The 2025 DeFi Playbook: The Narratives That Defined DeFi in 2025

Sofia Kim

05 Dec 2025 • 6 min read

As 2025 draws to a close, the DeFi landscape stands at a pivotal inflection point not merely as a collection of protocols, but as a maturing infrastructure layer redefining global capital flows. According to DeFiLlama, total value locked (TVL) has surpassed $170 billion (read: the highest level this year) while DEX volumes have topped $19 billion, also a yearly peak.

Throughout 2025, projects like Hyperliquid, Lighter, and Aster captured the spotlight in the perpetual DEX arena, while narratives around real-world assets (RWA) and stablecoins continued to push crypto toward – for lack of a better word – mainstream adoption. At the same time, platforms like Pump.fun drew attention from more speculative traders. Amidst this dynamic landscape, this article highlights six key narratives that have defined and shaped DeFi throughout 2025.

Key Takeaways

BTCFi transformed Bitcoin into a productive asset, with staking, restaking, and liquid derivatives enabling layered yield and capital efficiency.

Perpetual DEXs such as Hyperliquid, Lighter, and Aster drove DeFi’s evolution into a derivatives powerhouse.

Stablecoins gained mainstream adoption, supported by regulatory clarity, institutional investment, and rising onchain usage, making them core assets for payments, treasury management, and yield strategies.

Memecoins evolved into structured ecosystems with trading rails, liquidity mechanisms, and incentive models, enabled by launchpads like Pump.fun and Bonk.fun that simplified token creation and distribution.

DeFAI – autonomous AI agents in DeFi – became operational at scale, optimising yield strategies, cross-chain execution, and arbitrage.

Prediction markets went mainstream in 2025, with Polymarket leading explosive growth and new entrants like Kalshi and Fanatics Markets bringing onchain forecasting to everyday users.

BTCFi

BTCFi – or Bitcoin DeFi – transformed Bitcoin from a largely passive reserve asset into an active engine for yield, composability, and capital efficiency. In 2025, the BTCFi ecosystem experienced explosive growth, with the TVL reaching approximately $8.6 billion. This surge is primarily driven by high Bitcoin prices, institutional adoption (spot ETFs), and technological innovations like staking and restaking protocols.

Moreover, Layer 2 solutions such as Lightning and Stacks enabled composability on Bitcoin, creating new pathways for capital to flow across chains and applications while preserving the decentralised trust model that underpins the network.

At the heart of BTCFi was the introduction of liquid staking derivatives (LSDs) and restaking primitives, which allowed holders to earn yield by delegating BTC to validators or securing external networks, all while maintaining self-custody through threshold signature schemes. Restaking, in particular, became a major narrative in 2025, allowing users to leverage previously staked Bitcoin to generate additional yield across multiple protocols.

Liquid Staking Tokens (LSTs) and Liquid Restaking Tokens (LRTs), such as Lombard’s LBTC, represented staked BTC that could circulate freely across DeFi applications, enabling layered rewards, multi-chain deployment, and significantly enhanced capital efficiency. Coingecko reported that by the end of the year, Lombard had minted over 15,000 LBTC, with more than 269,000 users engaging with its products, reflecting widespread adoption and illustrating how Bitcoin could become programmable in ways previously reserved for smart contract-native chains. Platforms like Prodigy.Fi further empower users to put their BTC to work by offering structured yield products, enabling everyday investors to earn real, guaranteed returns while participating in this expanding BTCFi ecosystem.

Perp DEX and Hyperliquid

Perpetual Decentralised Exchanges (Perp DEXs) emerged as a defining narrative in 2025, propelling DeFi’s maturation into a derivatives powerhouse. Perp DEXs have seen a significant increase in market share and trading volume, reaching $1 trillion in monthly volumes for the first time in September 2025. Platforms such as Hyperliquid, Aster, and Lighter did more than replicate centralised exchanges’ functionality, they engineered new paradigms of verifiable, high-throughput execution that combined ZK-rollups with zero-fee models to remove centralised monopolies.

Hyperliquid led with $800 million in annualised revenue, enabling 100x leverage across 100+ pairs and supporting custom market creation. In late November 2025, Lighter surpassed Hyperliquid in 24-hour trading volume, reaching $9.41 billion. Aster complemented the ecosystem with extreme leverage and incentive-driven liquidity, and even captured the top spot in monthly perpetual swap trading volume in September 2025, recording over $490 billion in activity.

Perp DEXs resolve DeFi’s trilemma of speed, security, and composability. Audited order books, non-custodial liquidation pools, and integrated AI hedging allowed them to minimise slippage and maximise capital efficiency. Funding of $68 million for Lighter at $1.5 billion valuation alone attracted institutional flows while community airdrops such as HYPE supported retention.

Stablecoins

In the summer of 2025, stablecoins took center stage in crypto, driven by regulatory clarity and growing institutional adoption. The US GENIUS Act and similar international regulations provided clear guidelines for issuers, sparking interest from banks, fintechs, and Fortune 500 companies. According to Grayscale, major corporations began integrating stablecoins into treasury, settlement, and payment systems, signaling that stablecoins were transitioning from niche crypto tools into core financial infrastructure.

Moreover, Circle’s IPO on 5 June 2025 marked a turning point for institutional confidence, as its stock surged over 500%. Stablecoin supply surpassed $260 billion, with USDC issuance reaching $61 billion in a $253 billion market. B2B cross-border payments reached nearly $3 billion in February alone, while chains like Aptos and Base saw stablecoin transfer volumes surge with Aptos reporting almost $1.2 billion in supply, highlighting stablecoins as primary assets for DeFi, payments, and onchain yield strategies.

For users and builders, stablecoins became a foundation for low-volatility DeFi participation. Their programmability and transparency make them ideal for structured yield products, liquidity pools, and vaults, including offerings on Prodigy.Fi, enabling risk-managed onchain earnings without directional crypto exposure. Looking ahead, regulatory frameworks like the GENIUS Act are expected to inspire global adoption, positioning stablecoins as both safer instruments for users and a bridge for institutional capital into decentralised finance.

Memecoins

Memecoins experienced a remarkable evolution, transitioning from speculative curiosities into structured financial ecosystems capable of supporting liquidity, trading, and community engagement at scale. What had once been primarily cultural tokens driven by viral internet trends began to assume the characteristics of platforms, complete with their own trading rails, liquidity mechanisms, and incentive structures designed to reward participation and retention.

This transformation was driven by Pump.fun, which dramatically simplified the process of launching new tokens by abstracting away the technical complexities that came with token creation, such as smart contract development, liquidity pool configuration, and infrastructure deployment. With Pump.fun, users could create a fully functional memecoin simply by specifying a token name, symbol, and image, with all backend processes handled automatically, turning what was once a specialized technical task into a near-instant consumer experience.

This resulted in a highly competitive landscape, with Bonk.fun emerging as a dominant player by surpassing Pump.fun and capturing more than 55% of market share. This success was driven by a fee structure that routed a substantial portion of revenues back into the ecosystem, including buy-and-burn mechanisms for BONK and strategic reserve allocations, incentivising both speculation and long-term value capture.

DeFAI

By mid-2025, artificial intelligence (AI) had transitioned from a speculative concept to an active market participant, with reports indicating that the market capitalisation for AI agents reached approximately $5.38 billion. The narrative of DeFAI was driven not by hype, but by necessity as DeFi’s complexity scaled to include numerous protocols across multiple chains, human operators were increasingly unable to process the requisite information or execute strategies with the speed and precision required by modern markets.

DeFAI’s success rested on several key technological innovations. Firstly, oracle-agnostic AI models developed by projects such as Fetch.ai and SingularityNET enabled autonomous agents to process sentiment data from platforms like X, monitor onchain flows, and make predictive adjustments to yield strategies in real time, without reliance on centralised intermediaries.

Similarly, platforms like Virtuals Protocol leveraged intent-based execution, allowing agents to automatically rebalance positions across Layer 2 networks, capture sub-second arbitrage opportunities, and boost average portfolio efficiency. The emergence of DeFAI signaled a profound shift in DeFi’s operational model. No longer constrained by human cognitive limitations, capital could now be deployed, monitored, and optimised at scale in ways that were previously impossible.

Prediction Markets

The sixth narrative of 2025, prediction markets, showed how DeFi could evolve from simple speculation into a core layer of probabilistic infrastructure. By the end of the year, the sector had processed more than $27 billion in cumulative volume, a fivefold increase from 2024. Polymarket dominated the space with 56% market share and over $18 billion in total trades, including a record $3.7 billion in October alone.

This growth was accelerated by major regulatory wins in the US, such as the CFTC approving Polymarket’s QCX acquisition as well as a $2 billion investment from ICE. These moves helped position prediction markets as reliable forecasting tools rather than just betting platforms. Polymarket’s accuracy, often cited at around 90% for major events like elections and Federal Reserve decisions, outperformed traditional polls and cemented its status as the sector leader.

Other platforms also expanded the ecosystem like Kalshi, which operates with fiat rails and is valued at $5 billion. Moreover, Fanatics Markets, launched through a partnership with Crypto.com, has just launched this December. Positioned as a simple and user-friendly platform, Fanatics Markets allows users to trade predictions across sports, finance, culture, and more.

Together, these developments signaled that prediction markets are moving firmly into the financial and cultural mainstream, bridging crypto-native infrastructure with everyday use cases at scale.

Taken together, these narratives illustrate the sector’s maturation from experimental playground to a sophisticated financial ecosystem. Collectively, they signal a DeFi ecosystem that is now capable of sustaining capital, intelligence, culture, and derivatives execution simultaneously, laying the groundwork for the innovations and macro themes that will define the industry in 2026 and beyond.

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