless bi-directional bridge, can safely bring assets (such as ETH, USDC, WBTC) from the Ethereum mainnet into Polkadot Hub.
This resolves the issue of liquidity 'islandization', enabling the DeFi ecosystem of Polkadot Hub to directly inherit and utilize Ethereum's vast capital resources, providing sufficient startup funds and trading depth for new projects.
Shared security: Reducing systemic risk and ensuring high-value applications.
Polkadot's shared security model ensures that all parachains share the security of the relay chain's validators. This provides top-notch security guarantees for DeFi applications on Polkadot Hub.
Unlike Ethereum's L2 solutions, cross-chain interactions within the Polkadot ecosystem do not require additional trust assumptions and have no withdrawal delays. This is crucial for DeFi applications dealing with high-value assets, effectively reducing systemic risks arising from bridging vulnerabilities or fraudulent activities.
Prospects for DeFi applications
The launch of Polkadot Hub is also a crucial adjustment on Polkadot's development path: shifting from purely pursuing technological innovation to balancing ecological compatibility and market demand.
This is not a simple compromise, but a pragmatic, phased strategy. It is believed that Polkadot has recognized the need for a solid bridge between technological ideals and market realities.
In the short term, the core is EVM compatibility. Polkadot has prioritized launching solutions based on REVM to quickly address current market pain points. This allows high-value applications on Ethereum to migrate faster and lowers the barrier for capital and users to enter, which is crucial for the formation of DeFi network effects.
From the roadmap perspective, Polkadot will launch REVM on the Kusama Hub in late October and officially land on the Polkadot Hub in mid-December, making it possible to initiate ecological expansion before the end of the year.
At the same time, Polkadot has not given up on its own exploration. PolkaVM, as its technological ace, is steadily advancing towards a future of higher performance and more complex applications.
The roadmap indicates that a preview version of PolkaVM has been launched on Kusama and will enable higher-level optimizations such as JIT compilation by the end of the second quarter of 2025.
