DeFi Evolves Beyond Speculation as Protocols Embrace Tokenized Real-World Assets and Institutional Players Step In

Decentralized finance (DeFi) is undergoing a significant transformation, shifting from the speculative hype of past bull markets toward becoming a fundamental financial infrastructure layer, according to a new report from analytics firm Artemis and on-chain yield platform Vaults.fyi.

Unlike the previous era, driven largely by outsized—and often dubious—yields, the current growth in DeFi is fueled by deeper institutional engagement and its integration into the backend of user-facing applications, the report said.

TVL Surges Toward $60B

The total value locked (TVL) in leading DeFi lending protocols such as Aave, Euler, Spark, and Morpho has surpassed $50 billion and is approaching $60 billion—a 60% increase over the past year. This expansion reflects rapid institutionalization and more sophisticated risk management tools emerging across the ecosystem.

“These are no longer just yield platforms; they’re evolving into modular financial networks institutional investors can trust,” the report’s authors wrote.

The Rise of the “DeFi Mullet”

One of the most striking trends highlighted is the “DeFi mullet,” a phenomenon where consumer-facing apps integrate DeFi infrastructure behind the scenes to offer products like yield or loans without requiring users to engage directly with complex DeFi protocols.

For example, Coinbase allows users to borrow against their bitcoin (BTC) holdings, leveraging Morpho’s backend DeFi infrastructure. As of this month, this integration has facilitated more than $300 million in loans.

Similarly, Bitget Wallet users can earn a 5% yield on USDC and USDT holdings through an integration with lending protocol Aave, without leaving the wallet interface. Even PayPal has entered the fray, offering yields of around 3.7% on its PYUSD stablecoin to PayPal and Venmo users—though without using DeFi protocols directly.

The report suggested that fintech giants like Robinhood and Revolut could soon adopt similar strategies, embedding DeFi markets to offer services such as stablecoin credit lines and asset-backed loans, thus unlocking new fee-based revenue streams.

Tokenized RWAs Enter DeFi

DeFi protocols are also increasingly venturing into tokenized real-world assets (RWAs), including tokenized U.S. Treasuries and credit funds. These assets can act as collateral, generate yield, or serve as building blocks for more complex financial strategies.

Tokenization of investment strategies is gaining traction as well. Pendle, a protocol that lets users separate yield streams from the principal value of assets, now manages more than $4 billion in TVL, much of it tied up in tokenized stablecoin yield products.

New yield-bearing tokens, such as Ethena’s sUSDe, are offering returns upwards of 8% through strategies like cash-and-carry trades while shielding users from operational complexities.

On-Chain Asset Managers Gain Ground

Another significant development is the emergence of crypto-native asset managers like Gauntlet, Re7, and Steakhouse Financial. These firms allocate capital across DeFi ecosystems using professional strategies similar to traditional asset managers. They also play an active role in protocol governance, optimizing risk parameters and deploying funds into structured yield products, tokenized RWAs, and modular lending markets.

Since January, capital under management by these crypto-native asset managers has quadrupled from $1 billion to over $4 billion, the report noted.

Overall, the report paints a picture of DeFi maturing into a more sustainable and institutionally integrated segment of the financial system—far removed from its purely speculative origins.