DeFi protocols are increasingly adopting tokenized real-world assets, and crypto-native asset managers are actively shaping capital distribution and influencing governance structures, according to a recent analysis.
A subtle shift is currently reshaping the landscape of decentralized finance (DeFi).
According to a Wednesday report by analytics firm Artemis and the on-chain yield platform Vaults.fyi, the ongoing growth of DeFi stems from its transformation into a core financial infrastructure for user-facing applications and from increasing institutional participation, rather than the inflated and dubious returns seen during the previous bull cycle.
The report revealed that the total value locked (TVL) across leading DeFi lending platforms—such as Aave, Euler, Spark, and Morpho—has exceeded $50 billion and is nearing $60 billion, marking a 60% rise over the last year. Rapid institutional adoption and the implementation of more advanced risk management mechanisms have fueled this expansion.
The authors stated that these platforms have moved beyond merely offering yields and are rapidly transforming into modular financial ecosystems, with institutions actively adopting them.
The Rise of the ‘DeFi Mullet’ Trend in Finance
The report highlighted a prominent trend in which user-facing applications have discreetly integrated DeFi infrastructure in the background to deliver services like yield generation or lending. These functionalities are being abstracted from users, resulting in a smoother user experience. This approach, often referred to as the “DeFi mullet,” combines a fintech-style front-end with a DeFi-powered backend, the report noted.
For example, Coinbase users have been able to secure loans against their Bitcoin holdings through backend infrastructure supported by the DeFi lender Morpho. According to the report, this integration has already facilitated over $300 million in loan originations as of this month.
Bitget Wallet integrates Aave’s lending protocol, allowing users to earn around 5% on their USDC and USDT holdings across various blockchains—all while staying within the crypto wallet application. Meanwhile, PayPal has adopted a similar approach with its PYUSD stablecoin, providing yields close to 3.7% to users of PayPal and Venmo wallets; however, this feature operates without involving decentralized finance components.
The report predicts that crypto-supporting fintech companies with large user bases—such as Robinhood and Revolut—will likely adopt this model. These firms may introduce offerings such as asset-backed lending and stablecoin credit lines via decentralized finance platforms, thereby generating additional revenue through service fees.
Tokenized Real-World Assets Gain Momentum in DeFi
More DeFi protocols have started to implement applications involving tokenized representations of conventional financial instruments, including U.S. Treasuries and credit funds—commonly referred to as real-world assets (RWA).
Users can utilize these tokenized instruments as collateral, generate direct returns from them, or structure them into more intricate financial strategies.
The tokenization of investment approaches is gaining momentum. Pendle, a platform that enables users to separate yield from principal, currently manages over $4 billion in total value locked, with the majority held in tokenized yield-generating stablecoin products.
At the same time, tokens like Ethena’s sUSDe and other income-generating digital assets have launched offerings that provide yields exceeding 8% through methods such as cash-and-carry arbitrage. These strategies have been designed to remove the operational complexity for users.
Emergence of Blockchain-Based Asset Management Firms
A key but often overlooked development emphasized in the report involves the emergence of crypto-native asset managers. Firms such as Gauntlet, Re7, and Steakhouse Financial actively deploy capital throughout DeFi ecosystems using carefully managed investment strategies, closely mirroring the functions typically performed by conventional asset management institutions.
These entities play an active role in governing DeFi protocols, adjusting risk parameters and allocating funds across various structured yield instruments, tokenized real-world assets (RWAs), and modular lending platforms.
According to the report, the sector has quadrupled its managed capital since January, growing from around $1 billion to over $4 billion.
