Three Advantages of DeFi Over Centralized Finance

Although Decentralized Finance (DeFi) has emerged only in the last decade, it poses a significant challenge to traditional banking systems that are much older.

Just like the beginning of the internet, not many understand DeFi yet, but its advantages will soon become clear. As we enter a new bullish phase in the crypto market, here are three key benefits of DeFi we can expect in 2025:

1. Superior Exchanges Than Traditional Options

Decentralized exchanges (DEX) permit users to trade one cryptocurrency for another. Similar to foreign exchange markets, decentralized ones enable the swapping of crypto tokens. DEXs offer a broader range of cryptocurrencies than centralized exchanges like Coinbase and Binance.

Centralized vs Decentralized Exchanges

Trading on decentralized platforms vastly increases the options available to users, especially for new cryptocurrency projects.

As of mid-May 2025, the total value locked (TVL) in DeFi sits at approximately $116.5 billion according to DefiLlama.

2. Earning Interest on Your DeFi Assets

Lending platforms enable users to loan their cryptocurrency and earn interest on it. As common with lending systems, a collateral deposit by the borrower is necessary, typically in popular cryptocurrencies like BTC or ETH. The returns on these loans can significantly exceed what traditional investments offer, sometimes starting around 6% and reaching upwards of 100% ROI.

Lending Platforms

The leading lending platforms currently are Aave, Compound, and MakerDAO, all based on Ethereum - further underlining the importance of Ethereum in the DeFi space.

3. Challenging Centralized Digital Currencies

Central bank digital currencies (CBDCs) are about control, while DeFi aims for freedom. This divergence represents a core ideological conflict in the financial world. Stablecoins like USDC and DAI offer crypto-dollar equivalents without government tethering.

Final Thoughts

Despite being in its nascent stages, DeFi presents a remarkable opportunity for growth and investment in developing technologies. The only obstacle in the path of expansion for this sector is the entry barrier for new investors in the crypto market, a hurdle that needs to be addressed in the future.