Redefining Confidence: How DeFi's Openness is Transforming Crypto Lending

The landscape of crypto lending is experiencing a major transformation, with decentralized finance (DeFi) platforms now leading on-chain credit and overtaking centralized finance (CeFi) in terms of market dominance.

, that borrowing backed by crypto assets soared to an unprecedented $73.6 billion in the third quarter of 2025. DeFi accounted for 66.9% of this figure, a significant rise from 48.6% four years prior. This signals a fundamental shift from the 2021–22 era, which was characterized by uncollateralized lending and a lack of transparency. DeFi lending alone reached $41 billion, , fueled by yield farming incentives and innovations like Principal Tokens.

The growing prominence of DeFi highlights a wider movement in the industry toward openness and modularity. Platforms such as

have benefited from this trend, with within just five weeks. In contrast, CeFi lending, though it grew by 37% to $24.4 billion, is still limited by more stringent collateral demands and a shrinking share of the market. , the leading CeFi lender, but is operating in a market that remains a third smaller than its 2022 high point.

Mutuum Finance (MUTM), one of the most rapidly expanding DeFi projects, showcases the sector’s innovative edge. The platform features a dual-lending system, enabling users to borrow against their crypto or earn returns without giving up asset ownership. With 18,000 holders, Mutuum highlights the advantages of DeFi’s open liquidity and automated smart contracts.

DeFi’s inherent benefits—self-custody, modularity, and transparent open-source protocols—are changing how users interact with lending platforms. CeFi services focus on user convenience and regulatory adherence, while

and lower counterparty risks. Still, DeFi faces hurdles: its dependence on user vigilance and smart contract reliability stands in contrast to CeFi’s institutional protections. that the $19 billion liquidation wave on October 10 exposed the dangers of excessive leverage, but also showed that exchange auto-deleveraging mechanisms helped contain broader credit risks.

With DeFi lending now making up 80% of all on-chain transactions, the sector’s trajectory will depend on how it manages the balance between innovation and risk.

, which currently hold $12 billion in debt tied to leverage, are increasingly turning to DeFi solutions for greater efficiency. At the same time, hybrid models that merge CeFi frameworks with DeFi protocols are being developed to blend regulatory compliance with the flexibility of composable systems.

The migration from CeFi to DeFi signals a fundamental change in how trust is established in financial systems. While centralized lenders like Tether still play a role, the decentralized approach—emphasizing transparency and user empowerment—is drawing new participants. The numbers make it clear: DeFi’s surge in on-chain credit is

merely a temporary trend, but a profound transformation of the crypto lending landscape.