Overview:
The on-chain lending landscape has overtaken traditional finance—over $40 billion is currently borrowed through DeFi protocols. These are entirely run by crypto-native startups, not legacy banks or financial institutions.

Key Data & Trends

• DeFi Borrowing Hits New Highs
  As of Q2 2025, DeFi (on-chain) lending platforms reported $26.47 billion in outstanding loans—a record high. When combined with centralized (CeFi) crypto lending venues, the total reaches around $44.25 billion in crypto-collateralized borrowing.
• Crypto-Native Leadership
  All of this lending is driven by crypto-native startups, such as Aave and Compound, rather than traditional financial institutions—reinforcing the decentralized nature of this lending ecosystem.
• Rapid Growth Trajectory
  Open borrow volume on DeFi platforms surged from just $1.8 billion at the end of 2022 to over $19.1 billion by Q4 2024—a staggering growth of nearly 1,000% over eight quarters.
• Shift in Market Share
  While on-chain lending accounted for only about 34% of crypto lending during the 2020–2021 bull cycle, its share has since climbed to approximately 63% by Q4 2024.
• TradFi Platforms Still Present, but Secondary
  Centralized lenders like Tether, Galaxy, and Ledn now account for most of the CeFi lending volume—$17.78 billion in Q2 2025—with on-chain DeFi borrowing now outpacing their figures.

What It Means for Crypto Finance

• Market Validation for DeFi
  The massive rise in on-chain borrowing validates DeFi’s core promise: seamless, permissionless access to credit without traditional intermediaries.
• Financial Decentralization Gains Traction
  Crypto-native platforms are not only sustaining but dominating lending markets—marking a fundamental shift away from institutional finance dominance.
• Risks and Resilience
  The rapid increase in debt on-chain raises concerns about smart contract vulnerabilities, liquidation cascades, and regulatory exposure—even as DeFi’s architecture remains resilient post-bear market.
• Regulatory Spotlight Intensifies
  As DeFi lending becomes systemic, regulators are paying closer attention—especially regarding macroeconomic exposure, borrower protections, and platform risk protocols.

Summary

DeFi lending, powered by crypto-native startups, is now the backbone of open-source borrowing in the crypto ecosystem—with over $40 billion borrowed through on-chain platforms. Outpacing traditional CeFi lenders, these platforms are reshaping how credit is accessed and administered in digital finance. Yet with innovation comes heightened scrutiny and risk—a balancing act that will define DeFi’s next phase.