7 DeFi Trends You Must Look Out in 2024

5 min read
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As we step into a new chapter of decentralized finance (DeFi) amid shifting macroeconomic conditions, it’s more crucial than ever to stay updated with the freshest DeFi trends. It seems 2024 is gearing up to be a milestone year in the crypto space, with thrilling narratives like Liquid Staking making waves in the DeFi scene.

In this article, we will guide you through the top 7 DeFi trends of 2024, which are all ready to reshape our approach to financial freedom. We’ll also highlight leading projects in each trend, so read thoroughly to uncover potential gems.

Let’s dive into the promising trends defining the 2024 DeFi space with Pink Brains!

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DeFi Trends Defining the 2024

  1. Liquid Staking Derivatives: The Vanguard of DeFi Innovation
  2. LSDfi: Amplifying Yield Opportunities
  3. Stablecoins: A Bullish Behemoth in 2024’s DeFi Landscape
  4. Account Abstraction: Pioneering a User-friendly DeFi Ecosystem
  5. Decentralized Perpetual Trading: A Game-changer in DeFi
  6. Real-World Assets: Bridging the Gap to Mainstream Adoption
  7. Liquid Providing Derivatives (LPDfi): The Next Frontier in DeFi

1. Liquid Staking Derivatives: The Vanguard of DeFi Innovation

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If you surf crypto news on Twitter every day, you might see the term “Liquid Staking Derivatives” no less than 10 times. The Ethereum network’s shift to Proof-of-Stake, coupled with the Shapella upgrade enabling staked ETH withdrawals, has catalyzed a staking surge and the birth of Liquid Staking Derivatives (LSDs). To summarize, LSDs are tokens issued by liquid staking platforms (such as stETH, rETH, WBETH, and others).

LSDs offer a more accessible entry point to Ethereum staking by lowering capital requirements and technological hurdles. Moreover, they preserve the liquidity of staked assets, facilitating broader participation in the DeFi ecosystem.

With a 73.18% market share, Lido is the leader in global staked ETH. Following that are other high-yield liquid staking protocols, like Rocket Pool and Frax Finance.

2. LSDfi: Amplifying Yield Opportunities

Imagine you own LSDs and are earning staking rewards on them. This is all well and good, but what if you could go a step further and earn additional yields on top of the regular staking rate? 

This is where “LSDfi” comes into play.

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Liquid staking and LSDfi map. Source: Delphi Digital

LSDfi is a term referring to DeFi protocols that are constructed on top of liquid staking derivatives. LSDfi protocols enable LSD holders to put their funds to work and optimize yield by providing extra revenue-generating options.

2024 has seen the meteoric rise of LSDfi protocols. The cumulative Total Value Locked (TVL) in top LSDfi protocols has soared to $600 million in TVL. While Ethereum has about $26.6 billion in LSD, this signals promising growth prospects and innovative yield-generating options from LSDfi on the horizon.

You might want to check out some top LSDfi protocols ranked by TVL: Curve Finance (crvUSD), Instadapp (lETH), and Lybra Finance.

3. Stablecoins: A Bullish Behemoth in 2024’s DeFi Landscape

We can’t talk about 2024 DeFi trends without talking about stablecoins, with some good catalysts such as Liquid Staking Derivatives (LSD)-backed stablecoins and traditional fintech entering the digital realm.

LSD-backed stablecoins allow users to collateralize their LSD holdings to obtain decentralized stablecoins, which avoid opportunity costs while combining stability and yield generation. Lyra Finance, Raft, and Prisma are among the most prominent LSD-backed stablecoin protocols that allow users to mint stablecoins using LSDs as collateral.

2024 also marks a pivotal moment in the stablecoin market when PayPal, the online payments service, became the first major U.S. financial company to launch its own U.S. dollar-backed stablecoin. PayPal USD (PYUSD). Its entry created a ripple effect to accelerate the integration of traditional and decentralized financial systems and fuel a bullish phase in the stablecoin sector.

4. Account Abstraction: Pioneering a User-friendly DeFi Ecosystem

As we navigate through 2024, Account Abstraction stands as a beacon of innovation, heralding a shift towards a more user-friendly, secure, and integrated DeFi ecosystem.

Typically, entering the DeFi world requires users to manage multiple crypto wallets and possess a substantial understanding of seed phrases and wallet addresses. That complexity deterred mainstream adoption. Account abstraction intends to simplify the user experience on blockchain by fostering a more intuitive account model.

In addition, account abstraction promises enhanced security and privacy features by offering users greater control and customization options over their accounts. This helps safeguard them from prevalent threats in the crypto space.

Some of the leading competitors in the account abstraction narrative include Argent and UniPass.

5. Decentralized Perpetual Trading: A Game-changer in DeFi

Perpetual contracts, also known as perpetual swaps, are futures contracts with no expiration date. They offer users opportunities to trade using margin or leverage. In the crypto space, not only do these instruments prove more capital-efficient for market makers, but they also enable derivatives markets for illiquid assets.

In 2022, these instruments generated billions of dollars in daily trading volume on Centralized exchanges like Binance and OKX, surpassing spot crypto trading at times. However, decentralized perpetual trading is capturing attention this year.

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Overview of Perceptual Sector (Souce: Token Terminal)

Clocking in at nearly $1.3 billion in TVL at the time of reporting and over $1.5 billion in daily trading volume, decentralized perpetual is the next major development in the crypto space.

Top players in this domain include dYdX, Synthetix, and GMX.

6. Real-World Assets: Bridging the Gap to Mainstream Adoption

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Real-world Assets Overview as of March 2024. Source: Coin98 Analytics

A recent BNY Melon survey in the digital asset area indicated a growing institutional interest in the potential of Real-World Assets (RWAs). Investing in tokenized off-chain assets and infrastructure is therefore expected to be high on their agenda over the next two years.

Tokenization has made everything possible to be virtualized, from art and clothes to cars. However, one of the most exciting features is the tokenization of financial instruments, particularly US treasuries, private credit, and real estate.

For example, tokenized bonds will offer SMEs (Small and Medium Enterprises) new avenues for funding. From the standpoint of retail investors, they will have more exposure to digital-asset options in service-oriented companies such as banks or investment funds. Moreover, the trend fosters a synergy between TradFi (Traditional Finance) and DeFi. The DeFi market valuation might expand from billions to trillions in the coming years.

Prominent protocols in the RWA ecosystem selected by Binance Research include MakerDAO, Goldfinch, and Centrifuge.

7. Liquid Providing Derivatives (LPDfi): The Next Frontier in DeFi

LPDFi is one of the next trending DeFi narratives primed to explode in 2024 due to its ability to build yields on top of Liquidity Pools. Although it might sound unfamiliar and complex, it’s all about providing more use cases for DeFi. 

This concept involves the creation of derivatives on liquidity provisions, offering protection against price fluctuations and other market risks. These tradable derivative contracts present fresh approaches to managing finances and risks in the DeFi sector.

Keep an eye on pioneering projects in the LPDfi arena, including Logarithm Finance and Limitless.

Conclusion

2024 is shaping up as a landmark year in the DeFi landscape, brimming with innovation and opportunities. As you explore the most promising DeFi trends in 2024, count on Pink Brains to be your trustworthy guide in this vibrant world.


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Disclaimer: This article serves informational purposes only and does not constitute financial advice. Conduct your own research before making investment decisions.