The decentralized finance (DeFi) landscape is undergoing a significant evolution, as detailed in a recent report by Artemis and Vaults.fyi. Unlike the speculative frenzy that characterized previous bull markets, this new phase is marked by DeFi’s integration as a backend financial layer for various applications, supported by a surge in institutional participation.
As it stands, the total value locked (TVL) in leading DeFi lending protocols, including Aave, Euler, Spark, and Morpho, has soared to nearly $60 billion—an increase of 60% over the past year. This growth reflects a shift away from merely chasing high yields to the development of sophisticated financial networks that are increasingly institutionalized.
One notable trend highlighted in the report is the concept of the “DeFi mullet.” This term refers to user-facing applications seamlessly embedding DeFi infrastructure into their backend. By abstracting complex DeFi processes, these applications can provide users with services such as loans or yields with a more intuitive experience. For instance, Coinbase users can leverage their Bitcoin holdings through Morpho’s lending infrastructure, which has already facilitated over $300 million in loans. Similarly, integrations with protocols like Aave allow wallets to offer competitive yields on digital currencies without requiring the users to engage directly with DeFi mechanics.
Moreover, DeFi protocols are expanding their scope to include tokenized real-world assets (RWAs) like U.S. Treasuries, which can now serve as collateral or earn yield. This innovation includes platforms like Pendle, which provides tokenization of investment strategies and is managing over $4 billion in locked value through tokenized stablecoin yields.
Another key development is the emergence of crypto-native asset managers, such as Gauntlet and Re7, which are actively managing capital across DeFi ecosystems. These firms are playing a critical role in governance and risk management, with their managed capital quadrupling since January, now totaling over $4 billion.
As this new wave of DeFi adoption takes shape, it is clear that the sector is moving beyond its early speculative roots and is positioning itself as a foundational component of the broader financial ecosystem.
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