In the annals of cryptocurrency development, the summer of 2020 was an indelible highlight, later referred to as the 'Summer of DeFi.'
It was a time full of opportunities and madness, as the crypto market was ignited by the roaring flames of DeFi, ushering in a magnificent bull market. The summer of 2020 felt like a sudden financial carnival where DeFi quickly entered the public eye. At that time, the traditional financial market appeared somewhat dull under the economic fluctuations, while DeFi shone like fireworks in the night, instantly bursting forth in splendid brilliance.
Looking back to 2020, the global economy was still shrouded in the shadow of the COVID-19 pandemic, with central banks around the world initiating quantitative easing policies, injecting massive liquidity into the market. The low interest rate environment of the traditional financial system led investors to eagerly seek new high-yield opportunities, and at that time, DeFi emerged as a shining new lighthouse, attracting global capital's attention.
As the main battleground for DeFi, Ethereum saw various innovative projects sprouting up like mushrooms after rain. The rise of the decentralized exchange Uniswap broke the monopoly of traditional financial trading models. It was like a digital free market where users could freely trade digital assets without needing a third-party intermediary. Every transaction was recorded on the blockchain, making it public, transparent, and immutable. The lending protocol Aave provided a new channel for the circulation of funds, allowing users to easily borrow funds by collateralizing their digital assets or lending idle funds to earn substantial returns, all in an efficient and convenient process without cumbersome procedures and lengthy waits. The algorithmic stablecoin MakerDAO worked to maintain the stability of the coin's value, injecting a sense of certainty into the turbulent crypto world, like a sturdy lighthouse on a stormy sea.
These innovative DeFi projects, with their unique advantages and unlimited potential, quickly captured the attention of global investors. From novice cryptocurrency investors to seasoned financial giants, everyone flooded into this emerging field, attempting to share in the spoils of this financial revolution. Total Value Locked (TVL) skyrocketed from $600 million at the beginning of the year to $16 billion by year-end, reaching an astonishing $210 billion in 2021. The prices of various DeFi tokens soared, and many early participants became overnight millionaires, with wealth myths circulating in the market as the entire industry submerged in a frenzy, making DeFi the hottest topic of the time.
Good times don’t last long. As market speculation began to inflate excessively, the bubble gradually expanded, and the DeFi market faced a brutal correction. Prices plummeted significantly, many projects fell into trouble, and the market seemed to have suddenly entered a winter from summer. People's enthusiasm for DeFi quickly cooled, and the once-boisterous atmosphere gradually returned to calm. In the following years, DeFi did not sink into despair; instead, it silently accumulated strength, continuously evolving and improving. Developers made numerous technical improvements and innovations addressing previous issues like security, scalability, and user experience. Previously complex and difficult-to-understand interfaces became simple and user-friendly, the security of smart contracts was greatly enhanced, and new financial primitives like re-staking and liquid staking continually emerged, making the DeFi ecosystem richer and more mature.
Time has come to 2025. When the U.S. Securities and Exchange Commission (SEC) released a signal of acknowledgment for DeFi, it seems that another bull market storm is quietly brewing. The SEC's change in attitude towards DeFi has become the focus of market attention. For a long time, DeFi has been struggling in the gray area of regulation, with compliance hanging over the industry like the sword of Damocles. Now, the SEC's acknowledgment is like a ray of light illuminating the path forward for DeFi. This shift not only provides legal protection for DeFi projects but also allows more traditional financial institutions to see the potential in this field, prompting them to begin their investments.
The entry of large financial institutions brought massive funds, rich experience, and professional resources to DeFi, like a small boat that had been sailing alone in the ocean suddenly receiving protection from a huge ship, making the path ahead smoother. At the same time, with the changing global economic situation, the Federal Reserve initiated a new round of accommodative monetary policy, and market liquidity became abundant again. A large amount of capital was seeking high-yield investment opportunities, and DeFi, with its unique advantages, once again became the darling of investors.
In terms of technological innovation, DeFi has also not stopped. The continuous development and application of technologies like zero-knowledge proofs, sidechains, and cross-chain solutions have significantly enhanced DeFi's performance, making transactions faster, cheaper, and safer. At the same time, significant progress has been made in the tokenization of real-world assets (RWA). Traditional financial assets such as stocks, bonds, and real estate can be converted into digital assets through blockchain technology, entering the DeFi ecosystem and further expanding DeFi's application scenarios, tightening the connection between DeFi and traditional finance, as if a bridge connecting two seemingly separate worlds.
Various signs indicate that the DeFi of summer 2025 is like a volcano ready to erupt, having accumulated enough energy to potentially trigger a new round of market activity at any time. Of course, the market is always full of uncertainties, and DeFi faces numerous challenges such as regulation and security during its development. Nevertheless, DeFi has profoundly changed the landscape of the financial industry. Its development history is like a grand adventure epic, and we are fortunate to witness this financial revolution.
