Aave

DeFi

when

Opinion by: Rachel Lin, co-founder and CEO at SynFutures
DeFi has come a long way since the boom-and-bust cycle of 2020’s DeFi Summer. Much of the surge in the early days was fueled by experimentation, hype and unsustainably high incentives.&nbsp;
Five years on, DeFi’s foundations look very different. The past year’s experimentation is a quiet consolidation phase, setting the stage. 2025 may be remembered as the year when DeFi surpassed centralized exchanges (CEXs).
The bear market in 2023 and 2024 washed out many DeFi projects that lacked a product-market fit, and forced other DeFi platforms to mature, focusing on infrastructure and achieving real adoption.
<h2 id="decentralized-exchanges-evolved">Decentralized exchanges evolved</h2>
While Celsius and BlockFi’s collapse and FTX’s bankruptcy <a href="https://cointelegraph.com/news/after-ftx-defi-can-go-mainstream-if-it-overcomes-its-flaws" rel="noopener noreferrer nofollow">exposed weaknesses</a> inherent in many centralized platforms, decentralized exchanges (DEXs) have sought to deliver similar speed and user experience, leveraging high-performance chains and building their own infrastructure.
Just as importantly, as blockchain latency has improved, fully onchain order books have become viable, allowing DeFi protocols to start tackling prior pain points in capital and liquidity efficiency.&nbsp;
Moving beyond the pool-based models of early perpetual DEXs like GMX, new hybrid designs combine automated market makers (AMMs) with the order execution of orderbook exchanges, or support outright order books only, enabling far more efficient liquidity provisioning for traders by mitigating slippage and depth issues.
<h2 id="defi-captures-market-share">DeFi captures market share</h2>
From a numbers standpoint alone, Q2 saw the top 10 DEXs in the market facilitating $876 billion in spot trades (up 25% from the previous quarter). In contrast, CEXs saw their spot volumes decline 28% to $3.9 trillion, pushing the volume ratio between the two to a record low of 0.23 in Q2.&nbsp;
DeFi’s resurgence can be attributed to the growth of trading. Lending protocols, for instance, have eclipsed their centralized peers, <a href="https://coinmarketcap.com/academy/article/crypto-lending-drops-43percent-from-2021-peak-as-defi-borrowing-jumps-959percent-since-2022-low" rel="noopener noreferrer nofollow" target="_blank">recording</a> a meteoric 959% jump in activity since the late-2022 bottom. Aave now holds enough deposits to <a href="https://aavevsbanks.com/" rel="noopener noreferrer nofollow" target="_blank">rank among the 40 largest banks in the United States</a>, a testament to the <a href="https://cointelegraph.com/news/aave-goes-live-on-aptos-ecosystem-expansion" rel="noopener noreferrer nofollow">growing scale and credibility of DeFi</a>. Meanwhile, <a href="https://cointelegraph.com/news/coinbase-bitcoin-backed-loans-morpho-defi" rel="noopener noreferrer nofollow">Coinbase’s partnership with Morpho</a> to launch Bitcoin-backed loans via cbBTC, routed directly through Morpho’s onchain infrastructure and liquidity, signals a broader shift toward DeFi-native infrastructure.
Related: <a href="https://cointelegraph.com/news/aave-dao-50m-annual-buyback-proposal" rel="noopener noreferrer nofollow" target="_self">Aave DAO proposes $50M annual token buyback using DeFi revenues</a>
People clearly seem to prefer the transparency and automation of onchain lending after seeing a string of CeFi lenders go bust. Whether in terms of trading volume or credit provision, DeFi has established a commanding lead in growth that cannot be ignored.
<h2 id="regulation-and-renewed-trust">Regulation and renewed trust</h2>
The flipside of DeFi’s growth story is that the broader crypto market is finally offering more regulatory clarity. Rather than pushing innovation offshore, this shift is encouraging leading DeFi protocols to engage with regulators and operate within clearer frameworks. Uniswap, for example, has taken a prominent role in <a href="https://blog.uniswap.org/fighting-for-defi" rel="noopener noreferrer nofollow" target="_blank">advocating for sensible policy discussions</a> that would legitimize DeFi’s transparency and self-custody.
Coincidentally, users’ preference for onchain systems is especially apparent during moments of regulatory tension, like the SEC’s <a href="https://journals.library.columbia.edu/index.php/stlr/blog/view/598" rel="noopener noreferrer nofollow" target="_blank">lawsuits</a> against Binance and Coinbase, when traders quickly migrated to decentralized exchanges, with volumes surging 444% within hours of the announcements. The message was clear: When regulation tightens, activity doesn’t vanish. It simply evolves onchain.
Security and custody risks have only reinforced this shift. Between 2012 and 2023, centralized exchanges lost nearly <a href="https://cointelegraph.com/news/self-custody-gets-smarter" rel="noopener noreferrer nofollow">$11 billion to hacks and mismanagement</a>.&nbsp;
That’s more than 11 times what was stolen directly from decentralized protocols or wallets. For many users, keeping assets on a big exchange has proven far more dangerous than using self-custody and DeFi smart contracts.
<h2 id="cefi-is-imitating-defi-and-still-falling-behind">CeFi is imitating DeFi, and still falling behind</h2>
Unable to ignore DeFi’s momentum, some CEXs have started integrating onchain infrastructure directly into their platforms. Coinbase, for instance, has integrated Aerodrome, the leading spot DEX built on Base, Coinbase’s own layer 2 network, enabling users to tap into decentralized liquidity while staying within a familiar interface — a notable step, but one that still keeps Coinbase as the point of distribution.&nbsp;
Binance’s ecosystem offers another telling example. BNB Chain hit record highs in October and attracted millions of active users. <a href="https://cointelegraph.com/news/bnb-chain-sees-record-user-activity-transactions-up-151-in-30-days" rel="noopener noreferrer nofollow">Much of this surge was driven by Aster</a>, the perpetual DEX on BNB Chain that has sparked speculation about direct ties to Changpeng “CZ” Zhao. If many of the same founders behind CEXs are now building in the decentralized space, one might wonder how truly decentralized these new ecosystems and products are.
Core metrics are speaking the same truth. By late 2024, <a href="https://www.coingecko.com/research/publications/2024-annual-crypto-report" rel="noopener noreferrer nofollow" target="_blank">TVL numbers</a> had rebounded to approximately $130 billion, nearing all-time highs and continuing to rise. In sectors like derivatives, asset management and payments, DeFi capabilities have surpassed traditional venues, offering increased transparency and permissionless access.&nbsp;
Centralized exchanges, with their heavy compliance burdens and multi-jurisdictional footprints, are finding it increasingly difficult to move quickly. Many CEXs are pulling back. <a rel="noopener noreferrer nofollow" target="_blank">Crypto.com</a> recently <a href="https://coinmarketcap.com/academy/article/crypto.com-shutters-institutional-trading-in-u.s." rel="noopener noreferrer nofollow" target="_blank">scaled down</a> US operations, delisted multiple tokens and even delayed new product launches pending regulatory clarity. OKX, too, has been cautious about expanding its decentralized initiatives amid shifting compliance expectations.
In contrast, DEXs operate with leaner, code-driven structures that allow them to ship updates and innovate at a fraction of the time and cost. They can deploy new features at the speed of software, whether it’s support for tokenized real-world assets, inventive yield strategies, or integrations with AI-powered trading agents.&nbsp;
<h2 id="a-peek-into-the-future">A peek into the future</h2>
Unless CEXs fundamentally reinvent their models, they risk becoming irrelevant, especially as simply copying a few DeFi features or offering self-custody options may no longer be sufficient for customers.&nbsp;
The crypto community’s trust has tilted toward systems “built in code” rather than those built on corporate promises. It’s telling that when liquidity and trading volumes flooded back into the market recently, decentralized entities <a href="https://cointelegraph.com/news/dex-volumes-hit-record-q2-2025-pancakeswap-hyperliquid-lead?utm_source=chatgpt.com" rel="noopener noreferrer nofollow">captured</a> a disproportionate share of these funds.&nbsp;
The dawn of DeFi’s primacy is upon us, signaling a more resilient and user-empowering financial ecosystem ahead.
Opinion by: Rachel Lin, co-founder and CEO at SynFutures.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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