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Self-custodial crypto cards have a significant impact in the context of DeFi, especially with the emergence of innovative projects such as Alchemic and J. Finance.
The concept of on-chain personal finance and Zero Knowledge (ZK)-based tools open up space for disruptive applications in DeFi. The use of reputation as collateral for loans, the integration of wallets with tools such as Google Calendar, and the prediction of 2025 as the year when DeFi for consumers will run more smoothly, allow users to further commit to on-chain finance and expand the adoption of DeFi to the wider community.
Table of Contents
Decentralized Exchange (DEX) Achievements in 2024
By 2024, DEXs in Solana account for nearly 50% of on-chain spot trading volume, driven by memecoin activity and increased trading on Radium and Orca. Despite attracting many traders with high-performance applications, innovation in Automated Market Maker (AMM) design on Solana is still limited.
Aerodrome at Base also recorded over 2 billion dollars in trading volume, generating 218 million dollars in trading fees. However, they had to spend nearly 490 million dollars on growth incentives.
The dominance of DEX in Solana points to flaws in Ethereum’s DeFi, such as the need for faster block times and higher throughput.
DEX Transformation in 2025
The year 2025 is expected to bring significant changes with the launch of Uniswap V4. UniChains is emerging as a new solution that not only replicates the Ethereum Virtual Machine (EVM), but also introduces features specific to DeFi. The trend towards custom-made chains, such as Hyperliquid and Sei Atlas, is also gaining ground.
- Hyperliquid: Building a high-performance layer 1 to support on-chain order books.
- Sei Atlas: Highly efficient implementation of Solana Virtual Machine (SVM), enabling applications to take advantage of high performance, low cost, and predictable JIT (execution delay).
- UniChains: Aims to be the main hub of DeFi liquidity that can be optimized and adapted to future needs, with sub-block times around 250ms and verifiable block construction.
Hyper Liquid – Towards “Binance On-Chain”
Although currently not fully decentralized, Hyperliquid aims to offer an on-chain order book and a fully decentralized marketplace for spot trading, derivatives, and pre-launch tokens. Hyperliquid’s ambition is to become the “Binance on-chain”.
Currently, Hyperliquid ecosystem tokens such as HYPE, PURR, and HEAV, are only accessible through trading on the platform and cannot be moved out until Hyper EVM is active. This means capital must go into Hyperliquid to access those ecosystems.
After the launch of Hyper EVM, comparisons with other EVM and layer 1 chains will occur, opening up new valuation opportunities. There will likely be the addition of other collateral such as BTC, ETH, and SOL into the Hyperliquid ecosystem. HyperVM also enables the listing of HYPE tokens on other exchanges, as well as further growth of DeFi and AI projects.
Full details on the HYPE token, including governance, revenue sharing, and burning mechanisms, are expected to be released soon. Staking has already launched on the testnet and is expected to come to the mainnet in the near future.
New Wave of Innovation on Decentralized Exchange
Besides Uniswap, several new innovations are changing the DEX landscape. Here are some noteworthy approaches:
Valantis – Modularity in DEX Design
Valantis offers a modular approach to building a DEX, like putting together Lego blocks. They divide the swap functionality into composable parts, called modules, including pricing, swap fee, oracle, liquidity vault, and transaction verifier modules. This modular design allows developers to build a new exchange by changing just one part without having to rewrite everything.
Ara – Hybrid Order Type (HOT) AMM
Built by the Ara Finance team, the HOT AMM stands out thanks to its intent-focused design, which aims to align the interests of liquidity providers (LPs) with liquidity users. To mitigate the effects of Maximal Extractable Value (MEV), HOT AMM utilizes a dual mechanism: Normal AMM and flash swap. Flash swap allows deeper integration with intension-based protocols, which in turn will connect LPs with more order flow, protecting LPs from MEV, while increasing the volume and fees they receive. The system also aims to minimize Loss-Versus-Rebalancing (LVR) by ensuring pool prices are updated frequently to be close to external market prices.
Fluid – Leveraging Loan Liquidity
Fluid enables loan assets to work more efficiently through two key concepts: Smart Collateral and Smart Debt. With Loan-to-Value (LTV) ratios touching 90%, traders can achieve up to 19 times leverage (10 times collateral and 9 times debt).
Fluid is conservative in its liquidity management, with a wider liquidity range than Uniswap V3. Fluid’s key innovation is to leverage underused loan liquidity for trading on the DEX, increasing utilization across the loan and trading markets.
Fluid DEX V2, coming next year promises to improve liquidity management beyond simple utilized LPs. If successful, this could be a real challenge to Uniswap’s market dominance.
Order Book – AMM Alternative
On-chain trading has two competing systems: order book and AMM. Both excel in different scenarios. AMM excels at handling a wide range of tokens, while order books are more efficient for popular trading pairs.
Building an order book on Ethereum used to be futile due to insufficient infrastructure. However, the emergence of new, faster blockchain platforms has changed this. For example, Phoenix regularly processes over 300 million daily trades with only 1 million dollars of capital expended.
New high-performance networks such as Monad, Kujira, Sei, DeepBook (Sui), Eclipse, and ম্যাগpie, as well as GMX, are all launching with order books right from the start.
The big question is, to what extent can order books expand beyond popular trading markets? Can they rival AMMs in handling small volumes of crypto assets? The year 2025 will hopefully provide more data and new ideas to improve order book-based DEXs.
Starknet’s Potential in the DeFi Ecosystem
Starknet is an under-the-radar ecosystem that has great potential to excel and compete in 2025. It offers good differentiation in terms of technology and applications, and has several potential catalysts in the coming year.
Starknet has a lot in common with Solana in its early days. Back then, Solana was overlooked as a centralized chain backed by SBF. However, its community of supporters is growing and optimistic. Solana offered a different approach to technology and made substantial improvements that went unnoticed due to market sentiment at the time.
Starknet is almost a similar story. Its superior technology was briefly overlooked due to its controversy, but it continued to grow while building a community of loyal fans quietly.
Starknet differentiator
Many alt-EVM ecosystems offer a better User Experience (UX) than Ethereum, but there is little application innovation. Alt-EVMs usually only have a lending market similar to Compound V2 and a DEX similar to Uniswap V3.
What makes the Ethereum ecosystem special is that most new DeFi ideas, even the less successful ones, come from Ethereum or its layer 2. Here are some of the featured DeFi projects in the Starknet ecosystem:
- Ekubo: Starknet’s most advanced AMM with an extensible architecture, similar to Uniswap V4. Key features include customizable liquidity pool creation, on-chain DCA feature, limit orders, audited, tokenized, and a unique DAO.
- वसू (Vesu): A new lending protocol that enables permissionless and governance-less pool creation. Pool parameters, including interest rates, are customizable.
- AVNU: Serves as a DEX aggregator on Starknet. Key features include on-chain DCA (like Ekubo) and integration with leading wallets like Argent and Braavos.
- Argent: Known as the smart contract wallet committed to Starknet. Its main features are the best mobile experience, direct integration with DeFi apps, and strong security features. Its service fees range from 0.02% to 0.05%, much lower than other wallets such as Phantom, Backpack, and Metamask.
Starknet’s Potential Catalysts
Despite its strong foundation, Starknet must find a catalyst to attract new users. Implementing EIP-4844 (dank sharding) allowed layer 2 to scale significantly, improving the UX at layer 2 despite sacrificing the ETH asset narrative.
Blob space has started to reach its limit, and blob delivery costs have increased sharply. This will drive up gas fees at layer 2, creating an opportunity for Starknet to stand out with five-times cheaper blob gas fees.
Conclusion
The future of DeFi exchanges is expected to be increasingly modular, adaptive, and sophisticated, with a focus on reducing value leakage due to MEV, improving capital efficiency, and providing a more purposeful trading experience. The new generation of decentralized exchanges is expected to accelerate the creation of on-chain markets for various types of assets, including utility tokens, real-world assets (RWAs), stablecoins, memes, and NFTs.
While much progress has been made, there is still the question of whether DeFi has built the most important and impactful tools. Advances in ZKPs, covert computing, stablecoins, DEXs, and identity systems amplify opportunities for improvement and expansion of the design space, creating new opportunities for the development of consumer DeFi applications and more inclusive financial markets.