DeFi is so much more than just ‘number go up’: It’s a renaissance

DeFi yield is more than just an appealing number — it’s an essential cog in the machinery of most protocols

OPINION
article-image

Midjourney modified by Blockworks

share

Just a few short years ago, the allure of double-digit and even higher yields was irresistible. 

But since late 2022, these returns have taken on a new light — they’re too often viewed by skeptics as a potential red flag and a harbinger of risk and instability, rather than the enticing red carpet they once were.

To those skeptics and critics, I say: I still firmly believe DeFi yield will continue to be a vital category. It’s more than just presenting an appealing number — it’s an essential cog in the machinery of most protocols. 

That yield strengthens governance, fuels liquidity provision and increases protocol security; proving that it’s not just yield for yield’s sake, but a direct result of technological advancements that improve capital efficiency. 

This stands true even in the face of recent adversities. This would include the Euler hack of $200 million (eventually returned), or the Iron Bank incident that saw Alpha Homora’s users’ funds held hostage in an attempt to offset bad debt.

While DeFi’s recovery may not necessarily take the form of the eye-watering APY users have grown accustomed to, it offers a more sustainable solution and a chance for broader participation. Some users may be fine with taking the risk. However, the focus is gradually shifting from chasing astronomical returns to more calculated strategies, creating opportunities for a larger demographic and financial inclusion. 

DeFi is poised to have a renaissance in 2023.

Demonstrated resilience in the face of challenges

Acknowledging the undeniable resilience of DeFi is crucial, as it isn’t just another catchphrase in the crypto world; It’s a vital component to crypto’s survival. 

Evidence of this dependency can be seen in the events of 2022, wherein centralized entities imploded while DeFi held strong. Numerous projects such as Rocket Pool and Sonne pushed forward, using the so-called “crypto winter” that followed as a learning experience to refine their proposition and open up new opportunities to users. 

It is during times of turbulence that we, as a community, are given the chance to refine our strategies, reassess our priorities and consolidate our strengths. These challenges serve as the proving grounds for the next generation and enable us to step up and showcase an alternative future that’s decentralized.

Emergence of liquid staking derivatives

A significant factor in helping weather the storm of 2022 has been the rise of liquid staking derivatives. LSDs saw substantial growth during this period thanks to the promise of the Shapella upgrade — 4.3 million ETH deposited — despite the market sentiment.

Major contributors such as Lido were able to alleviate concerns through user-friendly and low-barrier-to-entry approaches, promoting more sustainable yield that remained liquid.

Read more from our opinion section: It’s a total fool’s errand to regulate NFTs right now

This very process not only gained trust quickly, but also opened the doors wide, enabling anyone with a small amount of capital and slightly less-than-total-degen technical sophistication to participate. 

In this new world, geography is irrelevant. Your location or background doesn’t dictate your ability to earn returns.

Coinbase’s cbETH, with its 2.2 billion TVL, is evidence of this shift. It signals a growing acknowledgment of an inclusive financial future where anyone can participate and reap rewards.

The promise of layer-2 solutions in finding yield

Layer-2 solutions have been nothing short of transformative in their impact on the DeFi landscape. For years, Ethereum’s transaction fees have been a barrier, hindering accessibility and usability for many DeFi participants. However, the emergence of layer-2 solutions has revealed a world of untapped possibilities. These solutions offer significantly lower fees and faster transaction speeds, outperforming the limitations of mainnet, and provide a perfect environment for LSDs to become more inclusive.

These improvements, however, are not just about outperforming mainnet’s limitations; they are about forging a new path to universal access. Layer-2 solutions provide the perfect launchpad for anyone, irrespective of their location, to engage with DeFi. 

Even those who were previously shut out by high costs can now participate and try their hand at various strategies. Should they decide to bow out, they still gain the invaluable experience of navigating a world that was previously inaccessible to them.


Jordan Kruger is the Head of DeFi at Bloq and co-founder of Vesper Finance and Metronome.

Get the news in your inbox. Explore Blockworks newsletters:

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Unlocked by Template (10).png

Research

Innovations on Aptos’ technical design through Raptr, Shardines, and Zaptos approach near-optimal latency and throughput by unlocking 100% utilization of network resources, with the capacity to settle 260k transactions per second with latencies less than 800ms. The original Move language was revamped with the launch of Move 2, supporting more expressivity in smart contract logic and a scalable ability to interact with high volume datasets. The ecosystem has benefitted from strong asset inflows, now hosting over $1.3B in stablecoins, $450M in bridged BTC, and $530M in RWAs. Activity in the Aptos ecosystem has grown notably over the past year, with monthly application revenue reaching ~$835k and monthly DEX volumes growing to over $5B, both at new all time highs.

article-image

The Stripe-acquired firm has big plans for a streamlined, multi-wallet future

article-image

Both founders of the former crypto lender have now landed in new crypto industry roles

article-image

Bitcoin’s recent peak is a victory lap for curvers left and right

article-image

Securitize CEO Carlos Domingo says institutions are eager to get exposure to tokenization

article-image

Trade isn’t war and prosperity isn’t a contest