DeFi in 2024: The Quiet Revival and What’s Next for the Future
Despite facing challenges in recent years, the DeFi sector is recovering. With the rise of Bitcoin and growing interest in spot ETFs, optimism is returning to the space.
The Concordex team has gathered all the key insights you need to understand DeFi’s progress and evolution in 2024. Let’s dive into the exciting developments shaping the future!
Bear Market and Consolidation
From mid-2021 to early 2024, the crypto market endured a prolonged bear phase marked by recession and stagnation. This period tested the decentralised finance (DeFi) sector. Ethereum faced significant scalability challenges, which led to the rise of Layer 2 (L2) solutions. While alleviating network congestion, solutions introduced liquidity fragmentation and composability issues between protocols.
Despite occasional network failures, Solana gained popularity as a fast and low-cost alternative to Ethereum during this time. By December 29, Solana’s Total Value Locked (TVL) had grown more than sixfold since the start of the year, securing its place as the second-largest DeFi ecosystem behind Ethereum.
New Landscape and DeFi Renaissance
Despite the decline in key metrics during the bear market, development in the DeFi space continued. Established projects like Maker, Aave, and Uniswap maintained their strong positions, providing investment opportunities and technological innovations. New projects and entire ecosystems also emerged, increasing competition within the sector. As a result, user numbers in DeFi began accelerating in early 2024, signalling a steady market recovery.
About six months after Bitcoin’s fourth halving, the crypto market showed signs of revival, positively impacting decentralised finance’s total value locked (TVL). In early November, the TVL exceeded $100 billion, double the value from the start of the year. By December 29, the total TVL reached around $122 billion, though it is still far from the peak of over $170 billion seen in November 2021.
Ethereum’s First Layer
Uniswap remains the leading decentralised exchange (DEX) on Ethereum, with its trading volume accounting for nearly half of the combined volume of other major non-custodial exchanges. However, competition intensifies, causing Uniswap’s market share to decline gradually. In response, the developers have been working on the fourth version of the platform, which will introduce innovative features like “hooks” — plugins that enhance liquidity pools with dynamic fee adjustments and the ability to create various orders. Additionally, the new “flash accounting” system, powered by EIP-1153, will reduce costs for liquidity providers by optimising on-chain data storage.
In late November, Uniswap Labs announced the largest bounty reward in its history, offering up to $15.5 million for discovering critical vulnerabilities in the smart contracts of Uniswap v4. The platform also expanded its capabilities, enabling direct exchanges of native tokens and stablecoins across nine networks via the permissionless Across Protocol. Meanwhile, Aave, another key player in the DeFi ecosystem, has solidified its position with a TVL surpassing $20 billion, ranking just behind Lido in DeFi Llama’s charts. The lending platform operates across 13 networks and launched its decentralised stablecoin, GHO, on Arbitrum in 2024.
L2 on Ethereum
In March, the major Dencun upgrade significantly lowered fees for Layer 2 solutions, particularly those based on Rollup technology. Supported by Coinbase, the Base ecosystem surpassed Arbitrum in TVL, reaching over $3.6 billion as of December 29. A boost in on-chain activity and high turnover on DEXs drove this surge in TVL.
Among the Base-based platforms, Aerodrome stands out as the leader, with its TVL and daily trading volume surpassing $1 billion. Other prominent L2 networks such as OP Mainnet, Linea, ZKSync, Starknet, and Scroll continue growing, competing to strengthen their positions in the ecosystem while retaining user loyalty.
Solana’s Growth and Ecosystem Development
As mentioned earlier, Solana’s ecosystem has grown significantly, with its TVL reaching approximately $8.6 billion as of December 29. Key protocols driving this growth include Jito (liquid staking), Jupiter (non-custodial trading for spot and perpetual futures), and Raydium (AMM exchange).
Platforms like Orca, Raydium, Jupiter, and Drift have managed to break free from the shadow of the bear market, boosted by the hype surrounding meme coins. As a result, they’ve seen their trading volumes increase, even surpassing decentralised exchanges on Ethereum.
The Future of DeFi: New Developments and Innovations Ahead
In 2025, DeFi is expected to continue evolving, so let’s take a look at what to wait for in this field:
- Ethereum’s Major Upgrades and L2 Growth: Ethereum is set to scale significantly, with Vitalik Buterin projecting up to 100,000 transactions per second (TPS) through Layer 2 solutions.
- Streamlined Staking and Node Access: Ethereum aims to lower the 32 ETH requirement, making it easier for users to participate.
- The Rise of Beam Chain: The project aims to improve transaction speeds and security through innovations like fast second block times and quantum-resistant features.
- Hyperliquid’s High-Speed, Decentralised Trading: Hyperliquid’s decentralised platform for perpetual futures trading sets the high speed and decentralisation standards, allowing efficient trading and scaling within the DeFi space.
- Avalanche’s Major Update: Avalanche’s release of Avalanche9000 significantly reduces the cost of deploying subnets, with a 99.9% reduction in costs and 25 times cheaper C-Chain transactions.
- Unichain’s Cross-Chain Interoperability: Uniswap Labs has launched Unichain, an L2 solution built on OP Stack designed to enable cross-chain communication and decentralised validator networks.
- MegaETH: A Real-Time Ethereum-Compatible Blockchain: MegaETH is an L2 solution designed for high-speed transactions with a capacity of 100,000 TPS.
- Innovative Solutions like Stylus on Arbitrum: Stylus allows developers to write smart contracts in programming languages like Rust, C, and C++, ensuring Ethereum compatibility without compromising flexibility.
- Future Integration of AI and DeFi: The DeFi space will continue to integrate with artificial intelligence, gaming platforms, and other emerging technologies. Innovations will streamline user experiences, improve transaction speeds, and drive more profound ecosystem interconnectivity.
- Expanding Tokenisation in DeFi: Tokenisation will play a significant role in DeFi’s future, with predictions that most global assets, such as stocks, bonds, real estate, and more, will eventually be tokenised and available for trading in decentralised finance markets.
Conclusion
The bear market was a pivotal moment in the evolution of decentralised finance, strengthening its foundation for future growth. Despite setbacks, DeFi has shown resilience and innovation, with protocols like Uniswap, Aave, and Sky thriving through advanced features. Layer 2 solutions such as Arbitrum and Base drive scalability and attract new users, while new blockchains intensify competition. As DeFi reshapes the financial landscape, it opens up new opportunities, promising further innovation and growth.
About Concordex
Concordex is a cutting-edge Decentralised Exchange (DEX) that operates on the Concordium Blockchain. Renowned for emphasising institutional-grade security, transparency, and user-centric design, Concordex offers various services, including staking, swapping, and perpetual trading. With a mission to bridge the divide between traditional finance and decentralised systems, it offers users an unparalleled trading environment.
