Original Title: Where DeFi Goes From Here
Original Author: @0xKolten
Translated by: Peggy, BlockBeats
Editor's Note: DeFi is once again approaching historical highs but has yet to make a significant breakthrough, revealing not a lack of products but a bottleneck in the growth of its user base. The expansion of stablecoins, yield-bearing stablecoins, and RWA indicates that the demand for moving funds on-chain and earning returns remains strong, but it has not yet been truly brought to the mass market.
This article points out that the next step for DeFi is not in more complex structures or speculative designs, but in simple, secure, yield-focused products and user-friendly methods of use and distribution aimed at ordinary users. Only when DeFi begins to attract fintech users, rather than just serving the crypto-native crowd, can a new growth cycle truly begin.
The following is the original text:
Current Situation
By 2025, the total value locked (TVL) in DeFi reached a new historical high, but it has not increased much compared to the peak in 2021. As the market gradually cools down, a question worth re-examining is: where will the next wave of funds and users come from?
Driven by DeFi Summer, the TVL soared to $204 billion by the end of 2021. Subsequently, with the collapse of events like FTX and the market entering a bear phase, the scale of funds fell sharply. Afterward, DeFi struggled to recover and reached $225 billion in October 2025. However, the growth over four years is only about 10%, which clearly does not indicate explosive growth. The earliest participants in DeFi—mainly crypto-native users and traders—may have already approached a "ceiling."
The two peaks are so close that it is indeed worth being cautious, but it does not constitute a "survival crisis." The existing user base—despite being highly sticky and engaged—simply does not have the scale to push DeFi to the next level.
To achieve a breakthrough, DeFi needs to reach a larger audience. The good news is that such an audience does exist—they are just still off-chain, waiting to be truly "guided on-chain" by the right tools and products.
A Ray of Hope
In the past year, the stablecoin market has been one of the biggest beneficiaries. The on-chain dollar scale has reached an all-time high, unprecedentedly large. USDT and USDC have continued to grow steadily, with a combined market cap exceeding $260 billion—meaning that the size of stablecoins alone is already greater than the entire DeFi market.
Even in the absence of parabolic growth in DeFi, people are still continuously minting stablecoins, indicating that the demand for moving funds on-chain remains strong. Meanwhile, more and more users are beginning to earn returns provided by DeFi, and this growth in the sector points to where the next breakthrough may come from.
The rise of yield-bearing stablecoins and RWA (real-world assets) further confirms this trend. According to data from @stablewatchHQ, the scale of yield-bearing stablecoins has exceeded $20 billion, with products like sUSDS and sUSDe gaining significant adoption over the past year. Alongside yield-bearing stablecoins, RWA has also made progress on-chain: these products are backed by traditional assets like government bonds, providing real returns and growing rapidly.
The problem is that they are still primarily serving crypto-native users and large on-chain players. As long as they remain limited to this, their potential will be underestimated. If they can be productized and packaged in a way that is closer to everyday users, there is a huge opportunity for yield-bearing stablecoins and RWA in the mass market.
Retail Investors Have Yet to Arrive
To understand how large this opportunity is, it is helpful to compare DeFi with fintech. Currently, the total TVL of DeFi is about $164 billion. Meanwhile, the global mobile fintech applications manage customer assets exceeding $20 trillion; just the top 100 neobanks have asset sizes reaching $2.4 trillion. In contrast, DeFi is currently almost a negligible fraction.
The saying "build it and they will come" ultimately brings limited growth. If DeFi wants to continue expanding, it must attract the ordinary users that have made fintech so massive.
By 2025, the success of protocols like Aave, Ethena, and Pendle has already proven that market participants have a strong demand for returns. They were the highlights of the year, attracting significant funds and attention. If these types of products can be delivered to the public in a clear, easy-to-understand, and low-barrier manner, what lies ahead will be (literally) trillions of dollars in funds and tens of millions of potential users.
Path Forward
In the coming year, the real test for DeFi will be: can it enable ordinary people to easily and safely access earning opportunities? Growth will not come from more complex financial structures, the 100th mining pool, the 100th perpetual contract DEX, or the millionth airdrop. Growth will come from simple, reliable products—those based on decentralized protocols that address real problems faced by ordinary people. Moreover, returns should take center stage (ahem, Aave App, ahem).
Today, hundreds of millions of people use banks and fintech applications daily, and they are already accustomed to managing funds on their phones. If DeFi can capture even a small share of this, it will be enough to spark a new wave of growth, and it will no longer stall at the $200 billion TVL level.
Embedded DeFi will play an important role in this—fintech companies and neobanks will directly integrate on-chain earning capabilities into their products. But teams should not stop there. Protocols that are truly consumer-facing and ahead of the curve will capture the largest upside; while those that continue to optimize only for crypto-native users will ultimately just be competing for a slice of a pie that may no longer expand.
DeFi will win.
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