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 climb in the early days was fueled by experimentation, hype and unsustainable high incentives.
Five years on, Defi’s foundations are very different. Last year’s experiment was a quiet integration phase, setting the stage. 2025 can be remembered as the year that defi surpasses centralized exchanges (CEX).
The Bear Market in 2023 and 2024 washed away many defi projects that lacked a suitable product-market, and forced other defi platforms to mature, focus on infrastructure and achieve real adoption.
Decentralized exchanges have evolved
While the collapse of Celsius and Blockfi and losses of FTX exposed vulnerabilities Inherently centralized platforms, decentralized exchanges (DEX) sought to deliver a similar speed and user experience, usurping high-performance chains and building their own infrastructure.
Just as importantly, as blockchain latency has improved, full onchain order books have become viable, allowing defi protocols to begin addressing the earlier pain points of capital efficiency and liquidity.
Moving beyond the pool-based models of early perpetual DEXs like GMX, new hybrid designs combine automatic market makers (AMM) with order execution of order exchanges, or support order books only, enabling better liquidity allocation for traders by mitigating slippages and depth issues.
Defi takes market share
From a numbers standpoint alone, Q2 saw the top 10 DEXs in the market facilitate $876 billion in spot trading (up 25% from the previous quarter). In contrast, the CEXs saw their trading volumes fall 28% to $3.9 trillion, pushing the volume ratio between the two to a record low of 0.23 in Q2.
Defi’s resurgence can be attributed to the growth of the trade. Lending protocols, for example, have eclipsed their centralized peers, Recording A meteoric 959% jump in activity since the late-2022 bottom. AAVE now holds sufficient deposits in ranking among the 40 largest banks in the United Statesa testament to Defi’s growing scale and credibility. Meanwhile, Coinbase’s partnership with Morpho To launch Bitcoin-backed loans through CBBTC, routed directly through Morpho’s infrastructure and liquidity, signals a broader shift towards defi-native infrastructure.
Related: AAVE DAO Proposes $50M Annual Token Buyback With Defi Earnings
People clearly want the transparency and automation of onchain lending after seeing a string of cefi lenders go bust. Whether in terms of trade volume or credit provision, Defi has established a commanding lead in growth that cannot be ignored.
Regulation and changed trust
The flipside of Defi’s growth story is that the broader crypto market is finally offering more regulatory clarity. Instead of pushing innovation offshore, this change encourages leading defi protocols to engage with regulators and operate within clearer frameworks. For example, Uniswap has taken a prominent role in Advocating for informed policy discussions That legitimizes Defi’s transparency and self-custody.
Coincidentally, the preference of users for onchain systems is especially evident in moments of regulatory tension, such as the SEC laws Against Binance and Coinbase, when traders quickly moved to the decentralized exchange, with volumes covering 444% within the time of the announcements. The message is clear: When regulation is tight, activity does not disappear. It only changes onchain.
Security risks and safeguards have only reinforced this change. Between 2012 and 2023, centralized exchanges have virtually disappeared $11 billion in hacks and mismanagement.
That is more than 11 times what is stolen directly from decentralized protocols or wallets. For many users, keeping assets on a large exchange has proven to be more risky than using self-custody and defi smart contracts.
Cefi mimics defi, and still falls
Defi’s momentum cannot be ignored, some CEXs have started to integrate onchain infrastructure directly into their platforms. Coinbase, for example, has integrated Aerodrome, the leading Dex area built on the 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 maintains Coinbase as a point of distribution.
The Binance ecosystem offers another example. BNB Chain Hit Record Highs in October and attracted millions of active users. Much of this progress was driven by AsterThe Perpetual Dex on the BNB chain that has sparked speculation about a direct link 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 the new ecosystems and products are.
The key metrics speak the same truth. In late 2024, TVL numbers has rebounded to approximately $130 billion, approaching an all-time high and continuing to rise. In sectors such as derivatives, asset management and payments, defi’s capabilities go beyond traditional areas, offering increased transparency and unauthorized access.
Centralized exchanges, with their heavy compliance burdens and multi-jurisdictional footprints, make it difficult to move quickly. Many CEXs are pulling. Crypto.com Just recently Scaled down US operations, removed many tokens and even delayed new product launches pending regulatory clarity. OKX, too, is wary of expanding its decentralized initiatives amid shifting compliance expectations.
In contrast, DEXs operate on lean, code-driven structures that allow them to send updates and innovate at a fraction of the time and cost. They can deploy new features at software speed, whether it’s support for tokenized real-world assets, yield strategies, or integration with AI-powered trading agents.
A peek into the future
Unless CEXs fundamentally reinvent their models, they risk becoming irrelevant, especially as just copying some def features or offering self-custody options may no longer be enough for customers.
The trust of the crypto community leans towards systems that are “built on code” rather than those built on corporate promises. It says that when the liquidity and trading volumes captured a disproportionate share of these funds.
The dawn of the Defi primary is upon us, signaling a more resilient and financially empowered ecosystem ahead.
Opinion by: Rachel Lin, co-founder and CEO at Synfutures.
This article is for general informational purposes and is not intended to be and should not be construed as legal or investment advice. The views, thoughts, and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
