The Rise of Old DeFi projects

Introduction: The 2020 DeFi Boom and Bust

In 2020, decentralized finance protocols exploded onto the crypto scene, reshaping the financial landscape by removing intermediaries and allowing peer-to-peer financial services. Protocols like Aave, Uniswap, and MakerDAO led the charge during this "DeFi Summer," driving billions of dollars into smart contracts.

By late 2021, the total value locked (TVL) in DeFi soared to over $260 billion. However, with the bear market of 2022, these protocols faced a sharp decline, losing nearly 80% of their market value. Some questioned whether these blue-chip DeFi protocols would survive the downturn. Now in 2024, the old blue chips are making a comeback, leveraging advancements in technology, increased regulation, and new innovations like real-world asset tokenization to regain momentum and push the boundaries of decentralized finance once again.

Current State of DeFi

As of 2024, DeFi has matured significantly, with TVL steadily climbing back to $126 billion after its post-2021 collapse. Liquid staking and real-world asset (RWA) tokenization have emerged as dominant forces within the sector. Platforms like Lido Finance, which focus on liquid staking, now hold the lion's share of TVL, eclipsing older models of lending, borrowing, and decentralized exchanges (DEXs). Additionally, a better user experience and transparency have helped bolster trust, particularly with institutional investors. This new wave of growth is more structured, supported by compliance tools like real-time AML analytics, making DeFi more accessible to mainstream financial institutions and ensuring its long-term viability​

Factors Behind DeFi’s Resurgence

1. Projects Are Generating Revenue: Many DeFi protocols have moved beyond speculative tokenomics to focus on generating actual revenue. For example, Uniswap earns fees from facilitating decentralized trades, while Aave generates revenue through its lending services. These income streams have made DeFi projects more sustainable and attractive to both retail and institutional investors.
2. Token Supply Is Mostly on the Market: Unlike earlier stages, where large portions of token supply were locked in staking or vesting periods, much of the supply is now circulating in the market. This has reduced inflationary pressure on tokens and helped stabilize their prices. As a result, DeFi protocols are more appealing to investors looking for stable returns.
3. APYs Are Sustainable: One of the biggest criticisms of DeFi during its initial boom was the unsustainably high annual percentage yields (APYs) offered by many protocols. In the current cycle, projects are offering more sustainable yields, often backed by real revenue or liquid staking, making these returns more reliable over the long term
4. Improved User Experience and Onboarding: Technological advancements have dramatically improved the user experience in DeFi. Wallet integration, cross-chain compatibility, and simplified interfaces have made it easier for new users to onboard into DeFi. Innovations like one-click staking and automatic portfolio management tools have removed much of the complexity, broadening the appeal of DeFi beyond crypto enthusiasts​

The Future of DeFi: AI Integration and Seamless User Experience

Looking ahead, the future of DeFi is set to be shaped by the integration of artificial intelligence (AI) and an even more seamless user experience. AI is already being adopted in various parts of the crypto ecosystem, from risk assessment and automated trading to smarter portfolio management. In DeFi, AI is expected to enhance user interactions by providing real-time analytics, automated investment strategies, and improved security protocols, making decentralized finance more accessible and intelligent.

Additionally, advancements in token standards are streamlining the user experience by addressing a common pain point in DeFi—network switching. With new token standards like ERC-7683 and cross-chain technologies, users can now interact with multiple blockchains without manually changing networks. These developments ensure that assets and smart contracts can move more fluidly across different platforms, significantly reducing friction and improving accessibility for all users​

By combining AI-driven decision-making with seamless, multi-chain token transfers, the next wave of DeFi will offer unparalleled ease of use and efficiency, bringing it closer to mainstream adoption. This will likely accelerate the convergence of traditional finance with decentralized systems, positioning DeFi as a central pillar of the global financial system.

Conclusion

The resurgence of blue-chip DeFi protocols marks a significant turning point in decentralized finance. By focusing on revenue generation, sustainable APYs, and circulating token supplies, DeFi has matured beyond its speculative beginnings. Improvements in user experience, such as AI integrations and cross-chain token standards, are further streamlining the space, making DeFi more accessible and user-friendly than ever before.

As the sector embraces innovations like real-world asset tokenization and smarter technologies, it’s becoming clear that DeFi is no longer just a niche market. Its potential to integrate with traditional finance, fueled by regulatory advancements, is positioning it as a key player in the future of global finance. The evolution of DeFi points to a future where decentralized systems not only coexist with traditional financial structures but enhance them, making finance more transparent, efficient, and inclusive.