_This article is from: _Co-founder of Avon Prince

Translation｜Odaily Planet Daily (@OdailyChina); Translator｜Azuma (@azumaeth)_

TL;DR

The way people use DeFi has become highly convergent. The market and infrastructure are maturing, but user psychology has shifted from curiosity to caution. The yield mechanism has changed from "users bear risks and rewards themselves" to "users wait to be rewarded," and participation behavior is gradually converging around incentives.

The Gradual Fading of DeFi

The feeling of DeFi is fading, and I'm not joking. It hasn't stopped operating or evolving. What has truly changed is that you rarely have that sense of "engaging with something entirely new" anymore.

I entered this market in 2017 (during the ICO era), when everything seemed unfinished, even somewhat out of control, chaotic, yet very open. You could still believe that all market perceptions were temporary, and the next foundational innovation could reshape the entire ecosystem.

DeFi Summer was the moment when this belief became tangible. At that time, you weren't just trading tokens; you were witnessing the formation of an entirely new market structure in real-time. It wasn't a simple upgrade; it forced you to rethink "what is possible." Even when the system had issues, it felt like an exploration because the entire system was still growing.

Today, many DeFi projects seem to be repeating the same script with cleaner execution. The infrastructure is more mature, the interfaces are friendlier, and the models are well understood by users. It remains effective, but it seems to no longer frequently explore new territories, which has changed the relationship between users and it.

People are still building. What has truly changed is what kind of user behavior patterns DeFi "encourages."

The Evolution of User Behavior Patterns

DeFi has become highly speculative because what people initially wanted to do on-chain at scale was trading.

In the early days, traders were the first true heavy users. As they flooded in at scale, the system naturally adjusted around their needs.

Traders value choice, speed, leverage, and convenient exits. They dislike being locked in and do not want to rely on others' subjective judgments. Protocols that aligned with these intuitions grew rapidly; those that required users to change their behavior could still operate but usually only by paying users to tolerate this mismatch.

Over time, this shaped the psychological expectations of the entire ecosystem — user participation began to be seen as a behavior that required market compensation, rather than being inherently useful under normal conditions.

Once this psychological expectation is formed, it becomes difficult for people to break free from it, and they increasingly take it for granted. Users rotate faster, stay longer in stablecoins, and only act when opportunities are sufficiently obvious. This is not a moral judgment but a rational response to the environment created by DeFi.

Lending Became "Financing," Not "Credit"

Lending is the clearest example of the difference between how DeFi is often portrayed and its actual scaled form.

On the surface, lending implies credit. Credit implies time, meaning someone borrows for reasons outside the market, and someone is underwriting that time risk.

However, the truly scaled products in DeFi are closer to short-term capital financing. The mainstream borrowing group is not borrowing because they need a term but to gain positions — leverage, revolving loans, basis trading, arbitrage, directional exposure, etc. People borrow money not to hold a loan long-term.

Lenders have also adapted to this reality. They act more like liquidity providers than credit guarantors. They focus more on exits, prefer to redeem at par, and favor terms that can be continuously repriced. When both parties act this way, the market clearing results resemble a money market rather than a credit market.

Once the system grows around this preference, building a true credit structure on top of it becomes extremely difficult. You can add features, but you cannot force a change in user motivation.

Yield Has Become a Benchmark Expectation

Over time, yield has ceased to be just a return and has started to become a legitimate reason for participation.

On-chain risks include not only the volatility of the assets themselves but also smart contract risks, governance risks, oracle risks, cross-bridge risks, and that ever-present feeling that "things can go wrong in ways you haven't modeled." Users gradually realize that bearing these risks should come with visible compensation, and this expectation is reasonable.

But it has changed the way users behave. Funds do not gradually return from high yields to normal yields and continue to stay; they leave directly. Users maintain high liquidity of funds, waiting for the next opportunity to be rewarded for participation.

The result is that project data growth often has "intensity but lacks continuity." Activity surges when incentives are activated and cools rapidly when incentives disappear. What seems like adoption is essentially leasing.

When participation only occurs during incentive windows, anything attempting to exist long-term becomes difficult to build.

The Trust Issue

Another variable that changes everything is trust.

Years of exploits, rug pulls, and governance failures have altered user mindsets. Novelty no longer sparks curiosity but instead triggers vigilance. Even mature users will observe longer, take smaller positions, and prefer systems that have "lasted long enough" rather than those that "look better."

This may be healthy, but it has changed the market culture. Exploratory behavior has turned into due diligence, and the entire market has become more serious, which is clearly not synonymous with charm.

The more complex situation is that, on one hand, users have become accustomed to demanding higher compensation for risk, while on the other hand, they are increasingly unwilling to take on new risks. This compresses the middle ground that once accommodated experimentation.

Why Both Sides Are "Partially Correct"

This is precisely where the DeFi debate often talks past each other.

If you don't like DeFi, you're not wrong. It does sometimes seem self-indulgent, and many products serve the same small group of users, with historical growth largely driven by incentives rather than stable demand.

If you believe in DeFi, you're also not wrong. Permissionless access, global liquidity, composability, and open markets remain powerful concepts.

The mistake lies in pretending that these two were ever the same goal. DeFi has not failed. It has successfully optimized for a small subset of behaviors, but this success has made it harder to scale to other behaviors.

Whether this is progress or stagnation entirely depends on what you originally expected DeFi to become.

How Charm Can Return

DeFi will not regain its charm by recreating DeFi Summer. History never repeats itself.

What has truly disappeared is not innovation itself, but that feeling of "behavior is still changing." Once the system no longer reshapes how people use it and only focuses on the execution layer, the sense of exploration will vanish.

If DeFi wants to shine again, it must do the harder thing: create a structure that makes different behaviors rational. Provide reasonable reasons for fund retention; make terms understandable and exit-able rather than a begrudging burden; ensure that yield is no longer just a headline number but a decision you can genuinely take responsibility for.

Such DeFi will be quieter, grow slower, and will not occupy your social media timeline like past cycles, but when usage is driven by demand rather than continuous incentives, it often looks like this.

I am not even sure if this transformation is possible without disrupting the parts of the system that people still rely on. This is the real constraint.

If DeFi does not change "who is suitable to participate," it cannot expand its behavioral boundaries. Systems that continue to reward speed, choice, and convenient exits will still attract users who value these traits.

So the path is clear. If DeFi continues to reward the behaviors it has already "encouraged," it will maintain extremely high liquidity but will remain permanently in niche areas. If it is willing to bear the cost of shaping another type of user, charm will not return in the form of hype but will return in the form of attraction — the kind of power that allows capital to quietly remain even when nothing exciting is happening.

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