Decentralized Finance (DEFI) is undergoing a quiet transition.
While Defi’s previous bull market was driven by intoxicating and questionable-your fanaticism and speculative madness, the current growth has become the back-end financial layer of the industry becoming a user-facing application and increasing institutional engagement. Wednesday report Analytics company Artemis and on-chain earnings platform Vaults.fyi.
The total value on the highest additional loan options, including AAVE, Euler, Spark and Morpho, was locked, more than $50 billion, close to $60 billion, an increase of 60% over the past year, the report shows. This growth is driven by rapid institutionalization and increasingly complex risk management tools.
“These are not only earning platforms; they are developing into modular financial networks that have been rapidly institutionalized,” the author said.
“defi mullet”
One of the key trends highlighted by the report recently is that user-facing applications quietly embed static infrastructure into the backend to provide output or loans. The report says that these features are abstracted from users and create a more seamless experience, a trend commonly known as the “defi mullet:” Fintech front-end, the Defi back-end.
For example, a Coinbase user can borrow their Bitcoin
Shares provided by Defi Lender Morpho’s back-end infrastructure. The report noted that as of this month, more than $300 million in loans had been initiated through this integration.
Bitget Wallet integrates with loan agreement AAVE, with 5% USDC and USDT holdings across chains without leaving behind crypto wallet apps. PayPal also did something similar to its Pyusd Stablecoin, and despite the lack of Defi Element, the yield rate for PayPal and Venmo Wallet users is close to 3.7%.
The report says crypto-friendly fintech companies with a large user base, such as Robinhood or Revolut, may also adopt this strategy and provide services such as StableCoin credits and asset-backed loans through the DEFI marketplace, creating new expense-based revenue streams.
Token rwas in defi
The Defi protocol increasingly introduces use cases for token versions of traditional tools, such as the U.S. Treasury and Credit Funds, also known as Real World Assets (RWA).
These token assets can be used as collateral to earn yields directly or bundled into more complex strategies.
Tokenization of investment strategies has also become popular. Pendle is a protocol that allows users to separate their earnings streams from their principal and now manages over $4 billion in total value locks, most of which are used for tokenized StableCoin yield products.
Meanwhile, Ethena’s Susde and similar load-bearing tokens introduce products that provide over 8% of the gains through strategies such as cash and carry transactions, while abstracting the operational burden of the end users.
The rise of on-chain asset managers
A less obvious but critical trend highlighted in the report is the rise of crypto-local asset managers. Companies like Gauntlet, RE7, and Steakhouse Financial use professionally managed strategies to allocate capital across ecosystems, similar to the role of traditional asset managers.
These participants are deeply embedded in DEFI protocol governance, fine-tuning risk parameters and capital, covering a range of structured production products, token real-world assets (RWAS) and modular lending markets.
The report notes that the industry’s capital has quadrupled since January, from $1 billion to more than $4 billion.
Read more: Advisor cryptocurrency: DEFI yield, revival
