Where has the allure of DeFi gone?

Rigid behavior, loss of trust... Where lies the key to breaking this deadlock?

Original text: DeFi Has Lost Its Charm

Author: Prince

Compiled by: Saoirse, Foresight News

TL;DR: People's use of DeFi has become largely the same. The market and infrastructure are maturing, but the initial curiosity has turned into caution. Returns are no longer rewards that users obtain by taking risks themselves, but rather expectations of "waiting for distribution"; participation has also shrunk to just "incentive activities"—users are only willing to participate when there are rewards.

DeFi feels like it's gradually "fading away," but I'm not exaggerating. It hasn't stopped operating or evolving; the real change is that the excitement of "stepping into a completely new field" is becoming increasingly rare.

I entered this field in 2017 (during the ICO boom). Back then, everything felt unfinished, even somewhat out of control—chaotic as it was, it also exuded the potential for openness. You might have believed that the rules at the time were just "temporary versions," and that the next basic component could completely reshape the entire ecosystem.

The "Summer of DeFi" (around 2020, the DeFi boom) was the first time this "possibility" became a tangible reality. Back then, you weren't just trading tokens; you were watching the "market structure" gradually take shape in real time. The newly emerging foundational components weren't simple "upgrades," but rather allowed you to rethink "what is actually possible." Even if occasional problems arose, it felt like "exploring the unknown"—because the entire system was still being actively built.

But what about now? Many DeFi operations are like "rehashing old scripts," only executed more smoothly. The infrastructure is more mature, the interface is easier to use, and the models have been thoroughly understood. It can still be used, but it's difficult to achieve breakthroughs in "exploring new areas" anymore; and this has completely changed the way people interact with DeFi.

Of course, people are still doing DeFi-related development. But what has really changed is the user behavior that DeFi is "enhancing"—it's no longer about exploration, but about "profit-seeking".

What has DeFi been "optimized" into?

The reason why DeFi is so speculative is that "trading" is the first thing people are willing to do on a large scale on the blockchain.

In the early days, traders were the first true "heavy users." Once they scaled up, the entire system naturally revolved around their needs.

What do traders value? Flexibility, speed, leverage, and the ability to exit at any time. They dislike being "locked in" or having "risk controlled by others." Therefore, protocols that meet these needs grow rapidly; while those requiring users to "change their behavior patterns," even if functional, rely on "paying" users to tolerate the "mismatch"—such as issuing token rewards—to retain users.

Over time, the "user mentality" of the entire ecosystem has been shaped into this: participating in DeFi is no longer because "the product itself is useful", but because "the market should compensate me".

Once this expectation is formed, users will no longer "jump out" of this logic—instead, they will become increasingly adept at switching projects faster, holding stablecoins for longer, and only entering the market when the rewards are "clear and obvious." This is not a moral judgment, but rather a rational choice made by users within the environment created by DeFi itself.

Lending has become a "financing tool," losing its "credit essence."

When it comes to the "misleading" nature of DeFi, lending is the most typical example—it is often described as "decentralized credit," but what is actually being done is completely different.

From the outside perspective, "lending" means "credit," and "credit" means "time": some people borrow money for real needs outside the blockchain (such as doing business), while others lend money to bear "time risk" and obtain returns.

However, the largest "lending" activities in DeFi are more like "short-term financing." The mainstream borrowers don't actually "need long-term funds," but rather "want a trading position"—such as leverage, cyclical staking, basis trading, arbitrage, or betting on market direction. They borrow money not to "hold loans," but to "trade."

Lenders have adapted to this reality: they no longer act as "credit approvers" but rather as "liquidity providers." They only care about "whether they can withdraw at any time," "whether they can redeem at face value," and prefer terms like "interest rates can be adjusted at any time." When both lenders and borrowers think this way, the market becomes a "money market" rather than a "credit market."

Once the system is formed around this need, it becomes difficult to build "real credit" on top of it—you can add features, but you can't force users to "change their original intentions."

Benefits: From "returns" to "bottom-line requirements"

Gradually, "returns" ceased to be "the reward for taking risks" and became "the reason for participation"—without high returns, no one would be willing to participate.

On-chain risks go far beyond price volatility: smart contracts can have bugs, governance voting can go wrong, oracles can be fed incorrect data, cross-chain bridges can be hacked, and there are even risks you can't even imagine. Users have gradually come to realize that bearing these risks requires tangible compensation. This expectation itself isn't problematic, but it has fundamentally changed user behavior.

Funds won't "gradually decrease from high returns to normal returns and then stay"—as soon as returns drop, the funds will leave. Users keep their funds "always available," waiting for the next "rewarding" opportunity.

The result is that DeFi activity comes and goes – it's incredibly popular when incentives are in place, and it's deserted when incentives are gone. Those seemingly impressive "user growth" metrics are often just "paid-for behavior," and they don't retain users at all.

When users only come when there are rewards, it becomes extremely difficult to create a product that can survive in the long term.

Trust: Without trust, you lose the desire to explore.

There was another change that completely reshaped DeFi: trust was gone.

In recent years, there have been too many hacker attacks, project failures, and governance failures, and users' mentality has long changed. "New things" no longer arouse curiosity, but rather arouse vigilance. Even experienced users will "wait and see before entering the market" and "invest a small amount of money to test the waters," preferring "old systems that have survived" to "new systems with better features."

This might be a good thing—after all, people are more cautious. But it has also changed the culture of DeFi: "exploration" has become "due diligence," and "cutting-edge" has become "checklists." The whole field has become more "serious," but "serious" and "glamorous" are not the same thing at all.

What's even more difficult is that DeFi simultaneously makes users feel that "high risk must be high return," while also making them "afraid to take new risks." This has squeezed out the middle ground that was once "used for experimentation."

Why do both those who support and oppose DeFi have valid points?

The reason why the DeFi controversy is so intense is often because "the two sides are not talking about the same thing."

If you don't like DeFi and say it's "repetitive and unoriginal," you're not wrong—many products are serving the same group of users, and past growth has mostly relied on "giving out rewards" rather than "real demand."

If you believe in DeFi, you're not wrong to say it "has core value"—permissionless access (anyone can enter), global liquidity (money can flow across borders), composability (different protocols can be combined), and open markets (no intermediaries)—these ideas are still very powerful.

Both sides made the mistake of "treating different goals as the same." DeFi didn't fail; it simply "successfully optimized a small portion of the needs"—but precisely because of this success, it's difficult for it to push its boundaries further.

Whether you consider this "progress" or "stagnation" depends entirely on your initial expectations of DeFi.

How can the allure of DeFi be restored?

If DeFi wants to regain its appeal, simply "replicating the DeFi summer" won't work—those moments of "pioneering the frontier" will not be repeated.

What truly disappears is not "innovation," but "changes in user behavior." Once a system stops "enabling people to do things in new ways" and focuses only on "making old ways better," the "excitement of exploration" is gone.

If DeFi is to become important again, it needs to do something even more difficult: build a system that "makes diverse behaviors reasonable." For example, make funds "willing to be left unused for a long time," make "time periods" "understandable and exitable" (rather than "unavoidable"), and make "yields" no longer "eye-catching numbers," but "decisions that you can make yourself based on risk assessment."

This kind of DeFi will be "quieter": slower growth, and it won't "flood" the headlines like in the past. But this is what "demand-driven" looks like—not "endless rewards."

I'm not even sure if achieving this transformation will require "breaking what users currently rely on." That's the real limitation.

For DeFi to enable users to "do things in new ways," it must first change "who will participate." If the system continues to reward "speed, variety, and the ability to exit at any time," it will only attract "profit-seeking traders," and will remain in a "highly liquid but niche" circle.

Therefore, the path is clear:

If DeFi continues to reward "the current behavior pattern," it will maintain high liquidity, but it will always remain a niche area.

If it is willing to bear the cost of "cultivating new users", its appeal will not return in the form of "hype", but in the form of "attraction" - even if there is no excitement, the funds will stay there steadily.

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