The DeFi landscape in the first quarter of 2025 is showing significant evolution. Although yields on major lending platforms have decreased, the market is still maturing and growing. This decrease in yields, known as the Great Yield Compression, is evident across platforms like vaults.fyi and Spark, with rates dropping significantly. Despite this, stablecoin yields on platforms like Aave remain steady.

Interestingly, despite falling yields, stablecoin vaults on platforms like Aave, Sky, Ethena, and Compound have seen substantial growth. This growth reflects increased institutional comfort with DeFi as a legitimate financial infrastructure. Additionally, the rise of curators in the DeFi space, such as those on Morpho and Euler, signals a shift towards more sophisticated asset management strategies.

The DeFi market now exhibits a stratified structure, with blue-chip infrastructure platforms offering lower but safer yields, while other platforms focus on optimizing strategies to deliver higher yields. Ethereum mainnet continues to host many top yield opportunities, emphasizing its role as a key player in the DeFi space.

A notable development is Coinbase’s integration with Morpho on the Base network to offer Bitcoin-collateralized loans. This integration represents the “DeFi Mullet” concept, combining fintech interfaces with DeFi infrastructure. Moving forward, factors like democratized curation, RWA integration, institutional adoption, and specialized lending niches are expected to reshape the lending market in 2025. This evolution will require protocols to efficiently cater to a diverse range of users and risk profiles.