According to Coingecko, DeFi trends for investors to watch in 2024 include: perpetual LP pools, intent-based architecture, points and airdrops, liquid staking protocols, cross-chain bridges, real-world assets, Bitcoin Layer 2 solutions and prediction markets.
Total Locked Value (TVL) has more than doubled from its low of $36.59 billion in October 2023, and is currently over $90 billion. Trends to watch:
Since its inception in 2020, decentralised finance (DeFi) is arguably the biggest innovation in crypto-currencies. DeFi offers an alternative approach to financial services, cutting out intermediaries such as banks and brokers, and offering direct services such as lending, trading and investing in an open and transparent way.
TVL in DeFi is now $91.76 billion, down 53.49% from its peak of $176.25 billion in October 2022. While this may seem like a steep decline, a notable turnaround occurred in the fourth quarter of 2023. TVL more than doubled from its low of $36.59 billion in October 2023, showing a clear change in market sentiment.
Perpetual LP pools gain popularity in 2024
Liquidity pools (LPs) are smart contracts for locking tokens to provide liquidity. They are often used by decentralised exchanges and lending protocols to facilitate token trading and lending and borrowing activities, playing an important role in DeFi. Perpetual LP pools, particularly for perpetual trading, reduce the need for liquidity providers to closely monitor their positions, allowing for a wider "pooling" of returns.
GMX
GMX is a decentralised exchange (DEX) specialising in perpetual futures trading, operating on the Arbitrum and Avalanche networks. This DEX allows users to trade leveraged crypto-currencies, offering a decentralised option for derivatives trading. Liquidity in its LP pools is represented by its GLP token, made up of nine different assets.
Jupiter
Jupiter is a popular liquidity aggregator on the Solana blockchain, known for providing optimal trading routes across various DEXs on Solana. Jupiter Liquidity Pools (JLPs) refer to pools created and used by Jupiter to facilitate efficient trading.
Intent-based architecture
The current state of DeFi is often seen as complex and time consuming. Traditionally, transactions specify 'how' an action should be executed, whereas intent-based systems define 'what' the desired outcome should be.
UniswapX
UniswapX is an example of an intent-based protocol designed to overcome the challenge of inefficient routing across fragmented liquidity pools.
Aperture Finance
Aperture Finance uses AI-powered intents to simplify the complexities of DeFi.
Points and airdrops
Airdrops are widely used in DeFi to stimulate user participation and liquidity. They help build communities and raise awareness of new projects. For example, Compound's airdrop in 2020, which distributed COMP tokens to users, set a precedent followed by many other DeFi projects.
Blur
Blur, an NFT aggregation platform, has completed a $450 million airdrop of BLUR tokens based on user engagement.
EigenLayer
EigenLayer, a protocol built on Ethereum, introduces restaking and attracts over $15 billion in TVL.
Ethena
Ethena, a stablecoin platform on the Ethereum blockchain, has launched a points programme to incentivise user engagement.
Liquid staking protocols allow stakers to maintain liquidity while locking in assets for staking. This is done by issuing liquid staking tokens (LSTs), which act as derivatives of the staked assets.
Lido Finance
Lido Finance is the largest and most popular liquid staking platform, supporting multiple networks including Ethereum, Polygon and Solana.
Interchain bridges
The advent of cross-chain interoperability enables seamless transactions and asset transfers across various blockchain networks. According to L2Beat, bridges have a TVL of more than $9 billion.
Axelar
Axelar is a bridge designed to connect multiple blockchain networks, operating with a hub and spoke model.
Hyperlane
Hyperlane focuses on modularity and permissionless interoperability, allowing developers to deploy the protocol without approval from a central authority.
Chainlink's CCIP
Chainlink's Cross-Chain Interoperability Protocol (CCIP) enhances the DeFi ecosystem by enabling cross-chain liquidity pools and interoperable DeFi protocols.
With the collapse of FTX, Luna and 3AC in 2022, many investors are turning to the tokenised real assets (RWA) sector as a safe haven for their crypto-assets. According to CoinGecko's Crypto Real Assets Boom Report, 2023 saw a massive 782% increase in tokenised treasury inflows, with total locked value (TVL) rising from $104 million in January 2023 to $917 million by the end of 2023.
Tokenised cash
Realio
Realio Network is an interoperable real asset management platform based on the Cosmos SDK. Realio works with two tokens: the Realio Network Token (RIO) and the Realio Security Token (RST), while offering compatibility with the Ethereum Virtual Machine (EVM). Through tokenisation, Realio enables users to convert their physical or non-digital assets into digital tokens. These assets can then be bought, sold or traded on digital platforms while complying with KYC/AML laws and securities regulations.
Ondo Finance
Ondo Finance (ONDO) is another major project in the tokenised treasury market, focusing on bringing institutional funds into the crypto space via the tokenisation of T-Bills for yield with their USDY stablecoin. In 2024, Ondo Finance's TVL reached $420 million, a 959% increase from $39.22 million in March 2023. Ondo Finance is backed by major players such as Pantera Capital, Coinbase and Blackrock.
Swarm
Swarm Markets is a decentralised trading platform that enables institutional investors to trade and trade tokens based on real assets such as commodities and financial securities. Regulated by the German Financial Authority, Swarm allows asset issuers to create pools of tokens and liquidity directly on the platform. Users can buy popular stocks such as NVDA, COIN, MSFT and TSLA and participate directly in DeFi pools on the Polygon network, offering broader access to global markets.
Lightning Network
The Lightning Network facilitates instant, low-cost Bitcoin transactions via off-chain payment channels. In 2024, Lightning Network processes around 5,000 transactions per second (TPS), far more than the 7 TPS of Bitcoin's core layer. Network capacity has reached over 4,200 BTC, valued at over $100 million, indicating substantial adoption.
Stacks
Stacks brings Turing-complete smart contracts to Bitcoin through its proof-of-transfer consensus mechanism. This project allows developers to create decentralised applications (dApps) directly linked to the Bitcoin blockchain. Notable projects include Stackswap, Arkadiko and CityCoins. Stacks' market capitalisation has exceeded $1 billion, with more than 300 dApps developed on its platform.
RSK
RSK operates as a Bitcoin sidechain, enabling smart contract functionality via merged mining with Bitcoin. RSK hosts several DeFi projects, including Sovryn and Money on Chain. The RSK network has locked up more than 1,500 BTC, or around $40 million.
Liquid Network
Developed by Blockstream, the Liquid Network offers fast and confidential transactions, the issuance of digital assets and support for smart contracts. Bitcoin Liquid (L-BTC) is used within the network to facilitate these features. The Liquid Network handles more than 10,000 transactions daily, with total transaction volume exceeding $2 billion since its inception.
Prediction markets, where users speculate on future events, are gaining traction in the DeFi ecosystem. In 2024, the total locked-in value (TVL) in prediction markets reached $55.1 million, an increase of 57.7% since the beginning of the year.
Polymarket
Polymarket, built on Polygon, stands out as a blockchain prediction market. In 2024, Polymarket's average monthly trading volumes increased from $6.1 million in 2023 to $42.0 million. Polymarket covers a wide range of topics, including sports, politics and pop culture, enriching the DeFi space with more engagement opportunities for users.
DeFi is at a turning point, attracting more and more liquidity and institutional participation. The sector is evolving, offering financial primitives previously unavailable on blockchain. Innovations such as tokenisation of real assets and Bitcoin's Layer 2 solutions are reshaping traditional finance and introducing new investment avenues. While challenges remain, the rapid innovation in DeFi suggests that the next generation of financial primitives is on the horizon.
