The total amount of capital locked on decentralized funding (Defi) Protocols hit $ 170 billion on Thursday, a landmark as all the losses from the 2022 Terra/Luna ecosystem collapse and subsequent bear market have been deleted.
While Ethereum still commands the brother party of capital of 59%, newcomers including coinbase-supported layer 2 network base, Hyperliquids Layer 1 Blockchain and Sui have begun to chip away at Ethereum’s dominance, totaling overall overall more than $ 10 billion value of the total (Tvl)representing about 6%.
Investort trends have been changed in this recent cycle; Institutional adoption of Ether has led to outflow from traditional floating poor products such as Lido to institutional poor products as a figure, while there has also been growth in Solana and the BNB chain due to a seismic increase in memorecoin activity.
Solana is now the second largest blockchain with regard to DEFI with $ 14.4 billion in Tvl with BNB chain behind it with $ 8.2 billion.
A matured sector
The previous bull market between January 2021 and April 2022 experienced rapid growth across the defi -ecosystem, with Tvl jumping from $ 16 billion to $ 202 billion. This cycle has been more measured with a slow but steady gain from $ 42 billion in October 2022 to $ 170 billion in September 2025.
The increase suggests that cryptoinvestors may learn from their mistakes from 2022 and have created a more mature ecosytem to borrow, borrow and generate dividends.
The Terra Implosion experienced $ 100 billion of Tvl wiped out almost overnight, as investors, including bankruptcy crypto hedge fund three arrow capital, took a Gung Ho -approach on an algorithmic stableecoin that ultimately failed -leading to contagiousness and poor debt spread throughout the industry.
Terra was cryptoform of a classic “yield trap”, a product that offered yield that was too good to be true, but eventually turned out to be unsustainable.
Now the yield has disappeared with a lending protocol -Aave, which offers a 5.2% yield on stableecoins, while Restabe protocoleter.Fi offers 11.1%, much less than 20% Terra offers on its stablecoin.
What next for defi?
As the Defi sector was now back where it was before the Terra debate, albeit with more sustainable yields, critics will ask how the market can continue to grow to overthrow 2021’s record high in terms of tvl.
The answer to it is nuanced. Although it is true that institutional adoption and influx to assets such as Ether and Solana will continue to run a bullish narrative, the industry is still fighting violent hacks, scams and rugs associated with Memecoins.
Crypto investors lost $ 2.5 billion to hacks and fraud in the first half of 2025, and for the industry to really become a viable alternative to traditional funding, investors must be protected.
Unlike traditional funding, where deposits are often insured and protected, the very essence of cryptocurrencies means that you are on your own; If you lose your keys, phished or hacked, there is no auxiliary line to call.
The next iteration of defi, whether in this cycle or the next, will need to focus on security and hack prevention – because the industry is still an important implosion away from another crypto winter.
