# The Rapid Evolution of DeFi: 2024 Trends and Projects to Watch

Decentralized Finance (DeFi) is swiftly advancing, offering innovative financial solutions that span across both on-chain and off-chain realms. Lending, trading, staking, and tokenization have emerged as pivotal sectors within DeFi, boasting total value locked (TVL) in the tens of billions of dollars. This article reviews the hottest DeFi trends and related projects of 2024.

## Liquid Staking and Restaking

Liquid staking has firmly established itself as a major innovation within DeFi. The allure of liquid staking lies in its ability to maintain liquidity while yielding rewards. Users can leverage reward tokens (LST) in various ways, such as using them as collateral in lending protocols, trading on decentralized exchanges, or even restaking on other platforms for additional rewards.

With the evolution of liquid staking, restaking has also risen as a game-changer. Restaking involves staking already staked tokens again, offering high returns while enhancing network security. Protocols like EigenLayer have been at the forefront of this innovation, gaining significant attention within the DeFi ecosystem.

### Lido Finance

Lido Finance is a trailblazer in the liquid staking domain. As of December 20, 2024, it boasts a TVL of $33.119 billion, making it the largest decentralized liquid staking protocol. Users can stake their ETH and receive stETH, a tokenized staking asset, which can be utilized across various decentralized applications (dApps) within the Ethereum ecosystem.

### EigenLayer

EigenLayer introduces the concept of restaking within the Ethereum ecosystem. Users can deposit liquidity staking tokens (LST) like stETH into the protocol’s liquidity pool and restake them across multiple decentralized protocols.

## Real-World Asset Tokenization (RWA): Merging Traditional Assets with Blockchain

Real-World Assets (RWA) refer to the digital tokenization of physical or financial assets such as real estate, commodities, bonds, stocks, artworks, and intellectual property rights. This has been made possible through tokenization technology that brings off-chain assets onto the blockchain. The current market for RWA is approximately $14.11 billion, with BlackRock’s BUIDL and Ondo Finance’s USDY leading the charge.

### Ondo Finance

Ondo Finance has emerged as the largest RWA protocol in 2024, offering tokenized traditional financial assets like treasury bonds. Supported by major investors like Pantera Capital, Coinbase, and BlackRock, Ondo Finance’s credibility and standing in the market have been significantly bolstered.

### Swarm: Decentralized RWA Trading Platform

Swarm operates under the regulation of Germany’s financial authority (BaFin) and runs on the Polygon network, allowing users to purchase popular U.S. stocks like NVIDIA, Coinbase, Microsoft, and Tesla, or participate directly in DeFi liquidity pools on the Polygon network.

## The Rise of Layer 1 Blockchains

2024 has spotlighted Layer 1 blockchains such as Aptos and Sui. As demand for scalable, secure, and developer-friendly alternative blockchains grows, these platforms have positioned themselves at the forefront of the Layer 1 race. Both blockchains utilize the Move programming language, emerging as strong alternatives to the Ethereum Virtual Machine (EVM).

### Aptos

After three years of development, Aptos launched its mainnet in October 2022, securing $350 million in venture capital. Focusing on scalability and stability, Aptos is often compared to Solana, earning the nickname “Solana Killer” within the community.

### Sui Network

Sui aims to simplify the creation and deployment of decentralized applications (dApps), offering an alternative development environment for cryptocurrency projects. It uses the Move programming language like Aptos but adopts an object-centric approach, enabling developers to define assets with strict ownership rules and enhance dApp security.

## Layer 2 Solutions: Leading Ethereum’s Scalability

Layer 2 scaling solutions are chains linked to the mainnet (Layer 1, such as Ethereum), enabling faster and cheaper transactions while maintaining security and decentralization. These solutions are crucial for the rapid growth in areas like DeFi, NFTs, and gaming, addressing blockchain scalability issues.

### Base

Base is an Ethereum-based Layer 2 scaling solution developed through a collaboration between Coinbase and Optimism. By processing transactions off-chain, Base offers significantly higher throughput than Ethereum Layer 1, reducing network congestion and computational load while ensuring faster transaction speeds and lower fees.

### Arbitrum

Arbitrum processes billions of transactions weekly as a Layer 2 solution, handling transactions off-chain and reverting only necessary data to Ethereum. This reduces network congestion and ensures that all operations can be verified when needed.

### Optimism

Optimism improves Ethereum’s scalability and accessibility, offering fast processing speeds and cost efficiency. Its compatibility with the EVM allows many developers to easily utilize the platform.

## Cross-Chain Bridges: Enhancing Blockchain Interoperability

Cross-chain bridges are essential protocols enabling the transfer of digital assets between different blockchains, promoting seamless asset movement and enhancing blockchain ecosystem interoperability.

### Stargate Finance: Direct Transfers of Native Assets

### Across Protocol: Capital Efficiency and Security in Cross-Chain Transfers

### Synapse Protocol: Supporting Both EVM and Non-EVM Blockchains

## The Rise of Prediction Markets

Decentralized prediction markets, one of the most noteworthy trends in DeFi, leverage collective intelligence to offer high accuracy in fields like politics, finance, and sports. The importance of prediction markets has been further highlighted by the post-U.S. election period.

### PolyMarket

PolyMarket dominates the prediction market segment, capturing 99% of its share. The platform recorded nearly $1 billion in trading volume, with up to 100,000 traders participating at its peak.

## Bitcoin-Based DeFi Evolution: The Role of Layer 2 Solutions

Bitcoin-based DeFi is evolving through the development and adoption of Bitcoin Layer 2 solutions, overcoming Bitcoin’s scripting limitations and laying the groundwork for building decentralized applications (dApps) on the Bitcoin network.

### Stacks: Bridging Bitcoin and Smart Contracts

Stacks introduces Turing-complete smart contract functionality to Bitcoin through the Proof-of-Transfer (PoX) consensus mechanism, enabling developers to create dApps directly connected to the Bitcoin blockchain.

## Conclusion

In 2024, DeFi is breaking financial boundaries, integrating traditional finance with decentralized protocols to open new opportunities. The market for tokenized treasury bonds has already exceeded $2 billion, with traditional financial giants like BlackRock joining the trend. The growth potential for DeFi remains boundless.