Here is an article written by Mike Wasyl. Bracket.
DeFi’s economic model has failed miserably over the past four years. A tarpless economic system is romantic, and it keeps people on their toes. After peeling away the jargon and Ponzi schemes we discover a market that is open 24/7, creating new opportunities for those generations who are left on their own. For Gen Z, there will be no pensions of 30 years for ice cream scoopers.
Although we may have made jokes, the younger generation had to accept what they were given. We click through a UI that was created by a megacorp. We are duct-taped down to an uncomfortable seat, riding on rails that have been in use for decades. The old-fashioned roller coaster that spouts Jazz Age bucket store finance lingo is not for me. There are new rides—new tools that modernize the financial experience and help us earn on our own terms, 24/7. We’ll take a closer look at this slice of the world to see what we could be doing in 2025.
In crypto, proof-of-stake networks deliver native rewards for securing the network—”staking.” It is not possible to replicate staking in the traditional world of finance. Staking is an economic primitive that’s native to Blockchains. Liquid Staked Tokens are a product of Staking, which allows users to gain rewards without operating nodes. The value of liquid staking on Ethereum has risen dramatically through 2024. By the end of that year, it had reached a peak worth $70 billion. Even though ETH’s staking rates hovered around 3%, passive block rewards fueled holder counts.
Only 28% ETH is currently actively staked. Ethereum has the highest staking values, but only a small portion of ETH’s supply. In a few short years, we believe that this percentage will rise to 40%-50%. The year 2025 is crucial to unlocking the institutional capital. The utility of reward assets is understood by over half of Ethereum institutional holders. LST dominance is expected to increase as traditional financial institutions venture on-chain. The competition to earn rewards will increase despite the tailwinds. The users and the capital allocators will decide how best to stack yields to maximize value.
Stakers are seeking new growth opportunities as yields become more compressed due to competition. As liquidity remains stuck across DeFi protocol chains, it is challenging to create opportunities. Users’ staked Ethereum in one DeFi Pool is usually a monolithic pool, which remains until better yields or opportunities appear. The system is both inefficient and limited, making users look for outsized rewards and airdrops while waiting.
Ether.fi, a major player in the ETH restaking space, controls >50% of the liquid restaking market by allowing users to restake ETH across services like EigenLayer. “Restaking” Turns idle LSTs to Liquid Restaking Tokens, which aim to get rewards by extending ETH security to another service. To date, the most common rewards have been loyalty points, tokens and inflationary incentives. We will be able to determine if the yield is sufficient as more Restaking-secured Services come online.
The users want products that are flexible, mobile, and stackable. But in DeFi, protocol design lags behind demand. The simple act of reusing an economic security to generate new coins is speculation and can stress Ethereum. Most platforms still treat staking as a one-way mechanism—deposit ETH and earn rewards. The capital is recirculated within the reward loop. “ouroboros” Bracket has a capital that never leaves DeFi.
The users are looking for products which provide exposure to new asset categories with diversified risk. “set it and forget it” experiences. We would like to simplify products and make them transparent, with a focus on earning. However, we’d also want additional safety features. The product makers who ignore this shift will trap yield seekers in an inflationary reward cycle.
The Playbook for 2025 – Real-Yield Optimization and Strategy Management
DeFi allows money-legos. Traditional finance, such as banks and brokerages have struggled with this due to their highly fragmented system. DeFi has, on the other hand, unlocked a way to stack high-quality collateral onto the chain to increase yields. Consider the perfect state of a digital “yield stack”—passive staking rewards, plus real trading yield, plus real-world products, plus economic incentives that generate solid returns without leaving the on-chain ecosystem.
Users wouldn’t need to choose between pools or opportunities if products from Lido Coinbase and Binance were compatible with real-world assets in DeFi. The best option could automatically be selected, and participation can be managed based on the risk level.
The year 2025 will bring a surge of new products, new talent, and a change in the way people view high-quality assets. First time ever, staking and stablecoins, ETH as well influential capital allocations, have been legitimized. TradFi tokenized TradFi-based products are gaining traction, including on-chain funds for money markets, credit funds, or hybrids of on-chain/off chain models.
Introducing these yield-producing assets alongside an improved regulatory climate should unlock a wave of new capital deployment—something DeFi needs in order to exit the ouroboros loop and participate in the global economy. DeFi will be forced to create toolkits to assist the trillions in dollars that are waiting to flow at the pace of on-chain financing.
But a huge knowledge gap still exists. TradFi does not always know about on-chain, while regulators have no idea what DeFi is. This is where seasoned DeFi builders will help usher in the next wave of global finance—but they have to play nice. In the near future, we will have tokenized markets that are open 24/7 and offer users the most competitive selection of products and services. By 2025 the focus will be on building an infrastructure that connects products, DeFi users and real economic value.
Bottom Line
DeFi’s stagnation in terms of yield exposes the need for new assets and managers as well as new portals that lead to hybrid experiences, tokenized products, and tokenized services. The users don’t wish to be stuck with old systems which don’t work for them. The message is getting through to the institutions, which are building up trust with new collateral. In order to benefit users, new regulations are likely to attract innovative companies looking for a competitive edge.
DeFi is reaching an inflection point—its long-term viability depends on its ability to evolve beyond basic caveman reward structures and isolated PvP yield battles. After a certain amount of time, the fun will stop for all. Yield generation must become an active, adaptive process—one that integrates automation (even AI) and diversified income streams from asset classes that move at the speed of on-chain finance.
DeFi is at risk of becoming a zero sum game without unlocking the new assets and utilities on-chain. Capital will come in but returns are stagnant, so it’s like a snake eating its tail over and over again. TradFi has already begun tokenizing products that have institutional backing. DeFi, on the other hand, will be there to offer new rails and rides in 2025.
The DeFi developers must realize we will not win in PvP. It’s exhausting to eat our own tails. We need to create new tracks and rides for the trillions in financial assets, to fulfill our promise of an improved meritocratic society.
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