Opinion: Rachel Lin, SynFutures Co-Founder and CEO
DeFi has come a long way from the 2020 DeFi summer boom-bust cycle. Much of the initial surge was fueled by experimentation, hype, and unsustainably high incentives.
Five years later, the foundations of DeFi appear to have changed significantly. Last year’s experiment was a quiet integration phase that set the stage. 2025 may be remembered as the year DeFi surpassed centralized exchanges (CEX).
The bear market of 2023 and 2024 washed away many DeFi projects that lacked product-market fit, forcing other DeFi platforms to focus on infrastructure and mature to achieve real adoption.
Decentralized exchanges evolve
While the collapse of Celsius and BlockFi and the collapse of FTX exposed the weaknesses inherent in many centralized platforms, decentralized exchanges (DEXs) have sought to offer similar speeds and user experiences by leveraging high-performance chains and building their own infrastructure.
Equally important, as blockchain latency improves, fully on-chain order books become viable, allowing DeFi protocols to begin to address previous pain points in capital and liquidity efficiency.
Beyond the pool-based model of early perpetual DEXs like GMX, new hybrid designs enable much more efficient liquidity provisioning for traders by mitigating slippage and depth issues by combining automated market makers (AMMs) with order book exchange order execution or by supporting only outright order books.
DeFi gains market share
In terms of numbers alone, the market’s top 10 DEXs facilitated $876 billion in spot trades in Q2 (up 25% QoQ). In contrast, CEX spot trading volume fell 28% to $3.9 trillion, and the CEX-to-CEX trading volume ratio reached an all-time low of 0.23 in the second quarter.
The resurgence of DeFi can be attributed to the growth of trading. For example, lending protocols have outpaced centralized protocols, posting a staggering 959% growth from their late 2022 lows. Aave currently has enough deposits to rank among the 40 largest banks in the US, a testament to the growth in scale and credibility of DeFi. Meanwhile, Coinbase’s partnership with Morpho aims to launch Bitcoin-backed loans via cbBTC directly via Morpho’s on-chain infrastructure and liquidity, signaling a broader shift to DeFi-native infrastructure.
After seeing a series of CeFi lender failures, people clearly seem to like the transparency and automation of on-chain lending. Whether in transaction volume or credit provision, DeFi has established a commanding lead in growth that cannot be ignored.
Regulation and new trust
The flip side of DeFi’s growth story is that the broader crypto market is finally gaining regulatory transparency. This shift is encouraging major DeFi protocols to work with regulators and operate within a clearer framework, rather than pushing innovation overseas. Uniswap, for example, has played a key role in advocating for smart policy arguments that justify transparency and self-management in DeFi.
Coincidentally, user preference for on-chain systems has been particularly evident in moments of regulatory tension, such as the SEC lawsuit against Binance and Coinbase, which saw traders rapidly migrate to decentralized exchanges, causing volume to spike 444% within hours of the announcement. The message was clear. Even with stricter regulations, the activity will not disappear. It simply evolves on-chain.
Security and custody risks only further reinforce this change. From 2012 to 2023, centralized exchanges lost nearly $11 billion due to hacks and mismanagement.
This is more than 11 times the amount stolen directly from decentralized protocols and wallets. For many users, storing assets on major exchanges has proven to be much riskier than using self-custody or DeFi smart contracts.
CeFi imitates DeFi but still lags behind
Unable to ignore the momentum of DeFi, some CEXs are starting to integrate on-chain infrastructure directly into their platforms. For example, Coinbase has integrated Aerodrome, a leading spot DEX built on Base, Coinbase’s proprietary layer 2 network, allowing users to take advantage of decentralized liquidity while staying within a familiar interface. While this is a notable step, it still maintains Coinbase as the distribution point.
The Binance ecosystem provides another notable example. The BNB chain hit an all-time high in October, attracting millions of active users. Much of this surge was driven by Aster, a permanent DEX on the BNB chain that sparked speculation about its direct relationship with Changpeng “CZ” Zhao. If many of the same founders behind CEX are now building in the decentralized space, some may wonder how truly decentralized these new ecosystems and products are.
Core metrics speak the same truth. By late 2024, TVL numbers had rebounded to around $130 billion, near an all-time high, and continued to rise. In areas such as derivatives, asset management, and payments, DeFi capabilities go beyond traditional capabilities and provide increased transparency and permissionless access.
Centralized exchanges have heavy compliance burdens and locations across multiple jurisdictions, making it increasingly difficult to act quickly. Many CEXs are exiting. Crypto.com recently scaled back its US operations, delisted multiple tokens, and even postponed new product launches pending regulatory clarity. OKX is also cautious about expanding its decentralized efforts as compliance expectations change.
In contrast, DEXs operate on a lean, code-driven structure, allowing you to deliver updates and innovate in a fraction of the time and cost. Introduce new features at software speed, including support for tokenized real-world assets, out-of-the-box yield strategies, and integration with AI-powered trading agents.
Let’s take a look into the future
Unless CEX fundamentally reinvents its model, it risks becoming worthless, especially since copying a few DeFi features or offering self-custody options may not be enough for customers.
Trust in the cryptocurrency community leans toward systems that are “built into the code” rather than systems built on corporate promises. It is telling that recently, when liquidity and trading volumes returned to the market, decentralized entities have captured a disproportionate share of these funds.
The dawn of DeFi dominance is near, signaling a more resilient and user-empowered financial ecosystem to come.
Posted by: Rachel Lin, SynFutures Co-Founder and CEO.
This article is for general informational purposes only and is not intended to be, and should not be taken as, legal or investment advice. The views, ideas, and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
