Original Author: BitMart Founder Sheldon Xia
Some thoughts on the future of on-chain finance, written after the market's severe fluctuations on October 11, 2025
Introduction: Let's Start with a Simple Question
On October 11, 2025, the crypto market experienced the largest liquidation event in history. If you are following this field, you might ask: does such volatility mean that the blockchain experiment has failed? The answer is definitely no. But I would like to ask you to think from a different perspective: which systems collapsed during this extreme stress test? Which systems survived? Which systems were called into question? More importantly, which systems will become stronger?
Let me first introduce my background. I am the founder of BitMart and have been in the blockchain industry since 2013. Over the past nearly 13 years, our platform has processed trillions of dollars in transactions and served over 12 million users. I have also witnessed the complete transformation of this industry from speculative frenzy to infrastructure building. Today, I want to share a core idea with you: LayerFi is not a stopgap measure, but an inevitable choice for the maturation of on-chain finance.
To understand this idea, we first need to grasp a more fundamental question: what exactly is the financial system trying to solve?
1. The Essence of Finance is a Balancing Act of Efficiency and Trust
Let’s establish a framework for thinking. Imagine you want to lend money to a stranger; you face two core questions: first, how do you trust that he will pay you back? Second, can the lending process be fast and cheap enough for both parties to find it worthwhile? These are the two major propositions that the financial system has been solving for the past three hundred years: trust and efficiency.
A Review: How Financial Systems Establish Trust
Let’s quickly review history. In 1717, Britain established the gold standard, using the scarce physical asset of gold to guarantee the value of currency. This was humanity's first attempt to solve the trust issue with something "tangible." You can think of it as: I give you a banknote, but behind that banknote is real gold that you can redeem at any time.
By 1944, the Bretton Woods system was established, and the trust mechanism became more complex. The dollar was pegged to gold, and other countries' currencies were pegged to the dollar. It was like building a pyramid of trust: gold at the bottom, the dollar in the middle, and other currencies at the top. But this system collapsed in 1971 when Nixon announced that the dollar would no longer be pegged to gold. From then on, trust began to shift from "physical assets" to "institutional commitments" and "market mechanisms."
At the same time, efficiency improvements were also underway. In the 1960s, computerized clearing systems emerged, transforming financial transactions from manual matching to electronic processing. Think about it: previously, to complete a transaction, traders had to shout prices in the trading hall; now, they just need to click a mouse. This is a classic example of how technology enhances efficiency.
There is an important realization here: every major transformation of the financial system essentially rebalances the relationship between efficiency and trust.
The Dilemma of Traditional Finance: Trust Costs Erode Efficiency, Friction Continues to Rise
Now let’s look at the current traditional financial system. Its core logic is: establishing trust through intermediary institutions. Banks, exchanges, clearinghouses, custodians—these intermediaries act as "trust nodes," providing guarantees for both parties in a transaction.
This system worked well during the industrial era. But in today’s digital and globalized world, problems have begun to surface. Let me give you a specific example:
Suppose you are in China and want to transfer $10,000 to a friend in the United States. This money needs to go through your bank, an agent bank, the receiving bank, and other layers of institutions. Each layer charges fees, and each layer requires compliance checks. The entire process may take 1 to 3 business days, and fees can reach hundreds of dollars. More importantly, you cannot see where your money is in real-time; you can only "trust" these intermediaries to handle it properly.
Global financial institutions spend hundreds of billions of dollars annually on compliance, accounting for about 15% of the operating costs of large institutions. What does this mean? It means that every time you use financial services, a significant portion of the cost goes into "proving that this system is trustworthy," which is their friction coefficient.
Think about it: what if there were a technology that could reduce trust costs while maintaining or even enhancing efficiency?
The Breakthrough of Blockchain: Replacing Intermediaries with Algorithms
This is the significance of blockchain technology. In 2008, Satoshi Nakamoto published the Bitcoin white paper, proposing a revolutionary idea: we can establish trust using "distributed ledgers + proof of work" without relying on intermediaries.
Let me explain this concept with an analogy. Traditional finance is like a centralized library where all the ledgers are kept by a librarian, and you have to trust that the librarian won’t tamper with the records. Blockchain, on the other hand, is like making thousands of copies of this ledger and distributing them to everyone. Whenever there is a new transaction, everyone’s ledger is updated simultaneously. If someone wants to tamper with the record, they would need to modify thousands of ledgers at the same time, which is technically almost impossible.
From 2013 to 2015, the emergence of Ethereum further propelled this revolution. Vitalik Buterin introduced the concept of "smart contracts." This means that financial rules can be written as code and executed automatically. Using the previous example: if you want to transfer money to your friend in the U.S., a smart contract can automatically check your balance, execute the transfer, and update both accounts—all without any intermediaries, completing the process in minutes for just a few dollars in fees.
By October 2025, the total locked value in DeFi (decentralized finance) had reached $160 billion, and the peak daily trading volume on decentralized exchanges hit $80 billion. These numbers prove that replacing intermediaries with algorithms is not just a theory but a reality being practiced on a large scale.
However, pure decentralization has encountered new problems.
Here, I need to help you understand a key turning point. Although DeFi has technically achieved trustlessness, it exposes a new contradiction: experience and trust seem to be mutually exclusive.
For example: pure DeFi requires users to use self-custody wallets like MetaMask, managing private keys and mnemonic phrases. It’s like giving you a key to a safe but telling you: if you lose this key or write the password incorrectly, all your assets will be lost forever, and no one can help you retrieve them. This is too high a barrier for those who are not tech-savvy.
On the other hand, pure centralized exchanges, while convenient, require you to fully trust that the platform will not misappropriate your assets. There have been numerous historical instances of centralized exchanges collapsing or running away, resulting in significant user losses.
This leads us to the main topic of today: LayerFi. It attempts to answer the question: can we provide a centralized user experience while maintaining decentralized trust?
2. Understanding the Innovative Architecture of LayerFi
Now let’s delve into what LayerFi really is. Many people simply think of LayerFi as a hybrid of CeFi (centralized finance) and DeFi (decentralized finance), a compromise solution. But this understanding is rather superficial.
The Core Design Philosophy of LayerFi: Layered Architecture
Let me open your mind with an analogy you are familiar with. Imagine you are using an e-commerce platform, like Amazon. The front-end interface you see is meticulously designed—simple and easy to use, allowing you to browse products, place orders, and make payments effortlessly. But in the back end, there are extremely complex inventory management systems, logistics scheduling systems, and payment clearing systems running. You don’t need to see these systems, nor do you need to understand their details.
LayerFi adopts this very idea: the user-visible front end pursues an ultimate experience, while the user-invisible back end anchors decentralized trust. But this is not a simple "front-end and back-end separation"; it is a deeper architectural innovation.
Let me use another analogy to help you understand the essence of this innovation. Imagine a modern skyscraper. The foundation is buried deep underground, bearing the weight of the entire building, and must be extremely solid, possibly taking years to build, but once completed, it is unshakeable. The main structure needs to be strong enough to support various functions but does not require the same level of over-design as the foundation. The top-level observation restaurant, however, must be elegant and exquisite, providing an ultimate user experience.
No one would question why the foundation and the restaurant use different materials and designs—because they are solving fundamentally different problems. LayerFi applies this engineering wisdom to financial architecture.
Detailed Explanation of LayerFi's Three-Tier Architecture
Now let me break down this architecture specifically. LayerFi divides the entire financial system into three tiers, each with clear responsibilities and the most suitable technological solutions.
First Layer: Settlement Layer — The Foundation of Trust
This is the foundation of the entire system, responsible for the final asset settlement and security assurance. In this layer, our core goal is decentralization and absolute security, not speed. Just like a bank vault, we prefer it to be a bit slower and more complex, but it must be absolutely secure.
In terms of technical implementation, this layer is typically the Ethereum mainnet or other mature Layer 1 blockchains. All key asset custody and ownership verification are completed at this layer. Your assets are locked here through smart contracts, which are completely transparent, verifiable, and immutable. The platform has no authority to touch these assets; only you can transfer them through cryptographic signatures.
The design philosophy of this layer is: it’s okay to be slow, and it’s acceptable to be expensive, but it must be unbreakable. Just like you wouldn’t complain about the bank vault’s door being too thick or slow to open—because that is the guarantee of security.
Second Layer: Execution Layer — The Engine of Efficiency
This is the middle layer of the system, responsible for processing a large number of daily transactions and computations. In this layer, we pursue high performance and low costs. It’s like the main structure of a building, needing to be strong enough to support various functions but not requiring the same level of over-design as the foundation.
Technically, this layer typically employs Layer 2 scaling solutions, such as Optimistic Rollup or ZK-Rollup. The core idea of these technologies is to efficiently process a large number of transactions off-chain and then only package the final results to submit to the settlement layer. It’s like various departments of a company handling a large volume of business daily but only needing to report summarized results to headquarters periodically.
Let me give you a specific example. Suppose you are conducting high-frequency trading on the LayerFi platform, with dozens of transactions per second. If each transaction had to be confirmed on the Ethereum mainnet, you would be overwhelmed by the high gas fees (possibly tens of dollars per transaction) and slow confirmation speeds (which could take minutes). But through the execution layer, these transactions are completed instantly on Layer 2, costing only a few cents, with speeds reaching milliseconds. The system then periodically packages the results of batch transactions to submit to the settlement layer, ensuring final security.
This design allows you to gain both speed and cost advantages while maintaining ultimate decentralized security assurance. This is not a compromise but achieving optimal solutions at different levels.
Third Layer: Application Layer — The Interface of Experience
This is the layer that users directly interact with, responsible for providing a friendly interface and rich functionalities. In this layer, we pursue an ultimate user experience. It’s like the restaurant on the top floor of a skyscraper, which must be elegant, comfortable, and easy to use.
In this layer, the platform can adopt a centralized approach to optimize the experience, as this layer does not involve asset control.
You can register using your phone number or email without needing to understand what a private key is. You can receive real-time assistance from customer service, just like using a traditional financial app. The system will automatically handle complex technical details: calculating and advancing gas fees, verifying address formats, optimizing transaction paths, and providing real-time market analysis and risk alerts. All of this is designed to make your experience as smooth as possible.
But there is a crucial design principle here: although this layer is centralized, it has no authority to touch your assets. Just like a restaurant waiter can take your order, pour water, and introduce dishes, they cannot take money from your wallet. Your assets are always locked in the smart contracts of the first layer, and only you can transfer them through cryptographic signatures.
What the platform can do in this layer is only to help you construct transaction instructions, provide an interface, and optimize the experience. But the ultimate power to execute these instructions always remains in your hands.
The Ingenuity of Layered Design: Breaking the Impossible Triangle
Now let me help you understand why this layered architecture is a groundbreaking innovation rather than a simple compromise.
Traditional blockchain systems face a well-known "impossible triangle": decentralization, security, and performance cannot all be optimized simultaneously. If you choose extreme decentralization and security (like Bitcoin), you have to sacrifice performance; if you choose high performance (like some new public chains), you have to compromise on the degree of decentralization.
LayerFi breaks this dilemma through layered design. The key insight is that different functions have different requirements for these three dimensions.
Asset custody must be decentralized and secure, but it can be a bit slower—so we place it in the settlement layer. Daily transactions require high performance and low costs, but can moderately reduce the degree of decentralization—so we place it in the execution layer, while ensuring final security by periodically submitting results to the settlement layer. The user interface needs an ultimate experience and can be completely centralized—so we place it in the application layer, but never give it asset control.
This is akin to successful logistics systems in reality. For ordinary packages, standard processes are used, pursuing efficiency; for valuable items, special protection processes are activated; and in the final core clearing and accountability phase, strict institutional guarantees are in place. Each layer is optimized for specific needs, achieving a balance of cost, efficiency, and security overall.
Practical Validation of the October 11 Event: A True Display of Architectural Advantages
Now let’s return to the question at the beginning of the article: why did some systems collapse during the extreme market conditions on October 11, while platforms with certain architectures performed robustly?
Traditional centralized exchanges are prone to systemic risk transmission under concentrated clearing pressure. Like a domino effect, if one link has a problem, the entire system is affected. Moreover, in extreme situations, platforms may take opaque risk control measures for their own interests, or even maliciously liquidate positions. Users are entirely reliant on the platform's "goodwill," but at critical moments, the platform's "goodwill" is often unreliable.
Purely decentralized DeFi, while free from the risk of platform malfeasance, faces issues with on-chain execution delays and users needing to manage risks independently, making it difficult for many users to respond to market changes in a timely manner. When gas fees soar to hundreds of dollars during extreme market conditions, ordinary users cannot operate at all. When liquidation prices are triggered, users may be unable to add margin in time due to technical issues, leading to amplified losses.
The Layered Architecture of LayerFi Exhibits Unique Advantages in Such Situations:
The centralized front end can respond quickly, maintaining liquidity and service continuity, helping users adjust their positions in a timely manner. The system can provide real-time risk warnings, automatically adjust gas fee strategies, and optimize transaction paths. These functions require strong centralized server support, but they can indeed save lives at critical moments.
The decentralized back end ensures the transparency and fairness of the clearing process through smart contracts, avoiding human intervention. You can verify in real-time that the platform is executing the clearing according to established rules, rather than through opaque operations. Even if the platform's front-end servers crash, your assets remain securely locked on-chain, executed according to the rules, and you can interact directly with the smart contracts through other means to retrieve your assets.
This is like a ship sailing in a storm: the captain (centralized front end) needs to respond flexibly to changes, adjust the course in a timely manner, and direct the crew to handle various emergencies; but the ship's structure (decentralized back end) must be solid and reliable, not subject to change based on the captain's decisions. The captain can decide which route to take, but he cannot change the ship's materials, nor can he turn an iron ship into a paper ship.
Think about it: is this architecture a compromise? No, it is a systematic innovation that achieves optimal solutions at different levels. It allows you to have the support of professional services while retaining ultimate asset control.
3. Why LayerFi Will Dominate the Next Five Years
Now you might ask: since pure DeFi is theoretically more perfect, why will LayerFi dominate the future? Let me explain from three dimensions.
First Dimension: User Threshold Determines Market Boundaries
Let’s start with a thought experiment. Imagine on-chain finance needs to grow from the current 25 million monthly active users to 150 million monthly active users. What is needed?
The answer is simple: lower the usage threshold. The vast majority of people are not technical experts; they do not want to understand what private keys, mnemonic phrases, or gas fees are. They just want a simple and easy-to-use financial service. Just like most people use PayPal or WeChat Pay, they do not need to understand the underlying payment clearing technology; they just need to scan a code.
The usage threshold of pure DeFi means it can only serve a niche group. If a mnemonic phrase is lost, assets cannot be recovered permanently, and the numerous interactions hide uncontrollable security risks, which is an unacceptable risk for ordinary users. Manually setting gas fees can lead to transaction failures or excessive payments if not done carefully. If an address is mistyped by a single character, assets will be sent to the wrong address and can never be retrieved.
LayerFi solves this problem through "hiding backend complexity and simplifying frontend interaction." Users enjoy a Web 2-level experience, but the underlying security is guaranteed by Web 3 technology. This is a prerequisite for large-scale adoption.
An important insight: the success of technology lies not in how advanced it is, but in how many people it can serve.
Second Dimension: The Logic of Institutional Capital Entry
Now let’s look at it from the perspective of institutional investors. Traditional financial institutions manage trillions of dollars in assets and are very interested in on-chain finance, but they have two core concerns:
First, the responsibility subject is unclear. The anonymous governance structure of pure DeFi means that if problems arise, there is no one to hold accountable. This conflicts with the basic requirements of financial regulation. Imagine if a pension fund wants to invest in a completely anonymously governed protocol; would the regulatory authorities agree? Would the board agree?
Second, the security of asset custody cannot be verified. Institutions need custodial solutions that are auditable and traceable, requiring third-party audits and clear compliance processes.
LayerFi addresses these issues. The front end has a clear operating entity that can assume legal responsibility. Although the back end is decentralized, all transaction records are on-chain, completely transparent and traceable. Asset custody is executed by smart contracts, with third-party auditing firms conducting regular audits.
In 2025, the scale of on-chain RWA (real-world assets) grew from $8.6 billion to $30 billion, a growth of 249%. Most of the projects adopting the LayerFi architecture are included. Why? Because traditional financial giants like BlackRock need this "compliance and regulatory + technology trust" hybrid architecture.
If the scale of RWA is to grow to $5 trillion in the next five years, LayerFi will be the necessary path for institutional capital entry.
Third Dimension: Regulatory Adaptability Determines Survival Space
Finally, let’s talk about regulation. This may be the most easily underestimated but ultimately decisive factor.
The attitude of global regulatory agencies towards crypto assets is shifting from "watching" to "regulating." Their core demand is to achieve controllable risks and traceable responsibilities without stifling innovation.
Pure DeFi struggles to meet basic regulatory requirements such as KYC (Know Your Customer) and AML (Anti-Money Laundering) due to the lack of a governance subject. Regulatory agencies cannot implement effective oversight over a completely anonymous protocol.
Pure CeFi, while subject to regulation, poses single-point risks due to excessive centralization. Platforms may misappropriate customer assets or manipulate markets, requiring continuous strong regulation.
LayerFi achieves effective compatibility with regulation through its layered architecture. The front end executes compliance requirements such as KYC and AML, allowing regulatory agencies to clearly know who is using the platform. The back-end on-chain records are completely transparent, enabling regulatory agencies to track the flow of funds in real-time and prevent money laundering and terrorist financing risks.
Let me give you a historical analogy: the emergence of PayPal in 1998. It did not attempt to overthrow the banking system but acted as a bridge between the traditional banking system and internet payments, promoting the large-scale adoption of electronic payments within a compliance framework.
LayerFi plays a similar role: it is a bridge between decentralized ideals and regulatory realities, a feasible path for on-chain finance to move towards mainstream acceptance.
4. The Four Pillars Supporting the LayerFi Ecosystem
Now let’s delve into how the LayerFi ecosystem operates. I like to use architecture as an analogy: if the modular architecture is the skeleton, then RWA, composability, security systems, and compliance frameworks are the four pillars supporting this building.
First Pillar: RWA — The Value Anchor Connecting Virtual and Real
Let me start with a question: why was DeFi early on considered a "castle in the air"? Because it primarily relied on crypto-native assets like BTC and ETH, which have volatile values and are almost unrelated to the real economy.
Imagine this: when global stock markets crash, Bitcoin might soar; when the Federal Reserve raises interest rates, Ethereum might plummet. This disconnection from the traditional economy makes it difficult for DeFi to become a true financial infrastructure.
The introduction of RWA (real-world assets) changes this situation. Through blockchain technology, we can tokenize traditional assets such as government bonds, stocks, bills, real estate, money market funds, and commodities, allowing them to circulate and trade on-chain.
Let me illustrate with a specific example. BlackRock's BUIDL fund invests in tokenized U.S. government bonds. This means that an ordinary investor in Singapore can purchase a tokenized share of U.S. government bonds for a few thousand dollars, enjoying the stable returns of U.S. government bonds. In the traditional financial system, this would require complex cross-border processes and high thresholds.
At the beginning of 2024, the scale of on-chain RWA was only $8.6 billion. By September 2025, this figure surpassed $30 billion, growing by 249%. Why such rapid growth? Because regulation is becoming clearer, technology is maturing, and most importantly, traditional financial institutions are starting to take this field seriously.
RWA not only injects stable value support into on-chain finance but, more importantly, establishes a bridge between on-chain finance and the real economy.
Second Pillar: Composability — The Lego Blocks of the Financial World
Now let me help you understand a more abstract but crucial concept: composability. This is the core gene that distinguishes on-chain finance from traditional finance.
In traditional finance, if you want to combine different financial products, you need to deal with multiple institutions, sign multiple contracts, and go through various systems. For example, if you want to implement an "arbitrage strategy": borrow on platform A, buy assets on platform B, sell on platform C, and then repay on platform A. This process may take several days, involve multiple accounts, and is complex and risky.
In on-chain finance, all of this can be completed in a single transaction. Different protocols, assets, and functions are like Lego blocks that can be freely combined. This is known as "composability."
Let me explain composability in three levels:
Morphological Composability: This is the most basic level. Just like USB interfaces are standardized, any USB device can be plugged into any USB port. On-chain, all tokens follow the same standards (like ERC-20), and all protocols provide standardized interfaces. This way, USDC can be traded on Uniswap and borrowed on Aave without any adaptation.
Syntactic Composability: This is akin to function calls in programming languages. You can combine Uniswap's trading functionality, Aave's lending functionality, and Compound's interest rate mechanism to create entirely new financial products. Developers can combine existing modules like building blocks.
Atomic Composability: This is the highest level. Multiple operations can be "all or nothing" in a single transaction. Either all steps succeed, or everything rolls back. This avoids the risk exposure of intermediate links. It's like dominoes; either all fall down or none do.
Now, the introduction of AI technology has brought composability into a new phase. AI agents can monitor the market in real-time and automatically combine the optimal protocols and strategies. For example, when market volatility increases, AI can automatically shift your assets from high-risk leveraged trading to stablecoin investments; when arbitrage opportunities arise, AI can automatically invoke flash loans and DEX modules to complete the arbitrage.
Composability allows on-chain finance to evolve from "programmable finance" to "self-driving finance," an innovative dimension unimaginable in traditional finance.
The Third Pillar: Security System — The Technical Foundation of Trust
Let’s face a problem honestly: security risks are one of the biggest challenges in on-chain finance. In the first half of 2025, the DeFi industry lost hundreds of millions of dollars due to various security issues. If basic security cannot be guaranteed, then even the best architecture is meaningless.
How does LayerFi address this challenge? The answer is: by establishing a multi-layered security defense system.
Prevention: All new projects undergo security audits and ratings by authoritative or market-recognized security agencies before going live. This is similar to how buildings must pass fire safety inspections before being put into use. Audit content includes code logic vulnerabilities, permission control flaws, asset security risks, etc. For core protocols, formal verification is also required to mathematically prove the correctness of the code logic.
For RWA projects, in addition to technical audits, off-chain asset due diligence is also necessary. For example, tokenized bonds need to verify the issuer's credit rating, the authenticity of money market funds, the legality of custodians for stocks and bills, and real estate needs to verify property ownership and valuation reports.
Monitoring: The platform monitors on-chain transaction behavior in real-time. If abnormal fund flows are detected, such as large transfers or frequent small transfers (characteristics of money laundering), the system will automatically trigger alerts. If necessary, freezing permissions can be added to freeze accounts or suspend transactions, in compliance with regulatory requirements.
At the same time, some platforms have also introduced on-chain insurance mechanisms. Users can purchase insurance, which will compensate for losses caused by smart contract vulnerabilities.
Post-Event Handling: If a security incident does occur, the platform has a clear compensation mechanism. Affected users are compensated through an income pool or insurance fund. This addresses the flaw of "losses are borne by oneself" in pure DeFi models.
The core idea of this system is: we cannot guarantee that problems will never occur, but we can try to prevent them before they happen, respond promptly when they do, and handle them properly afterward.
The Fourth Pillar: Compliance Framework — Institutional Guarantee for Long-Term Development
Finally, let’s talk about compliance. Many people see compliance as a constraint on innovation, but I want to offer a different perspective: compliance is the ticket for long-term development.
Imagine you want to open a restaurant. You could choose not to obtain a business license or undergo health inspections, saving a lot of costs and trouble. But what would the result be? You might be shut down at any time, customers would be afraid to come, and you would never grow. In contrast, if you proactively comply, although the initial costs are higher, you gain the legitimacy for long-term operation, customer trust, and the ability to grow and strengthen.
What is LayerFi's Compliance Framework?
User Side: Implement moderate KYC and AML requirements. Users need to provide identification when registering, and large transactions require additional verification. This is not to restrict users but to prevent the platform from being used for money laundering, terrorist organizations, child pornography, etc.
Platform Side: Actively report the platform's financial status, risk control measures, and user fund management, suggesting a registration system rather than establishing a strict and complex regulatory framework.
Asset Side: RWA tokenized products must be issued in cooperation with licensed institutions; native assets can be excluded, and future data assets will be discussed separately. For example, tokenized U.S. government bonds must be issued and custodied by financial institutions holding relevant licenses.
Some platforms have even established comprehensive compliance reporting systems. Users can view the platform's asset proofs in real-time, and regulatory agencies can access transaction records at any time. All asset custody information is on-chain and completely transparent.
Compliance is not a constraint but a necessary path for on-chain finance to move towards the mainstream and gain broader recognition.
### Looking Ahead to the Financial Landscape of 2030
Now, let’s turn our attention to the future. Based on current trends and technological evolution, we can reasonably predict what will happen in the next five years.
Digital Will Speak: The Rise of a Trillion-Dollar Market
First, let’s look at some key data. Grand View Research predicts that the global DeFi market size will grow from $26.94 billion in 2025 to $231.19 billion in 2030, with a compound annual growth rate of 53.7%.
But this is just based on revenue. If we look at the actual assets under control, the predictions will be even more aggressive. I believe that by 2030, the total locked value (TVL) in DeFi will grow from the current $160 billion to $2 trillion. More importantly, the scale of RWA will explode from $30 billion to $5 trillion, with LayerFi platforms contributing over 80%.
User numbers will also see a qualitative leap, growing from the current 25 million monthly active users to 150 million monthly active users. This penetration rate is comparable to the early levels of mobile payments in 2015.
This means that on-chain finance will transform from a tool for professionals into a daily financial service for ordinary people.
Three Stages of Technological Evolution
Let me help you understand how this growth will be achieved. I divide the next five years into three stages:
Stage One (2025-2026): Infrastructure Consolidation Period
The core task of this stage is to solidify the foundation. Layer 1 high-performance financial public chains + Layer 2 technology will become mainstream, with over 70% of transactions completed on layer two networks, and gas fees dropping to a few cents. Imagine that a transaction on the Ethereum mainnet currently costs tens of dollars in gas fees; in the future, it will only cost a few cents, or on high-performance public chains like Solana or Hyper, you can sacrifice some decentralization for lower gas fees.
At the same time, account abstraction technology will bring a qualitative change to user experience. You will no longer need to remember mnemonic phrases; you can log into your wallet using your phone number, email, or social media account, or even an NFT or identity token. If you forget your password, you can recover it through a "social recovery" mechanism, as simple as recovering a WeChat password.
The goal of this stage is to make using on-chain finance as easy as using PayPal or WeChat Pay.
Stage Two (2027-2028): Application Explosion Period
Once the infrastructure matures, the application layer will experience an explosion. The types of RWA assets will significantly expand, including not only government bonds but also commercial real estate in core cities, small and medium-sized enterprise loans, etc. The scale of tokenized government bonds is expected to exceed $1 trillion.
Traditional financial institutions will participate deeply. Imagine this: in your bank app, in addition to purchasing traditional financial products, you can also buy on-chain financial products with one click; in your brokerage app, in addition to buying and selling stocks, you can trade tokenized securities.
Even more interesting is the integration of AI and LayerFi. AI agents will become your "smart financial advisors," automatically allocating assets based on your risk preferences. When the market fluctuates, AI will automatically adjust your portfolio; when arbitrage opportunities arise, AI will automatically execute strategies.
The characteristic of this stage is that the boundaries between on-chain finance and traditional finance become blurred, and users may not even feel that they are using blockchain technology.
Stage Three (2029-2030): Ecosystem Maturity Period
By this stage, a unified technical standard and regulatory framework will be established globally. Modules developed by different countries and platforms can seamlessly connect. The regulatory system will become more consistent, and cross-border business will no longer require repeated compliance.
On-chain finance will cover complex structured financial products. Tokenized bonds and real estate can directly interact with yield modules, insurance modules, and credit modules, achieving a level of product complexity comparable to traditional finance.
The hallmark of this stage is that on-chain finance becomes part of the global financial infrastructure, coexisting and symbiotically with the traditional financial system.
Opportunities for Different Participants
For Ordinary Users: You do not need to become a technical expert; you just need to choose a trustworthy LayerFi platform to participate in investments that were previously only accessible to institutions. For example, you can use a few hundred USDC or USDT to purchase tokenized U.S. government bonds, stocks, or money market funds to obtain relatively high-quality assets and returns; you can invest in overseas real estate without having to go there in person.
At the same time, you can also earn token incentives by participating in platform governance, sharing in the platform's growth dividends.
For Traditional Financial Institutions: LayerFi is the best tool for your digital transformation. In the short term, you can migrate some backend processes on-chain, significantly reducing costs; in the medium term, you can launch hybrid products that combine online and offline services to enhance competitiveness; in the long term, you can build your own LayerFi modules to expand into global markets.
Importantly: you do not need to overthrow yourselves; you just need to view LayerFi as a tool for business expansion.
For Regulatory Agencies: It is recommended to implement risk-based regulatory measures, applying different levels of regulatory intensity to projects of varying risk levels. Promote regulatory sandboxes to allow innovative projects to experiment in a controlled environment. Push for the unification of international standards to avoid regulatory arbitrage, prioritizing a registration system.
### Conclusion: The Future of Finance is Symbiosis, Not Disruption
Let’s return to the initial question: What is LayerFi? Is it a compromise?
I hope you now understand: LayerFi is not a compromise but a balance achieved at a higher dimension. It is not simply a trade-off between centralization and decentralization but achieves optimal solutions at different levels.
When 2030 arrives, and DeFi TVL surpasses $2 trillion, with RWA scaling to $5 trillion, we will find that LayerFi has not disrupted traditional finance but has established a symbiotic ecosystem.
Imagine a scenario where farmers in Africa can directly participate in the global capital market through their mobile phones; investors in New York can easily invest in real estate projects in Asia; ordinary people can enjoy financial services that were previously only available to institutions; idle funds can quickly flow to where they are most needed around the world.
In this scenario, the compliance and user trust of traditional finance perfectly merge with the transparency and efficiency of on-chain finance. Financial services become as flexible as building blocks, and the financial system becomes as open as the internet.
The market panic on October 11 will eventually subside, but the transformation driven by LayerFi will not stop. In the next 3 to 5 years, projects that deeply engage with LayerFi, focusing on RWA and user experience, will become industry leaders. Ordinary participants only need to choose compliant platforms to share in the dividends of this transformation.
The future of finance is not a choice between efficiency and trust, but a synergistic win-win of both; it is not a confrontation between centralization and decentralization, but a complementary advantage of both.
LayerFi is the key bridge to this future. And now is the best time for us to embark on this journey.
PS:
On-chain computing is already relatively mature, and decentralized storage on-chain may become a new key component in the next 5 years.
Beyond RWA assets, a larger asset category will be the social production data generated by human societal behavior on-chain. We will discuss this in our next article.
I believe DeFi is the future, and LayerFi is a necessary stage in this evolutionary process.
We are also working on a high-performance Layer 1 public chain, so stay tuned.
Our BitMart Card is very useful, and everyone is welcome to apply. https://www.bitmart.com/bitmart-card
Our U.S. site will be launched in October. On the launch day, we will be able to legally provide digital asset trading services to users in 49 states across the U.S. Stay tuned for updates.
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