Crypto Lenders Manage Close to $60 Billion in Assets Amidst Rising DeFi Adoption

Key Insights

The DeFi landscape is rapidly transforming into an essential financial layer for applications, with total value locked in lending protocols nearing $60 billion, according to a report from Artemis and Vaults.fyi.
Applications targeting end-users are increasingly incorporating DeFi infrastructure for enhanced financial services, a phenomenon dubbed the “DeFi mullet.”
The report indicates that DeFi protocols are venturing into tokenized real-world assets, where crypto-native asset managers are instrumental in capital management and governance.

Overview of DeFi’s Evolution

There’s an ongoing evolution in decentralized finance (DeFi). Unlike earlier market booms driven by unsustainable yields, current growth stems from its integration as a backend for user applications and increasing institutional interest.

According to a Wednesday report by the analytics firm Artemis and yield provider Vaults.fyi, the total value locked across major DeFi lending protocols—such as Aave, Euler, Spark, and Morpho—has surged past $50 billion, with expectations to reach $60 billion.

“These are not merely yield platforms; they are evolving into modular financial networks undergoing rapid institutionalization,” the report’s authors indicated.

The ‘DeFi Mullet’

A crucial trend highlighted in the report is the transformation of user-facing applications that embed DeFi functionalities for lending and yield generation in a way that is seamless for users, hence the term “DeFi mullet:” fintech in front, DeFi behind.

For instance, Coinbase users can utilize the backend services of Morpho to borrow against their Bitcoin holdings, resulting in over $300 million in loans facilitated through this integration.

Bitget Wallet features Aave to provide a 5% yield on USDC and USDT without users needing to navigate outside the app. PayPal has taken a similar route with its PYUSD stablecoin, offering nearly 3.7% yields, although without employing DeFi methods.

As DeFi protocols continue to innovate, the emergence of tokenized real-world assets (RWAs) like U.S. Treasuries is being explored as collateral or yield generating assets. The increase in investment strategies emphasizing tokenization is also notable, paving the way for growth in this sector.

The roles of crypto-native asset managers are becoming more critical as they help allocate capital across DeFi platforms, and their managed assets have grown from $1 billion to over $4 billion since January.