Emerging markets: The growth engine of decentralized finance

The term DeFi stands for decentralized finance. While some may think of it as the process of distributing financial authority or decision-making from a central authority to lower levels, with the growing adoption of blockchain, cryptocurrencies, and smart contracts, the term has evolved to describe a financial ecosystem that operates “on-chain,” or native to the blockchain network, where users must hold and transact in the network’s specific tokens.

A more precise definition of DeFi would be a set of applications or platforms that provide on-chain financial services through smart contracts.

In the traditional sense, accessing financial services requires a government-issued ID for know-your-customer purposes; an active bank account; a credit history; and a source of income or collateral. For DeFi, one only needs access to an on-chain digital wallet such as MetaMask or Trust Wallet. Once funded, this wallet allows the user to interact directly with on-chain financial services, often referred to as protocols.

This may raise the question of what types of protocols are available on-chain. To identify the most important ones, the industry uses a metric known as total value locked (TVL). TVL represents the total amount of assets — commonly measured in U.S. dollars — committed to a specific DeFi protocol; it’s often used as a proxy for liquidity. The higher the liquidity, the greater the trust and acceptance the protocol tends to have.

As of August, based on TVL data from DeFiLlama, these are some of the most relevant categories that make up DeFi:

• Yield: Protocols that generate returns when users commit tokens through activities such as lending, staking, or liquidity provision. In short, it’s a way of earning income through smart contracts; it’s often viewed as passive.
• Lending: Users supply tokens into a pool in exchange for yield. The pool then lends out those tokens at another rate. All transactions are managed automatically by smart contracts without intermediaries.
• Staking: A process where users lock tokens on a blockchain to earn rewards. While locked, tokens remain inaccessible. Liquid staking offers more flexibility; users earn the same rewards but also receive a proof token that can be traded, lent, or used in other protocols. It also opens the door to restaking, where those proof tokens can be committed again to secure additional services.
• Bridge: Since most blockchains are not interoperable, bridges allow users to transfer tokens between them by locking the original tokens on the source chain and issuing equivalents on the destination chain. If one is implemented by the blockchain’s own developers, it is considered a canonical bridge.
• Decentralized exchanges (DEXes): Centralized exchanges like Coinbase or Binance use order books, peer-to-peer solutions, or over-the-counter services to facilitate trades and earn fees. DEXes enable the same function via smart contracts, removing intermediaries.
• Real-world assets (RWAs): Protocols that bring off-chain assets into the blockchain ecosystem, such as bonds, real estate, stocks, or commodities. This integration allows users to interact with traditional assets on-chain.

A dashboard tracking the evolution of DeFi protocols shows that 2023 marked an important inflection point for understanding DeFi’s trajectory and performance, even when broken down by protocol category.

Between 2021 and mid-2023, DEXes dominated the space for over two years, almost reaching $80 billion in TVL. Lending and bridges also experienced growth in TVL during and after Bitcoin reached its all-time high in that market cycle. This trend reversed around May 2022, when the Terra Luna collapse shook the entire crypto space, reducing TVL heading into 2023.

From mid-2023 onward, liquid staking became the category with the highest TVL, while lending and bridges maintained their relative positions. In contrast, DEXes were impacted by regulatory uncertainty and lower trading volumes during the bear market cycle.

In April 2023, the Ethereum upgrade, known as Shanghai + Capella, enabled withdrawals of staked ETH — Ethereum’s native blockchain token. At the same time, protocols such as Lido, Marinade, Stride, and Quicksilver expanded beyond Ethereum, driving liquid staking adoption across multiple chains. By 2025, the category has grown from under $20 billion in TVL in early 2023 to nearly $90 billion by mid-2025, reflecting both the surge in staked assets and the rising use of liquid staking tokens across DeFi.

According to a World Bank report, by 2024, 1.3 billion adults worldwide are “unbanked,” or lacking access to a bank account or financial institution. In sub-Saharan Africa alone, over 80 million adults remain unbanked despite owning a mobile phone, a basic ID, and the foundations for account ownership. As traditional financial institutions struggle to expand access, DeFi is emerging as an attractive alternative.

Although data on DeFi in emerging markets is still limited, Chainalysis reports that between July 2023 and June 2024, DeFi activity grew nearly 150% in Latin America, making it the fastest-growing region globally.

Sub-Saharan Africa followed with growth slightly above 100%, and Eastern Europe saw an increase of around 70%. In contrast, regions such as Western Europe, Middle East & North Africa, and Eastern Asia experienced more moderate growth of 20 – 40%, while North America and Central & South Asia and Oceania saw minimal expansion. Overall, emerging markets drove most of the global increase in DeFi activity during this period.

This is not surprising, as many countries in these regions struggle with inflation, weak banking systems, and limited access to banking services, making DeFi attractive. While comprehensive evidence is still limited, the available data strongly suggests that emerging markets are becoming a growth engine for DeFi.

What can we expect for 2025 and beyond? Traditional finance companies are pursuing partnerships with crypto-native or blockchain-related firms. Increasingly, private companies are also interested in releasing their own blockchains.

However, the essence of DeFi lies in the absence of intermediaries and in providing direct, borderless access to financial services without heavy requirements. With greater regulatory clarity, the future of on-chain financial services will take shape, and one thing is clear: The needs of emerging markets will play a decisive role in what comes next.

About the author

Carlos Eduardo Bernos Amoros is a 2025 MBA graduate and a researcher at the Emerging Markets Institute at the Samuel Curtis Johnson Graduate School of Management. He specializes in fintech, blockchain, and cryptocurrencies. He is the cohost of Dentro del Bloque, a blockchain education podcast focused on Latin America with over 60 episodes. He has also conducted research for the Cornell Brooks School Tech Policy Institute, exploring the relationship between Bitcoin and financial freedom. Prior to the Johnson School, he worked in anti-money laundering compliance across the banking, fintech, and crypto industries, where he developed a strong passion for blockchain, Bitcoin, and emerging technologies.