Decentralized finance (DeFi) is a revolutionary shift in the financial landscape, offering a blockchain-based system that facilitates transactions without relying on traditional intermediaries like banks or brokerages.
While the DeFi sector experienced a challenging period through 2022 and early 2023, the latter half of 2023 saw a significant resurgence. This growth was largely fueled by the anticipation and eventual approval of spot crypto exchange-traded funds (ETFs) in the US, signaling a pivotal moment for digital assets.
These moves were a major step toward blending digital assets with traditional financial products, a transition that has been further driven by the increasing maturation and institutionalization of the crypto ecosystem.
This is evident in the development of other products and services, such as:
- Tokenization
- Liquid staking
- Derivatives and futures
DeFi has now moved beyond retail users, integrating further with traditional finance as institutions begin to incorporate DeFi protocols into their operations. The DeFi world moves at an exceptionally fast pace, with new technologies and platforms constantly emerging, making it a complex and confusing space for investors to navigate.
This guide explains how these key technologies and others are shaping the evolving DeFi landscape.
What are decentralized exchanges?
Decentralized exchanges, known as DEXs, facilitate the direct trading of cryptocurrencies between users through smart contracts, eliminating the need for a central authority.
These platforms allow users to maintain control of their assets throughout the trading process. A few popular DEXs include Uniswap, PancakeSwap and dYdX.
What is DeFi asset management?
DeFi asset management services aim to make investing simpler and more accessible.
They often use automated strategies to maximize yield without the need for constant monitoring. Some examples include Galaxy Asset Management and Maple Finance.
These systems are non-custodial, meaning users don’t have to give up their private keys or transfer their funds. An example is Yearn Finance, which automates yield-farming strategies to optimize returns.
What are yield farming and staking?
Yield farming allows users to earn rewards by providing liquidity to a protocol. This is done by depositing cryptocurrencies into a liquidity pool; in return, the user receives a portion of the trading fees.
Staking involves locking up assets to help secure and run a blockchain in exchange for rewards.
Liquid staking is a newer technology where users stake their crypto, but receive a liquid staking token (LST) in return that can be used elsewhere in DeFi while their original assets are locked. Liquid Collective’s Liquid Staked SOL (LsSOL) on the Solana network is an example of this. Another is JitoSOL, an LST by Jito Network.
Asset manager VanEck has filed an S-1 registration with the SEC to launch an ETF tracking JitoSOL.
Alongside DeFi-native staking options, centralized exchanges like Kraken make staking easy for users who want a simple, custodial experience, and they increasingly offer access to LSTs and expanded staking products.
How do DeFi lending and borrowing protocols work?
Lending and borrowing platforms enable users to lend their crypto assets and earn interest, or borrow assets by providing collateral. Unlike traditional loans, DeFi lending protocols often require borrowers to over-collateralize their loans. Interest rates are typically set by the supply and demand on the platform through an algorithm.
Examples of lending platforms include Aave, Compound and MakerDAO.
Aave is available on multiple blockchains, including Ethereum, Avalanche and Aptos, making it one of the most accessible and innovative lending protocols in DeFi today.
What is DeFi infrastructure?
The DeFi space includes firms that provide the foundational technology and tools for building and using DeFi.
Circle, the issuer of the USDC stablecoin, is partnering with Fireblocks to launch a new blockchain called Arc, which is tailored for businesses and optimized for stablecoins. Meanwhile, Coinbase Global (NASDAQ:COIN), a major crypto exchange, has launched a new app called Base, which combines a crypto wallet, trading, payments and social media. Coinbase also plans to launch nano perpetual futures for SOL and XRP in the US.
To boost its stablecoin payment services, Ripple plans to acquire a stablecoin payments platform called Rail.
What are stablecoins?
Stablecoins are cryptocurrencies designed to minimize price volatility by pegging their value to a stable asset, like the US dollar. There are different types of stablecoins, including:
- Fiat-collateralized stablecoins, which are backed by reserves held in traditional currencies.
- Crypto-collateralized stablecoins, which are backed by other cryptocurrencies.
- Algorithmic stablecoins, which use algorithms to maintain their peg without direct collateral.
Examples include Tether (USDT), Circle Internet Group’s (NYSE:CRCL) USD Coin (USDC) and Dai (DAI). Coinbase, Kraken and Gemini are well-known platforms for trading stablecoins and other cryptocurrencies.
Additionally, MetaMask, a self-custodial crypto wallet, is set to launch its own stablecoin, MetaMask USD (mUSD), which will be issued by Bridge and powered by M0 liquidity.
What is tokenization?
DeFi platforms translate real-world assets, such as real estate or stocks, into digital tokens on a blockchain. This makes these assets accessible on-chain, effectively bridging traditional finance and DeFi.
There are several companies and platforms at the forefront of this trend.
JPMorgan Chase (NYSE:JPM) has a tokenized debt platform, Kinexys, that allows clients to trade and settle tokenized debt instruments, a service that State Street has also joined.
Additionally, Backed Finance recently partnered with Kraken to expand its xStocks product, which tokenizes stocks, to the Tron blockchain. Meanwhile, S&P Dow Jones Indices is reportedly in talks to license and list tokenized versions of its benchmarks with exchanges, custodians and DeFi protocols.
Ethereum and Solana have a major role in the tokenization movement too.
Ethereum is favored by institutions for its smart contracts. DBS Group Holdings (SGX:D05), a major financial institution, recently announced plans to launch tokenized structured notes on the Ethereum blockchain, while eToro Group (NASDAQ:ETOR) has plans to launch tokenized versions of US-listed stocks on the same network.
For its part, Solana was recently selected by Galaxy Digital (NASDAQ:GLXY) and Superstate for the launch of GLXY, a tokenized public share.
What are blockchain oracles?
These services connect smart contracts to real-world data, enabling them to execute based on off-chain information. Chainlink is one prominent blockchain oracle. Recently, it partnered with Intercontinental Exchange to bring foreign exchange and precious metals data on-chain. Chainlink also has its own on-chain treasury vehicle, Chainlink Reserve, which can support staking rewards and development funding.
What are perpetual futures?
Perpetual futures, known as perps, are derivatives contracts that allow traders to speculate on the price of an asset without an expiration date. They are a high-risk financial instrument that uses leverage to amplify gains or losses.
Coinbase has a derivatives arm, Coinbase Financial Markets, that launched US perps on July 21, 2025. On September 22, Coinbase Derivatives will expand its product suite with the launch of equity index futures.
Coinbase acquired Deribit, the largest platform for trading Bitcoin options and the world’s leading crypto options exchange by volume and open interest, in a US$2.9 billion deal in May 2025.
Kraken also offers US-compliant perps.
Investor takeaway
As DeFi continues to mature and attract interest from traditional financial institutions, its integration with conventional finance is accelerating. With ongoing advancements, DeFi is set to redefine how financial transactions are conducted, making it a pivotal area to watch in the future of finance.
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Securities Disclosure: I, Meagen Seatter, hold no direct investment interest in any company mentioned in this article.
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