DeFi is no longer "sexy".

Original title: DeFi Has Lost Its Charm

Original author: @0xPrince

Original translation by Peggy, BlockBeats

Editor's Note: DeFi has not stagnated or collapsed, but it is losing something that was once most important: "a sense of exploration".

This article reviews the evolution of DeFi from its early explorations to its gradual maturation, pointing out that after infrastructure improvements and solidified transaction models, the ways in which people participate in on-chain finance are converging: returns become the basic expectation, lending is more like short-term financing, and incentives dominate user behavior. The author is not denying the value of DeFi, but rather posing a more difficult question: once efficiency and scale are fully optimized, can DeFi still shape new behaviors, rather than just serving the existing small group of users?

The following is the original text:

TL;DR

People's use of DeFi is becoming increasingly similar. The market and infrastructure have matured, but curiosity has been replaced by caution; returns have changed from "rewards earned by users taking risks" to "compensation waiting to be paid out," and participation is increasingly centered around incentives.

The feeling that DeFi is slowly fading is real. I'm not trying to be dramatic. It hasn't stopped operating or evolving; what's really changed is that you rarely feel like you're stepping into something truly new anymore.

I entered this industry in 2017 (the ICO era). Everything seemed rough, unfinished, and even a bit out of control back then. It was chaotic, but also open. You felt that the rules were temporary, and the next "primitive" could completely reshape the entire ecosystem.

DeFi Summer was the first time this belief was made concrete. You weren't just trading tokens; you were watching in real time how the market structure was taking shape. The new primitives weren't just simple upgrades; they forced you to rethink "what is possible." Even if the system made mistakes, it still felt like exploration because everything was still evolving.

Today, many DeFi projects appear to be simply repeating the same script with cleaner execution methods. The infrastructure is more mature, the interfaces are better, and the models are already well-understood. It's still effective, but it no longer frequently expands into new territories, which changes people's relationship with it.

People are still building, but the behavioral patterns that DeFi has reinforced have already changed.

DeFi optimized form

DeFi has become highly speculative because trading was the first demand to be truly moved onto the blockchain on a large scale.

In the early days, traders were the first true "heavy users." As they flooded in, the system naturally began to adjust to their needs.

Traders value options, speed, leverage, and the ability to exit at any time. They dislike being locked in and the risk of relying on the discretion of others. Protocols that align with these instincts grow rapidly; while protocols that require users to act differently, even if functional, often require "subsidies" to compensate for this mismatch.

Over time, this has shaped the psychological expectations of the entire ecosystem: participation itself has begun to be seen as a "behavior that should be compensated," rather than because the product is useful under normal circumstances.

Once this expectation takes hold, people won't simply "step out" of the market; they'll become more adept at it: rotating faster, holding stablecoins longer, and only appearing when trading conditions are clearly favorable. This isn't a moral judgment, but a rational response to the environment created by DeFi.

Lending has become financing, not credit.

Lending best illustrates the gap between the DeFi narrative and the actual path to scaling.

In the traditional understanding, lending means credit, and credit means time—meaning that someone is borrowing for a real need, and also that someone is willing to bear the uncertainty of that time.

But what truly scales up in DeFi is more like short-term financing. The main borrowers aren't looking for "term," but rather for positions: leverage, revolving accounts, basis trading, arbitrage, or directional exposure. People borrow money not to hold a loan.

Lenders have adapted to this reality. They no longer act as credit underwriters but rather as liquidity providers: prioritizing exits, hoping for redemption at face value, and favoring terms that allow for sustainable repricing. When both sides behave this way, the market becomes more like a money market than a credit market.

Once the system grows around this preference, it becomes extremely difficult to build a true credit structure on top of it. You can add features, but you can't forcibly change the motivation.

Returns have become a "basic expectation".

Over time, the benefits are no longer just a return, but a justification for participation.

On-chain risks are not limited to price fluctuations; they also include contract risks, governance risks, oracle risks, cross-chain risks, and the uncertainty that "there will always be problems in unexpected places." Users are gradually learning that they should receive clear compensation for bearing these risks.

This is reasonable in itself, but it changes the behavior.

Capital won't gradually return from high returns to normal levels and continue to participate; instead, it will exit directly. Users will maintain liquidity, waiting for the next opportunity to be "rewarded to participate again."

The result is: excessive intensity, insufficient continuity. Activity surges when the incentive is activated, and quickly subsides after the incentive ends. What appears to be adoption is often, in reality, "rented behavior."

When participation only appears in the incentive window, anything that is meant to last becomes difficult to build.

Trust issues

Another thing that fundamentally changed the ecosystem was trust.

Years of vulnerabilities, platform collapses, and governance failures have reshaped user psychology. Novelty no longer sparks curiosity but triggers wariness. Even seasoned users are more likely to enter the market later, with smaller positions, and prefer systems that have "survived" rather than those that are "theoretically better."

This may be healthy, but the culture changes as a result: exploration becomes due diligence, and the cutting edge becomes a checklist. Space becomes more serious, but seriousness does not equal charm.

What's more challenging is that DeFi simultaneously trains users to demand high compensation for risks while making them less willing to take on new risks. This squeezes the middle ground on which past experiments relied.

Why do both sides "have a point"?

This is precisely where the DeFi debate often goes astray.

If you don't like DeFi, you're not wrong—it does seem closed and self-sustaining, with many products serving the same small group of people, and its historical growth heavily reliant on incentives.

If you still believe in DeFi, you're not wrong—permissionless access, global liquidity, composability, and open markets remain powerful concepts.

The mistake was in pretending that the two were originally the same goal.

DeFi has not failed; it has successfully optimized a small subset of intentions. It is precisely this success that makes it more difficult to scale out new behavioral patterns.

Whether you see this as progress or stagnation depends entirely on what you initially expected DeFi to become.

How to regain charm

DeFi will not regain its allure by recreating the DeFi Summer. Cutting-edge moments will not repeat themselves.

What truly fades is not innovation, but the feeling that "behavior is still being changed." When systems no longer reshape how people use them, and only execution efficiency remains, the sense of exploration disappears.

If DeFi is to become important again, it must do something more difficult: build structures that allow different types of behavior to become rational.

To make capital willing to stay at certain times; to make timeframes an understandable and exitable option, rather than a burden to be endured; and to make returns not just headline numbers, but decisions that can be truly underwritten.

That kind of DeFi would be quieter, grow more slowly, and not dominate the timeline like past cycles—but this usually means that usage is driven by real demand, rather than by sustained incentives.

I'm not even sure if such a transformation is possible without disrupting the systems people still rely on. That's the real constraint.

DeFi cannot expand the boundaries of behavior unless it changes the question of "who benefits from participation".

Systems that consistently reward speed, choice, and quick exits will only continue to attract users who optimize these traits.

The path is actually quite clear:

If DeFi continues to reward the behavior it has already optimized, it will always be highly liquid, but also permanently niche;

If it is willing to pay the price to cultivate a different type of user, then its charm will not return in the form of hype, but in the form of attraction—a silent force that can keep capital in place even if nothing happens.