Key Trends in DeFi for 2024

Some key trends in DeFi this year include the rise of Layer 2 scaling solutions, the integration of blockchain with AI, and the increasing adoption of DeFi by traditional financial institutions, experts told The Block.

Integration with Traditional Finance

“In 2024, the dominant trend in DeFi is the growing integration with traditional finance (TradFi),” said Alvin Kan, COO of Bitget Wallet. “TradFi institutions are leveraging DeFi tools like automated liquidity provision and smart contracts. And we’re seeing the tokenization of real-world assets, which is unlocking liquidity for DeFi platforms and broadening access to investors.”

Kan mentioned that traditional finance players recognize the benefits of DeFi, such as higher yields, transparency, and efficiency, which solidifies its role as a transformative force.

Institutional Adoption of Crypto

Kean Gilbert, an institutional contributor at Lido Finance, noted that institutional crypto adoption has significantly shaped DeFi this year. The introduction of spot bitcoin and ether exchange-traded funds has brought traditional institutions into DeFi, expanding its reach.

“At the same time, these developments have sparked conversations about whether such inflows genuinely support decentralization or risk centralizing power,” Gilbert added.

Layer 2 Scaling Solutions

Another major trend for DeFi in 2024 is Layer 2 rollouts addressing scalability issues in Ethereum, according to Brecht Devos, co-founder of Taiko Labs. “This trend indicates a clear need for networks capable of operating faster and more efficiently, supporting large DeFi ecosystems and decentralized applications (dApps) without compromising decentralization,” Devos stated.

As Ethereum faced high fees and congestion, Solana gained popularity. DEX volume on Solana began to outstrip that of Ethereum for the first time this year, with Solana’s DEX volume being 217% higher in the second week of November according to The Block’s data dashboard.

Despite the surge in Solana’s metrics, some in the crypto community expressed concerns over possible bot activity undermining its decentralization. “While Solana offers faster and cheaper transactions, it lacks Ethereum’s decentralization and security,” Devos emphasized, noting these qualities make Ethereum the foundation for true trustless applications.

Political Influence on DeFi

DeFi gained momentum with the reelection of crypto proponent Donald Trump as U.S. President, creating a more positive sentiment across the crypto space. With Trump linked to a DeFi project run by his family, his administration is expected to support the DeFi sector by easing regulatory barriers.

In November, monthly DeFi revenue soared to $206 million, a 114% increase from the prior month’s $96 million.

Bullish Outlook for DeFi

Experts believe that regulatory easing and clearer rules for the crypto industry will nurture DeFi in the upcoming U.S. administration. “Trump’s focus on deregulation and promoting economic growth might create ideal conditions for DeFi,” stated ETHDenver Founder John Paller. He emphasized the need for policies that protect innovation while allowing creators to experiment freely.

Jawad Ashraf, CEO of the entertainment-focused Web3 firm Vanar, indicated that the new administration might bring clarity on whether crypto tokens are considered financial securities, possibly leading to more fee switch implementations and a legal route for distributing protocol revenue to token holders as dividends.

AI Integration and the Future of Web3

NEAR co-founder Illia Polosukhin predicted a paradigm shift for the entire Web3 space in 2025 through “intents.” “This expansion will allow users and app developers to achieve more and enable AI agents to transact in both Web2 and Web3,” Polosukhin stated.

As 2024 drew to a close, more projects integrating AI and crypto emerged. AI agents like ai16z and Truth Terminal gained traction on social media, leading to increases in associated tokens. Earlier in December, the developer of the FRAX stablecoin announced they are creating an AI tech stack to launch fully autonomous and sovereign tokenized AI agents.