Gate Ventures Research Insights: DeFi Enters 2.0, Curator Strategy Middleware Rises, RWA Becomes New Base Layer Asset

TL;DR

• Lending is evolving from “direct peer-to-peer protocols” to “protocol layer + strategy middleware.” Curators package institutional-grade risk control/portfolio/ routing into non-custodial vaults, with shareholding steadily increasing; rising RWA complexity makes verifiable risk management like PoR/DVN a necessity.

• RWA is no longer just “on-chain holdings” but becomes an interest-earning, collateralizable, composable strategy foundation; platforms and curators drive growth in multi-asset RWA vaults and derivatives, deepening institutional integration into DeFi infrastructure.

• CEXs/wallets handle user acquisition, experience, and compliance; DeFi handles yield execution, settlement, and risk control. The result is “one-click wealth management/lending on CEX,” driven by on-chain protocols and curator vaults.

• As yields grow, projects expand into payments, accounts, and cards, forming a “deposit—growth—spend” closed loop. Whether this scales depends on regulators filling in safety nets and defining responsibility boundaries while preserving verifiable advantages.

Introduction

The evolution of DeFi has followed a path from early liquidity mining and simple yield aggregation to popular recent innovations like cyclic lending and Pendle point farming. While the sources of yield appear to be changing, the underlying logic remains: taking on identifiable risks in exchange for corresponding returns. This is fundamentally similar to traditional finance’s yield assets.

Source: novelinvestor

Cash and T-bills are among the closest “risk-free” assets in modern finance, mainly including short-term US Treasuries and money market funds. Historical data shows a long-term nominal return of about 3.3%, with real returns near zero after inflation. Investors’ gains are almost entirely from the time value of money, with minimal credit or duration risk. The cost is that inflation erodes purchasing power, making them suitable for short-term parking rather than long-term capital appreciation.

Bonds embody the risk-and-return logic of “lending money.” Whether government or corporate bonds, different credit qualities correspond to different yield ranges: investment-grade bonds yield about 4–4.6%, high-yield bonds about 6–8%. These returns compensate for credit risk, interest rate duration fluctuations, and liquidity risk. The costs are clear: bond prices can decline sharply during rate hikes, real returns can turn negative in high inflation environments, and defaults or restructuring can cause irreversible principal losses.(1)

The same logic applies in DeFi.

DeFi has long been perceived as offering “high returns,” but the core reason is not that it creates a new wealth logic, rather that investors bear significantly higher risks than traditional assets. These include: protocol-level default risk; liquidation risks triggered by high volatility in cyclic borrowing; and return uncertainties in point farming due to TGE pricing or airdrop rule changes.

As the industry evolves, the DeFi market itself is undergoing structural change. More projects are actively seeking sustainable valuation growth, or deepening product verticals and upstream/downstream integrations to solidify their position—aiming to build long-term financial infrastructure rather than relying on early “barbaric growth” models driven by subsidies, airdrops, or unsustainable APYs to attract retail flow.

Based on these observations, the following will explore key emerging directions in the current DeFi landscape.

Trend 1: Modular Lending Markets Created by Risk Curators

Source: Bitwise X

On-chain lending markets have successfully developed into a large sector, with total value locked (TVL) around $58 billion, thanks to higher settlement efficiency and strong composability. Recently, Bitwise announced launching a non-custodial vault on Morpho curated by them, with dedicated strategies and risk management teams.

In DeFi 1.0, all participants are protocol-level “completely equal”: same interest models, same liquidation rules, transparent info. Users interact directly with the protocol, with no explicit middle layer providing professional risk management or strategy execution.

Under this structure, more complex and refined strategies—such as cross-market rebalancing, dynamic risk control, interest rate forecasting, and portfolio optimization—are typically run privately by institutions or professional traders. These strategies are not productized or open in a composable way to ordinary users. Protocols are open, but actual yield optimization and risk management remain concentrated among a few capable participants.

This is where vault and curator models emerge. They introduce a verifiable, non-custodial “strategy middleware” on top of DeFi 1.0’s openness, structuring risk management and yield optimization capabilities—originally limited to a few institutions—in a transparent manner accessible to broader on-chain participants.

Protocols like Morpho, through their curators, allocate user funds across opportunities with different risk and return profiles, dynamically adjusting based on risk assessments and expected yields.

Source: DeFillama

Data shows that since the emergence of the Risk Curator role, the amount of funds managed by these entities in lending protocols has steadily increased, peaking near 13%, now around 10%. Leading players like Steakhouse Financial, Sentora, and Gauntlet each manage over $1 billion in on-chain lending positions.

Source: Token Terminal

Why have these on-chain asset managers grown so rapidly?

The core reason is not “dependency,” but that infrastructure and specialization have matured, opening supply and demand sides simultaneously.

For example, Steakhouse’s holdings on Morpho account for nearly 20% of total TVL, mainly in blue-chip assets like BTC, ETH, and stablecoins (including various synthetic or wrapped assets). This growth resembles a mutually reinforcing closed loop: Morpho provides scalable market infrastructure, while Steakhouse packages strategies, risk controls, and productization into widely adopted non-custodial asset management products.

1. Product Layer: Strategies packaged as accessible “non-custodial funds”

• Morpho offers standardized vault/market interfaces and execution layers, routing funds across multiple markets.

• Steakhouse encapsulates risk selection and allocation logic into curator products, enabling users to access better risk-adjusted yields without selecting markets or tuning parameters themselves.

2. Risk Control Layer: Replacing “trust” with verifiable mechanisms

• Steakhouse reduces tail risk via timelocks, change delays, and access rules.

• Continuous evolution of Morpho’s guardian mechanisms (e.g., pausing operations during anomalies) further enhances reproducibility and stability.

3. Distribution Layer: From on-chain native to broader user bases

• For example, Coinbase’s USDC lending using Morpho exemplifies a “channel distribution + DeFi execution + curator risk control” model: Morpho provides the infrastructure, while curators produce more user-friendly yield products.

• Steakhouse also acts as a distribution channel: when clients seek on-chain yields, funds flow into Steakhouse-managed vaults on Morpho. This creates a positive feedback loop—Steakhouse expands its assets under management while indirectly boosting Morpho’s TVL.

Similarly, Sentora allocates client funds to Aave Horizon, earning lending spreads as a stablecoin provider, while strategies encapsulate RWA exposure; Gauntlet also manages scaled vaults on Morpho.(2)

Why is this a trend?

Funds are increasingly concentrated in specialized strategy layers (requiring dynamic risk management and portfolio assembly), often involving complex RWA lending strategies. These involve legal and operational layers—liquidation mechanisms, custody, compliance, etc. To promote DeFi adoption, it’s necessary to productize these complex institutional strategies, enabling ordinary users to participate with a single click. While lending platforms could do this internally, the costs of R&D and maintenance often outweigh the economic benefits; thus, delegating to specialized third-party curators becomes more efficient. This trend is expanding to other ecosystems, e.g., Solana’s leading lending platform Kamino is also moving toward modular vaults and structured products.

Source: Kamino Governance

RWA assets have seen the strongest growth in Kamino over the past month, especially PRIME (+$48 million) and syrupUSDC (+$46 million), driven by high-yield and leverage strategies. On the debt side, stablecoins account for 69% of all lending, supported by strategies based on RWA yields (e.g., PRIME, syrupUSDC, ONyc).(3)

Source: Kamino Governance

As RWA lending demand rises, Risk Curators managing these strategies attract more deposits and delegated funds. For example, Sentora’s PYUSD-related products became major net inflows last month, confirming that the complexity of RWA lending significantly enhances the value and necessity of Risk Curators.

RWA are not just on-chain collateral; they often involve issuance structures (e.g., SPV), custody, legal enforceability, compliance (KYC/whitelist/transfer restrictions), NAV pricing, oracles, and maturity/liquidity management. The risks extend beyond price volatility and liquidation lines to include credit, legal, operational, and liquidity risks. When DeFi introduces RWA lending, the role of Risk Curators shifts from “yield optimizer” to “risk filter and structurer,” responsible for selecting and layering complex risks, reducing single-exposure through portfolio aggregation, and productizing institutional-grade risk controls for broader participation. As RWA scales, curators may become an essential risk intermediary layer.

Risk oversight and risk control system restructuring

The collapse of Stream → Elixir → Euler in November 2025 illustrates that the biggest risk for Risk Curators is not “smart contract security” but “strategy and credit risk opacity.” When yields are packaged as simple deposit products, the true risks may already be transferred and amplified within routing and composition. Once strategies become black boxes, vaults regress from “asset management products” to " unverifiable risk intermediaries."

Common structural weaknesses include:

1. Centralized control: EOAs/multisigs pose single points of failure and permission abuse risks

2. Re-pledge leverage: multi-layer vaults amplify liquidity and liquidation pressures

3. Conflicts of interest: scale and growth incentives lead to hidden leverage and tail risks

4. Lack of transparency: absence of verifiable positions, valuation, backing, and stress scenario disclosures

Consequently, the market increasingly regards PoR (Proof of Reserves) as a key risk control infrastructure. For example, Chaos Labs’ PoR aims to fill “information vacuum” panic pricing: after Bybit’s incident, Ethena adopted Chaos PoR to improve USDe reserve visibility and verifiability, reducing chain reactions driven by speculation during extreme volatility. Mechanically, Chaos PoR automates multi-layer checks, continuously tracking core data streams—reserve locking, issued supply, collateralization—and outputs on-chain callable signals: reserve status, sufficiency, and collateralization. This shifts “reserve authenticity” from narrative or disclosure to programmable verification, enabling protocols and users to make decisions based on verifiable evidence.(4)

Additionally, Accountable offers solutions like DVN (Data Verification Network), which adds a “verifiable and confidential” data layer to DeFi vaults and risk curators: each participant runs a local node, with sensitive info (API keys, wallet/exchange accounts, custody data) stored locally and encrypted; data and calculations are cryptographically proven, allowing external parties to verify origin, integrity, and aggregation method without viewing individual positions. Curators can then selectively disclose key metrics (asset/liability size, leverage, collateralization, exposure ranges, liquidity coverage), enhancing transparency and trustworthiness while avoiding revealing detailed strategies.(5)

Compared to PoR, which mainly addresses “reserve sufficiency,” DVN further incorporates source credibility and debt integrity into verifiable risk management, alleviating black-box strategies, delayed accounting, and information asymmetry—especially important in complex RWA scenarios.

Trend 2: RWA On-Chain Matures Rapidly, DeFi Applications Expand

Source: Coingeek

RWA on-chain has become an industry consensus. Forecasts suggest nearly $20 trillion of assets will be tokenized by 2033, including treasuries, reinsurance premiums, and diverse real yield sources. However, most RWA platforms currently offer “single asset, single position” supply—similar to money market funds—where users deposit stablecoins and earn fixed composite yields, with little active management or dynamic rebalancing.

Therefore, following Trend 1 (rise of Risk Curators), the next major asset class to be managed at scale is multi-asset RWA vaults: curated, underwritten, and continuously monitored, combining multiple RWA exposures into a manageable portfolio, offering users more diversified, stable, and risk-adjusted real yields via a single position.

Source: Blockwork @SilvioBusonero

The scale of RWA lending collateral continues to grow: current TVL around $1.6 billion, about 3% of total lending, mainly on Aave, Midas, Morpho, Kamino. This upward trend reflects a shift in platform attitudes and product strategies:

Lending Platforms

Aave use Horizon to create compliant, modular RWA lending markets—integrating RWA into core products; Morpho’s curator vaults turn RWA collateralized lending into standardized, distributable products; Kamino lists RWA assets like PRIME and attracts Risk Curators to develop and execute diverse RWA yield strategies.

Looking at Kamino’s collateral structure, stablecoins + RWAs now account for about 48%, surpassing SOL + LSTs (~42%). Early liquidity and growth were driven by native assets and LSTs through cyclic lending; the shift indicates a clear focus on RWA collateralization, confirming that lending platforms’ product choices are key drivers of RWA lending trends.

Lending Products

Beyond platform initiatives, product innovation and structural evolution are injecting new momentum into RWA DeFi. Historically, tokenized assets like treasuries and gold were mainly single-position holdings—“assets on chain”—with limited on-chain functions mainly for holding and trading. Use cases at the application layer remain immature. For example, Tether’s XAUt/PAXG gold tokens are more like “transferable gold certificates,” focused on trading/storage, with little real DeFi utility.

Source: Theo Network Docs

From 2025 onward, RWA application layers accelerate: projects further transform RWA into composable, interest-bearing, and strategy-underlying financial building blocks. For instance, Theo Network’s thGOLD is a tokenized interest-bearing gold product that issues “gold-denominated loans” to established gold retailers, generating yield. Borrowers use gold for inventory turnover, repay with equivalent gold plus interest, turning gold into a cash-flow-generating asset with about 2% annualized yield.(7)

This interest-earning feature means on-chain gold is no longer static. It can serve as collateral and strategy component for more complex structured products, like delta-neutral or leveraged strategies—capabilities unavailable with traditional non-interest-bearing gold.

Source: X@rachit

Another example is OnRe Finance (Solana), whose interest-bearing token $ONyc$ derives yield from reinsurance—“insurance for insurers.” Insurers cover property or commercial risks, but catastrophic events like hurricanes or earthquakes can cause sudden payout spikes. To diversify tail risk, they transfer some risk to reinsurers and pay premiums; OnRe acts as a reinsurance provider in this structure.(8)

Mechanically, OnRe allocates funds into short-duration reinsurance contracts: insurers prepay premiums, and if no large disasters occur, premiums minus claims form underwriting profit, which becomes the $ONyc$ yield. Moving this to DeFi, users can hold and trade $ONyc$, and it can be used as collateral in Kamino’s lending, enabling leverage and yield stacking—combining reinsurance returns with capital efficiency tools.

Traditional Institutional Participation

Traditional finance is increasingly integrating into DeFi as a “more infrastructural” layer, not just buying tokens or short-term trading. One path is directly connecting compliant RWA into DeFi trading and liquidity: e.g., Uniswap × BlackRock’s partnership with UniswapX, integrating BlackRock’s tokenized money market fund BUIDL, allowing qualified investors to trade BUIDL and stablecoins seamlessly on-chain. The focus is on embedding institutional-grade assets into composable DeFi trading layers, enabling subsequent lending, collateralization, and secondary liquidity.

Another approach involves institutions making longer-term, deeper commitments—e.g., Apollo × Morpho’s partnership, where Apollo provides institutional capital and credit backing, and Morpho offers modular lending infrastructure and productized vaults. This signals a shift: on-chain lending is moving from DeFi-native products toward institutional-grade financial infrastructure.(10)

Perpetual RWA Contracts

Tokenized equity has attracted many platforms, but structures vary: xStocks, Backed, etc., use “1:1 custody” models—tokens backed by custodians holding actual shares, giving price exposure and 24/7 trading, but legal ownership remains with custodians, not token holders.

Superstate and Securitize take a different route: they act as SEC-approved transfer agents, registering token holders directly on the company’s shareholder register. This makes blockchain part of the official shareholder record and rights system.

A notable case: in September 2025, Galaxy Digital issued tokens via Superstate’s Opening Bell platform, making GLXY token holders actual shareholders with voting and dividend rights, bridging on-chain records with traditional shareholder registers.

Source: Coindesk

Meanwhile, market infrastructure is advancing: DTCC, the core clearing, settlement, and custody institution for US securities, has received SEC “no objection” to tokenizing parts of its infrastructure, bringing traditional securities closer to on-chain support.(11)

Current Data on RWA Perpetual Contracts

Source: Dune Analytics@yandhii

Current on-chain RWA perpetual contract daily trading volume hovers around $15–20 billion, mainly driven by Hyperliquid’s HIP-3 ecosystem, contributing over 60%. In comparison, US equities average about $51.65 billion daily, and gold about $233 billion. The liquidity gap remains large, with significant growth potential.

Source: Lighter X

The biggest advantage of on-chain assets is unlocking global liquidity: assets traditionally limited by trading hours, geography, and broker channels are now tradable 24/7 via standardized contracts accessible worldwide. For example, Lighter recently launched perpetual contracts on various Korean stocks, providing non-local investors easier access to overseas equities—significantly expanding cross-border stock exposure.

However, stock perpetuals do not represent actual stock ownership or voting/dividend rights. They are derivatives anchored to spot prices via indices or oracles, settled purely on price movements, without actual delivery or ownership transfer.

But two major bottlenecks remain:

1. Fragmented liquidity: tokenized stocks are scattered across chains and platforms, lacking unified order books and deep liquidity sharing—leading to lower depth, more price impact, and difficulty supporting large institutional trades.

2. Regulatory ambiguity: many products operate in offshore or lenient jurisdictions; US regulatory clarity is lacking. While some platforms have launched structured perpetuals, CFTC has yet to establish clear rules, leaving legal and compliance uncertainties.

This means current platforms face regulatory risks, and the long-term viability of perpetuals in the US retail market depends on CFTC issuing clear, predictable rules.

Trend 3: DeFi Becomes Distribution and Yield Infrastructure for CEXs

Examples include USD1 in Binance Earn; Coinbase’s Morpho-driven crypto collateral lending; Kraken’s DeFi yield products via Chaos Labs vaults; Ondo Global Markets tokens listed on Gate.io.

These point to a clearer trend: for scale, DeFi increasingly embeds into CEX and wallet distribution channels (Earn, Loans, Mini Apps), rather than competing directly at the user entry point. CEXs and wallets handle user acquisition, productization, and experience; DeFi handles execution, settlement, and risk control. This division results in a “distribution at centralized channels, yield and execution on-chain” model.

First, CEXs and mainstream wallets have superior user acquisition and conversion capabilities. They have large existing user bases, low-friction onboarding, fiat gateways, and mature customer service, enabling a seamless “buy—wealth management—lending” funnel. For most users, directly interacting with on-chain protocols involves higher learning curves and friction—wallet management, gas fees, cross-chain, signatures—and higher perceived risks (smart contract, phishing, mis-authorization). In contrast, one-click CEX experiences are closer to traditional finance, with higher conversion.

Second, trust and compliance are critical at the entry layer. Many retail and institutional funds are not short of yield opportunities—they lack confidence or willingness to use complex protocols. CEXs’ brand, risk controls, KYC/AML, jurisdictional compliance, and disclosures lower barriers—reducing fears of black boxes, scams, or irrecoverable losses. They package complex strategies into saleable, explainable, and responsible products.

This structure aligns business incentives: CEXs want to expand product lines, increase user assets and ARPU, but avoid bearing all protocol risks and engineering complexity; DeFi seeks scale and stable capital but lacks strong distribution channels and user education. The natural outcome: “front-end centralized, back-end on-chain”—CEXs/wallets manage user relations and compliance; DeFi handles yield execution, settlement, and composability—forming a division of labor.

Source: DeFillama, Dune Analytics@ryanyyi

The front-end CeFi, back-end DeFi pattern is exemplified by Coinbase × Morpho since January 2025. Coinbase launched crypto collateralized lending, allowing users to borrow USDC against BTC. The process: users initiate a loan, BTC is automatically converted into Coinbase Wrapped Bitcoin (cbBTC), and deposited into Morpho’s Base chain market as collateral. The key is that Coinbase offloads almost all on-chain complexity, enabling users to borrow as in traditional finance.(13)

Supporting infrastructure includes: Coinbase Smart Wallet (auto-linked to user accounts); Passkeys for private key management; Paymaster for gas paid in any token; MagicSpend for users to pay directly from Coinbase accounts even without on-chain assets. The result: users holding BTC can “one-click borrow USDC” within the app, with wallet creation, cross-chain, gas, and signatures seamlessly handled.

Post-integration, borrowing and collateralization via Morpho have steadily increased, driven by Coinbase’s channel and trust. For Morpho, benefits include not only increased TVL but also channel endorsement and trust spillover—being chosen as a trusted underlying infrastructure by mainstream platforms, making it easier to attract deposits, curators, and integrations, creating a positive cycle.

Source: Dune Analytics@ondo_team, @xstocks

Another example: Ondo Global Markets and xStock on multiple CEXs show significantly higher trading volumes than DEXs—about 3.5× and 32× respectively—highlighting that, at present, CEXs remain the most liquid, highest-concurrency distribution channels, naturally aggregating more users and enabling faster depth and price discovery.

Trend 4: DeFi Vaults Evolve into On-Chain “Banks” with Payments, Savings, and Yield

On the macro level, as stablecoin regulation matures, banks and institutions find clearer paths into digital assets. Agencies like OCC, FDIC, and Fed are relaxing restrictions and providing more operational regulatory space in custody, settlement, collateralization, and stablecoin issuance.

Meanwhile, frameworks like EU’s MiCA, Japan, Hong Kong, UK emphasize reserve adequacy, transparency, and risk management. Overall, the environment supports builders with clear compliance tools and lays a foundation for products like Neo Finance—integrating regulated systems with on-chain infrastructure.

At the infrastructure level, costs of L1/L2 chains have fallen sharply, account abstraction matures, enabling on-chain financial products to approach Web2 user experience: email registration, linked bank accounts, deploying funds into DeFi vaults for yield, and spending via debit cards.

Most importantly, Neobanks’ capabilities are highly modularized—“plug-and-play.” Payment accounts, deposits/withdrawals, card issuance, KYC, and custody are offered as standard modules by infrastructure providers: virtual USD accounts, payment channels (Bridge), crypto cards (Rain), frictionless onboarding and identity (Privy). Teams can assemble these modules to quickly launch products without deep banking partnerships or complex compliance.

These factors are shaping DeFi project strategies: to reach broader users, many are upgrading to bank-like integrated services—e.g., ether.fi expanding from LST platform to a full DeFi bank with savings, yield, and payments; Aave extending into mobile apps for more bank-like deposit and asset management; AllScale building a “global micro-enterprise” bank with stablecoins for cross-border payments and finance; Tether investing in Plasma to extend stablecoins from issuance to settlement and account layers—aiming to incubate infrastructure for payments, clearing, and account services within its ecosystem.

Of course, this shift is also a downstream scaling effect: as vaults and yield layers grow, projects naturally expand from single protocols to full financial stacks—“protocol → ecosystem/chain → financial application.” The logic is pragmatic and valuation-driven: relying solely on yield distribution caps growth and valuation multiples; extending into payments, custody, accounts, and user relationships creates more scalable, compound revenue streams and higher valuation potential.

Source: Dune Analytics @obchakevich

For example, ether.fi initially positioned as an LST protocol converting ETH into interest-bearing assets (eETH/weETH), allowing liquidity and staking yield simultaneously. Later, through deep integrations with Balancer, Pendle, and others, eETH/weETH evolved into a collateralizable, composable, strategy-automatable asset base—usable for lending, leverage, and complex vault strategies.

The final step: launching Cash (accounts + cards), extending “earning” into “spending,” completing a DeFi banking loop:

• Asset layer (LST/vault): deposits and assets, yield, strategy management—“deposit” and “growth.”

• Liability/payment layer (Cash + Card): collateralized spending and payments.

With “borrow to spend,” users avoid asset liquidation for daily expenses, improving capital efficiency and retention. The user experience becomes a full capital flow: deposit (stake/liquid) → grow (strategy/vault) → spend (Cash Card) → repay (anytime).

Crucially, the initial LST protocols laid the foundation: user assets and yield infrastructure. Expanding into payments and spending directly covers the full “yield—spend” lifecycle, maintaining leadership in crypto payment cards, with monthly spending surpassing $50 million, and evolving toward a full-stack DeFi bank: yield protocol → asset base → payment account/card → full DeFi banking.

This layered structure resembles a Point-of-Sale Conversion Bridge (POS) system: users swipe cards, backend converts crypto to fiat in real-time, merchants receive fiat, and traditional clearing via Visa/Mastercard completes the process. The entire exchange is transparent to merchants, enabling seamless crypto payments.

This architecture can be viewed as three layers:

Settlement Layer: fast, low-cost on-chain confirmation for POS on L2.

Smart Contract Layer: secure fund management, multi-sig, ERC-4337 accounts, collateralized lending.

Issuer Layer: real-time crypto-to-fiat conversion via CaaS, interfacing with banks and card networks, enabling global merchant acceptance.(15)

Meanwhile, Tether is actively extending into downstream applications, gradually approaching a banking role. Typical banking functions include:

• Funding (deposit-taking and lending): banks pool savings and lend to borrowers, earning interest spreads and fees.

• Payment and clearing hub: core in domestic and cross-border transfers, settlement, credit/debit card processing.

• Money creation and policy transmission: under capital and reserve constraints, banks expand deposits via lending, and serve as channels for central bank policies.

Tether Tether’s strategic investment in Plasma further enhances its “digital banking” capabilities:

At the monetary layer, issuing stablecoins as a widely circulating “digital dollar”; at the payment layer, using Plasma-like chains to upgrade stablecoins into high-frequency, low-cost, scalable payment and settlement rails; at the account and asset layer, embedding stablecoins into near-bank account experiences—“deposit—manage—distribute yield”—to boost user retention and capital accumulation, while providing sustainable yield pathways.

Outlook

Whether DeFi banks can scale depends largely on how their “trust mechanisms” differ from traditional banks. Banks have a 4,000-year history as licensed entities: regulation externalizes trust through licensing, clear entry barriers, legal accountability, and ongoing supervision. Users deposit money trusting the system, not just individual institutions.

DeFi’s trust relies on “verifiable system design”: auditable code, transparent on-chain data, automatic collateralization and liquidation rules—shifting trust from “people and institutions” to “rules and execution.” But it lacks the safety nets of traditional finance: deposit insurance, central bank lender-of-last-resort (LOLR). In systemic crises, DeFi relies on pre-set liquidation, insurance funds, or reserves.

Thus, mainstream adoption of DeFi banking hinges on regulation: only with clear rules that preserve verifiable advantages and provide safety boundaries can mass adoption truly occur.