Top 10 DeFi Projects You Need to Know in 2025: Short Summary For Each, So You Don’t Get Left Behind in Crypto
January 13th, 2025

Decentralized Finance (DeFi) has revolutionized the financial world, offering groundbreaking solutions in staking, lending, synthetic assets, and more. In this article, I've handpicked 10 of the most notable DeFi projects that every Solidity developer, auditor, or crypto enthusiast should know about.

Each project is outlined with only the most important information, so you can quickly grasp its relevance, innovation, and impact. This includes:

  • What kind of project it is

  • Launch details

  • Problems solved

  • How it works

  • How the protocol profits

Let’s dive in!


1. Lido — Liquid Staking

Lido is a platform that lets you stake cryptocurrencies without locking them up. Instead, you get liquid tokens like stETH for Ethereum that represent your staked assets. These tokens earn rewards and can also be used in DeFi for lending, borrowing, or trading.

Launch and TVL:

  • Launch: December 2020, created by Lido DAO.

  • Current TVL (as of January 2025): $31.7 billion.

Problems Lido Solves:

  1. Locked Funds:

    • Problem: Traditional staking locks your crypto.

    • Solution: Lido gives you liquid tokens you can trade or use in DeFi while still earning staking rewards.

  2. High Capital Requirements:

    • Problem: Ethereum staking requires 32 ETH, which is expensive.

    • Solution: Lido lets you stake any amount of ETH or supported tokens.

  3. Complexity:

    • Problem: Setting up staking nodes is technical.

    • Solution: Lido simplifies staking—no technical setup needed.

How It Works:

  1. Deposit: Stake your crypto (e.g., ETH) with Lido.

  2. Receive Tokens: Get liquid tokens like stETH in return.

  3. Earn Rewards: stETH grows in value as rewards accumulate.

  4. Use in DeFi: stETH can be traded, lent, or used as collateral.

  5. Governance: The LDO token governs Lido, allowing holders to vote on protocol changes.

How Lido Profits:

Lido takes a 10% fee from staking rewards, split between:

  • Node Operators: For running the staking infrastructure.

  • Lido DAO Treasury: For development and governance.


2. Aave — Lending

Aave is a decentralized finance (DeFi) protocol that lets users lend and borrow cryptocurrencies without intermediaries. Lenders earn interest on their deposits, while borrowers can take out loans using crypto as collateral. It is the biggest lending protocol by TVL.

Launch and TVL:

  • Launch: January 2020, created by Stani Kulechov and his team.

  • Current TVL (as of January 2025): $19.07 billion.

Problems Aave Solves:

  1. Access to Credit:

    • Problem: Traditional loans require banks and credit checks.

    • Solution: Aave lets anyone borrow crypto by depositing collateral—no credit score needed.

  2. Idle Assets:

    • Problem: Holding crypto doesn't earn income.

    • Solution: Aave lets users deposit crypto and earn interest.

  3. Risk of Liquidation:

    • Problem: Borrowing on-chain can lead to sudden liquidation.

    • Solution: Aave offers features like flash loans and stable interest rates to reduce risk.

How It Works:

  1. Deposit: Lenders deposit crypto into Aave's liquidity pools.

  2. Receive Tokens: Lenders get aTokens (e.g., aETH) that represent their deposits and earn interest.

  3. Borrow: Borrowers provide collateral to take out loans in crypto or stablecoins.

  4. Earn Rewards: Depositors earn interest, and borrowers manage their loans.

  5. Governance: Aave is governed by its native token, AAVE, which allows holders to vote on updates.

How Aave Profits:

  1. Interest Spreads: A small cut from borrower interest.

  2. Flash Loan Fees: 0.09% per transaction.


3. EigenLayer — Restaking

EigenLayer enables Ethereum validators to restake their staked ETH or liquid staking derivatives (LSDs) to secure additional blockchain services, earning extra rewards.

Launch and TVL:

  • Launch: June 2023, created by Sreeram Kannan and his team.

  • Current TVL (as of January 2025): $14.44 billion.

Problems EigenLayer Solves:

  1. Limited Validator Rewards:

    • Problem: Validators only earn rewards from the Ethereum network.

    • Solution: EigenLayer allows validators to earn additional income by restaking.

  2. High Security Costs for New Projects:

    • Problem: New DApps face high costs in establishing their own security infrastructure.

    • Solution: EigenLayer offers shared security via Ethereum's validators.

  3. Underutilization of Staked Assets:

    • Problem: Staked ETH is often locked and underutilized.

    • Solution: EigenLayer increases capital efficiency by allowing staked ETH to secure multiple services.

How It Works:

  1. Restaking: Validators restake staked ETH or LSDs on EigenLayer.

  2. Providing Security: Restaked assets secure additional services.

  3. Earning Additional Rewards: Validators earn rewards for services they secure.

  4. Governance: EigenLayer stakeholders participate in decision-making.

How EigenLayer Profits:

EigenLayer charges service fees to decentralized projects, distributed as follows:

  • 90% to LSD depositors (validators).

  • 5% to node operators.

  • 5% to EigenLayer as commission.


4. ether.fi — Staking

ether.fi is a decentralized Ethereum staking protocol allowing users to stake ETH while retaining control over their validator keys.

Launch and TVL:

  • Launch: May 2023, created by Mike Silagadze and his team.

  • Current TVL (as of January 2025): $8.20 billion.

Problems ether.fi Solves:

  1. Loss of Asset Control:

    • Problem: Traditional staking requires giving up control of private keys.

    • Solution: ether.fi uses Distributed Validator Technology (DVT) to keep validator keys in user control.

  2. Liquidity Constraints:

    • Problem: Staked ETH is typically locked.

    • Solution: eETH, a liquid staking token, provides liquidity for staked assets.

  3. Centralization Risks:

    • Problem: Centralized staking services create network centralization.

    • Solution: ether.fi supports solo stakers, promoting decentralization.

How It Works:

  1. Stake ETH: Users deposit ETH into ether.fi.

  2. Maintain Key Control: Users manage their validator keys.

  3. Receive eETH: Stakers get eETH, which accrues rewards.

  4. Earn Rewards: eETH holders accrue staking rewards.

  5. Governance: ether.fi is governed by the ETHFI token, empowering holders to participate in protocol decisions.

How ether.fi Profits:

ether.fi charges service fees distributed among validators, node operators, and the treasury.


5. Ethena — Crypto-Native Stablecoin

Ethena is a decentralized protocol built on the Ethereum blockchain, offering a crypto-native stablecoin called USDe. Unlike fiat-backed stablecoins like USDC or USDT, USDe operates independently of traditional banking systems. It is considered a next-generation stablecoin due to its innovative approach to stability, decentralization, and yield generation.

Launch and TVL:

  • Launch: February 2024, created by Guy Young.

  • Current TVL (as of January 2025): $5.88 billion.

Problems Ethena Solves:

  1. Dependence on Traditional Banking:

    • Problem: Many stablecoins rely on traditional banking systems.

    • Solution: Ethena's USDe operates independently, providing a decentralized alternative.

  2. Lack of Yield in Stable Assets:

    • Problem: Traditional stablecoins do not provide yield to holders.

    • Solution: USDe incorporates yield generation through Ethereum staking and perpetual swaps.

  3. Limited Accessibility to Financial Instruments:

    • Problem: Access to USD-denominated bonds in the crypto space is limited.

    • Solution: Ethena introduces the "Internet Bond," a globally accessible, dollar-denominated rewards instrument.

How It Works:

  1. Collateralization: Users provide crypto assets, such as Ethereum, as collateral.

  2. Synthetic Dollar Creation: Ethena uses delta-hedging strategies to create USDe.

  3. Yield Generation: USDe holders earn yield through Ethereum staking and perpetual swaps.

  4. Accessibility: USDe can be used across various DeFi platforms, offering liquidity and stability.

  5. Governance: Powered by the ENA token, which serves as the ecosystem's governance and utility token.

How Ethena Profits:

Ethena charges fees for its services, including:

  • The creation and management of USDe.

  • Yield-generating activities.

Fee Distribution: Collected fees are used to support the protocol's development, maintenance, and ecosystem incentives.


6. Maker — Stablecoin and Lending

Maker is one of the first and most important DeFi protocols, best known for its decentralized stablecoin, DAI. It allows users to generate DAI by depositing crypto as collateral in Maker Vaults, providing a decentralized alternative to fiat-backed stablecoins like USDC or USDT.

Launch and TVL:

  • Launch: December 2017, created by Rune Christensen and the MakerDAO team.

  • Current TVL (as of January 2025): $5.42 billion.

Problems Maker Solves:

  1. Dependence on Centralized Stablecoins:

    • Problem: Stablecoins like USDC and USDT are tied to traditional banking systems.

    • Solution: Maker's DAI is a crypto-backed stablecoin that operates without reliance on banks.

  2. Lack of Decentralized Borrowing Options:

    • Problem: Traditional loans require intermediaries and credit checks.

    • Solution: Maker allows users to borrow DAI against crypto collateral without intermediaries.

  3. Price Stability for Crypto Users:

    • Problem: Cryptocurrencies are volatile, making them unsuitable for daily transactions.

    • Solution: DAI is pegged to the US dollar, providing a stable digital asset.

How It Works:

  1. Collateralization: Users deposit cryptocurrencies (e.g., ETH, WBTC) into Maker Vaults.

  2. DAI Creation: Users mint DAI based on the collateral value.

  3. Stability Mechanism: Smart contracts maintain DAI's peg.

  4. Risk Management: Collateral is liquidated if its value drops below a threshold.

  5. Governance: MakerDAO, governed by the MKR token, decides protocol upgrades and parameters.

How Maker Profits:

  1. Stability Fees: Users pay a fee when generating DAI.

  2. Liquidation Penalties: A percentage of collateral is charged during liquidation.

  3. Surplus Auctions: Excess DAI collected is burned or reinvested.


7. Uniswap — Decentralized Exchange (DEX)

Uniswap is a decentralized exchange that allows users to trade cryptocurrencies directly from their wallets without intermediaries. It pioneered the Automated Market Maker (AMM) model, eliminating the need for order books.

Launch and TVL:

  • Launch: November 2018, created by Hayden Adams.

  • Current TVL (as of January 2025): $4.81 billion.

Problems Uniswap Solves:

  1. Centralized Exchange Risks:

    • Problem: Centralized exchanges can freeze funds or suffer breaches.

    • Solution: Uniswap enables decentralized trading directly from user wallets.

  2. Lack of Liquidity for New Tokens:

    • Problem: Traditional exchanges often exclude small or new tokens.

    • Solution: Uniswap allows anyone to create liquidity pools for any token pair.

  3. High Barriers for Market Participation:

    • Problem: Traditional exchanges require registrations and KYC.

    • Solution: Uniswap offers open, permissionless trading.

How It Works:

  1. Liquidity Pools: Users provide token pairs (e.g., ETH/USDC) to pools and earn fees.

  2. AMM Model: Uniswap uses the constant product formula (x * y = k) for pricing.

  3. Token Swaps: Traders exchange tokens instantly using pool liquidity.

  4. Governance: Uniswap is governed by the UNI token.

How Uniswap Profits:

Uniswap collects a 0.3% fee on each trade, distributed to liquidity providers.


8. Pendle — Yield Tokenization

Pendle allows users to tokenize and trade the future yield of their crypto assets, creating a secondary market for yield-bearing tokens.

Launch and TVL:

  • Launch: June 2021, created by TN Lee and his team.

  • Current TVL (as of January 2025): $4.44 billion.

Problems Pendle Solves:

  1. Lack of Yield Liquidity:

    • Problem: Yield-bearing tokens are not easily tradable.

    • Solution: Pendle tokenizes future yields into tradable assets.

  2. Yield Risk Management:

    • Problem: Fluctuating yields create uncertainty.

    • Solution: Pendle enables fixed-income strategies by selling future yields upfront.

  3. Limited Yield Opportunities:

    • Problem: Users are locked into a single yield strategy.

    • Solution: Pendle offers diverse yield exposure.

How It Works:

  1. Yield Tokenization: Users deposit yield-bearing tokens (e.g., stETH) and receive Principal Tokens (PT) and Yield Tokens (YT).

  2. Trading: PT and YT can be traded separately.

  3. Fixed Income: Users sell YT for upfront returns.

  4. Governance: Governed by the PENDLE token.

How Pendle Profits:

Pendle charges a small fee on transactions and token issuance, funding the protocol treasury.


9. Morpho — Optimized Lending

Morpho improves returns for borrowers and lenders by sitting atop platforms like Aave and Compound.

Launch and TVL:

  • Launch: July 2022, created by Paul Frambot and his team.

  • Current TVL (as of January 2025): $3.23 billion.

Problems Morpho Solves:

  1. Suboptimal Lending Rates:

    • Problem: Lending protocols often have inefficiencies.

    • Solution: Morpho matches lenders and borrowers peer-to-peer.

  2. Limited Accessibility:

    • Problem: Lending protocols are complex.

    • Solution: Morpho simplifies access.

  3. Capital Inefficiency:

    • Problem: Unmatched funds lower capital efficiency.

    • Solution: Morpho ensures unmatched funds earn base yields.

How It Works:

  1. Layered Approach: Integrates with existing protocols.

  2. Matching Engine: Matches lenders and borrowers directly.

  3. Base Yield: Unmatched funds earn interest.

  4. Governance: Governed by the MORPHO token.

How Morpho Profits:

Morpho charges fees on optimized lending transactions.


10. Compound — Lending

Compound Finance allows users to earn interest or borrow assets by depositing collateral.

Launch and TVL:

  • Launch: September 2018, created by Robert Leshner.

  • Current TVL (as of January 2025): $2.42 billion.

Problems Compound Solves:

  1. Lack of Decentralized Borrowing:

    • Solution: Users borrow crypto by depositing collateral.
  2. Idle Crypto Assets:

    • Solution: Users lend assets to earn interest.
  3. Liquidity Risks:

    • Solution: Over-collateralization minimizes systemic risk.

How It Works:

  1. Supply Assets: Users supply assets and receive cTokens.

  2. Borrowing: Borrowers provide collateral.

  3. Governance: Governed by the COMP token.

How Compound Profits:

Compound charges interest on borrowed funds and retains reserves.


Conclusion

Congratulations if you made it all the way through! We hope this deep dive into the top DeFi projects of 2025 has been insightful and valuable.

Don’t forget to follow CD Security (CDSecurity_) on Twitter, as well as the author (chrisdior.eth), for daily Web3 insights and security tips. Stay informed and stay secure!

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