There's a quiet transformation underway in decentralized finance (DeFi).
While DeFi's previous bull market was driven by eye-watering—and dubious—yields and speculative frenzy, the current growth has been powered by the sector becoming a backend financial layer for user-facing apps and increasing institutional participation, according to a Wednesday report by analytics firm Artemis and on-chain yield platform Vaults.fyi.
The total value locked (TVL) on top DeFi lending protocols—including Aave, Euler, Spark and Morpho—has surged past $50 billion and approaching $60 billion, growing 60% over the past year, the report showed. This growth has been driven by rapid institutionalization and increasingly sophisticated risk management tools.
"These are not merely yield platforms; they are evolving into modular financial networks undergoing rapid institutionalization," the authors said.
One of the key trend recently the report highlighted is user-facing applications quietly embedding DeFi infrastructure in the backend to offer yield or loans. These features are abstracted away from users creating a more seamless experience, a trend often called the "DeFi mullet:" fintech front-end, DeFi backend, the report said.
Coinbase users, for instance, can borrow against their bitcoin holdings powered by DeFi lender Morpho’s backend infrastructure. More than $300 million in loans have already originated via this integration as of this month, the report pointed out.
Bitget Wallet’s integration with lending protocol Aave offers a 5% yield on USDC and USDT holdings across chains without leaving the crypto wallet app. PayPal is also doing something similar with its PYUSD stablecoin, offering yields near 3.7% to PayPal and Venmo wallet users, albeit without the DeFi element.