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The Future of Decentralised Finance
The Future of Decentralised Finance
Trader Joe avatar
Written by Trader Joe
Updated over a week ago

Decentralised finance has seen tremendous growth over the last 30 months. It has managed to weather the biggest storms crypto has ever seen and not only survived but continues to flourish.

DeFi has gone through a few stages. Some of them lasted for a while, some of them didn’t, but each one brought it closer to the end goal - building a sustainable, open and permissionless financial system. As the industry continues to build and innovate, we can already see a few emerging trends that can help us understand what might come next for DeFi.


The DeFi summer of 2020 and subsequent bull runs were largely fueled by token emissions. Projects rewarded early adopters with their native tokens resulting in triple and quadruple-digit APRs. At the height of the (3, 3) euphoria, projects promised to double investors’ money practically overnight. This model clearly couldn’t last long.

As an alternative solution, more and more projects have started focusing on the “Real Yield”. This yield isn’t generated by emissions and is instead often sourced from fees and other revenue streams. It is considerably lower than inflationary rewards from the last cycle but much more sustainable.

We already can see some of the most talked about and innovative DeFi projects use real yield to provide value for their token holders. In future, as the adoption grows and more people see the value of sustainable cashflow-oriented tokens, the real yield narrative will continue to grow.


The future of crypto is clearly multichain, at least in the short term. With multiple alt-L1s and L2s trying to earn their spot under the sun, many DeFi projects will employ a cross-chain approach and try to onboard users from multiple networks.

In contrast to the first wave of multichain migration, where protocols simply redeployed the same code across multiple networks, more and more dapps become truly “cross-chain”, unifying liquidity and token flows across all deployments. This is made easier by the release of the next-generation bridges, such as Layer Zero, that allow for general message passing and not just token transfers.

Aave V3, for example, is built with the idea of cross-chain in mind and aims to use Portal to optimise liquidity flow across chains and make the protocol more efficient.

The Shared Liquidity AMM (SLAMM) mechanism proposed by Delphi Digital allows for the deployment of cross-chain DEXes without fragmenting liquidity while keeping them composable within a wider DeFi ecosystem.

This cross-chain future presents plenty of opportunities as projects become less and less reliant on one chain but also a fair share of challenges. The three biggest hacks in the history of DeFi were hacks of bridges, so securing the cross-chain communication layer will remain likely remain a high priority for a while.

Advanced products

As DeFi continues to move away from unsustainable yields and Ponzi schemes, the products offered in the space become more and more advanced, following the trajectory of traditional markets. These products also receive more attention from users and investors as they often offer real usecases and real yield. Following the UST collapse, the derivatives space experienced a much smaller drop in TVL compared to the rest of the market.

Inefficiencies of the “first-gen” DeFi protocols are being ironed out with new and better solutions being introduced for exchanges, markets and stablecoin issuers. TraderJoe’s liquidity book is a prime example of that transformation, as it innovates the existing AMM model by offering zero slippage swaps and improved capital efficiency.

However, the core issue with these complex products is that while they present great tools for more sophisticated traders and investors, the barrier to wide adoption remains high. This can be solved by vaults that wrap complex products and abstract all of the inner workings away. Developing vaults takes time and resources, but they’ll eventually become a great way to onboard retail users.


The collapse of almost all CeFi lenders and other centralised crypto institutions presents an excellent opportunity for DeFi to onboard the next generation of users. It, however, remains a difficult task as CEXes remain practically the only way to onramp and offramp cryptocurrencies.

In future, DeFi projects will need to find ways to get retail investors involved. This could include improving UI/UX, releasing educational content, and working on new retail-friendly features. At the moment, having to deal with bridges, cold storage, and wallet security are critical hurdles on the path of someone who wants to get into decentralised finance.

DeFi is an exciting and powerful space that has recently seen a lot of development and continues to grow rapidly, even in a bear market. And once the industry figures out how to clear the onboarding hurdles, the path to the mainstream will be wide open.

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