The following is a guest article from Mike Wasyl, CEO at Bracket.
DeFi has fast-tracked and failed with some terrible economic models over the last four years. But there’s something romantic about a tarpless economy that keeps onlookers gawking. Peeling back the penguins, Ponzi schemes, and perpetual jargon, we find a 24/7 market creating opportunities for generations left to fend for themselves. No 30-year ice cream scooper pensions for Gen Z.
Jokes aside, we younger generations had little choice but to use the tools we were dealt. In our brokerage accounts, we click around a fine UI generated by some megacorp army. But beneath the facade, we are actually duct-taped to a rickety seat riding decades-old rails. I don’t want to ride that old roller coaster slinging Jazz Age bucket shop finance lingo. There are new rides—new tools that modernize the financial experience and help us earn on our own terms, 24/7. Let’s take a look at a slice of this world and where we might go in 2025.
In crypto, proof-of-stake networks deliver native rewards for securing the network—“staking.” Staking cannot be replicated in traditional finance and is a revolutionary economic primitive native to blockchains (it’s ours!). Staking has led to the creation of Liquid Staked Tokens (LSTs), which allow users to earn rewards without running nodes. Ethereum-based liquid staking witnessed a precipitous rise through 2024, reaching a high of $70 billion in total value locked (TVL) by year’s end. Passive block rewards fueled holder count even with ETH’s staking rate hovering around just 3%.
While Ethereum leads in staking value, only ~28% of ETH supply is actively staking. We believe this number will increase to 40-50% within a few years, with 2025 pivotal to unlocking institutional capital. Over half of institutional Ethereum holders use liquid staking tokens (LSTs) and understand the utility of reward-bearing assets. As more entrants from traditional finance venture on-chain, LST dominance will rise. Despite the tailwinds, competition for rewards will heat up. It is up to users and capital allocators to decide how to stack yield efficiently to maximize the value of their on-chain collateral.
As competition compresses yields, stakers will look for new ways to grow beyond simple block rewards. Providing opportunities is difficult, as liquidity is stuck in DeFi protocols across several chains. A user’s staked ETH in one DeFi pool is a monolith, typically stuck until yields disappear or better opportunities arise. It’s inefficient and limiting, which makes users hunt for airdrops and outsized inflationary rewards in the meantime.
Ether.fi, a major player in the ETH restaking space, controls >50% of the liquid restaking market by allowing users to restake ETH across services like EigenLayer. “Restaking” turns idle LSTs into Liquid Restaking Tokens (LRTs) that aim to earn extra yield from extending ETH’s security to other services, getting rewards in return. So far, most returns are loyalty points, tokens, and other inflationary economic incentives to keep users occupied. As more restaking-secured services come online, we will see if there is adequate yield supply to meet the billions in demand for passive, on-chain earnings.
Users want flexible, mobile, reward-accruing, stackable products. But in DeFi, protocol design lags behind demand. Simply reusing economic security is speculative and stresses Ethereum. Most platforms still treat staking as a one-way mechanism—deposit ETH and earn rewards. This leads to capital recirculation within the rewards loop, the “ouroboros” we talk about at Bracket, where capital never leaves DeFi.
However, users want products that provide diversified exposure to new asset classes with “set it and forget it” experiences. We’d like to remove complexity and have transparent products that prioritize earning but with additional safety measures. Product builders ignoring this shift leave yield-seekers stranded in an inflationary rewards cycle.
The Playbook for 2025 – Real-Yield Optimization and Strategy Management
DeFi enables money-legos, something traditional finance has struggled to deliver in banks or brokerages due to highly siloed systems with those rickety old rails we talked about. DeFi, however, has unlocked the ability to layer great-quality on-chain collateral to compound yields. Think of the ideal state as a digital “yield stack”—passive staking rewards, plus real trading yield, plus real-world products, plus economic incentives that generate solid returns without leaving the on-chain ecosystem.
If products from Lido, Coinbase, and Binance could be used alongside real-world assets across DeFi, users wouldn’t have to pick one pool or opportunity. They could be automatically reallocated among the best options, managing participation based on risk tolerance.
2025 brings a surge in new blood, new products, and most importantly, a shift in perspective about high-quality collateral. For the first time, staking assets, ETH, and stablecoins are being legitimized by the government and influential capital allocators. Tokenized TradFi products like on-chain money market funds, credit funds, and even hybrid on-chain/off-chain models are emerging.
Introducing these yield-producing assets alongside an improved regulatory climate should unlock a wave of new capital deployment—something DeFi needs in order to exit the ouroboros loop and participate in the global economy. These changes will force DeFi to build toolkits and infrastructure to help the trillions of dollars waiting to move at the speed of on-chain finance.
Yet, a massive knowledge gap remains. DeFi builders don’t always understand finance, TradFi doesn’t understand on-chain building, and regulators understand nothing. This is where seasoned DeFi builders will help usher in the next wave of global finance—but they have to play nice. We are at the precipice of making all tokenized markets 24/7, offering users the best choices among highly competitive products and services. In 2025, the place to be is building infrastructure to connect products and DeFi power users to real economic value (fun new rides).
The Bottom Line
Stagnation in real yield in DeFi exposes a need for new assets, new managers, and new gateways to tokenized products and hybrid experiences. Users don’t want to stay stuck in old systems that don’t serve them. Institutional actors are getting the message, building trust in new collateral types. New regulations should usher in waves of innovative competitors looking for an edge, benefiting users like us.
DeFi is reaching an inflection point—its long-term viability depends on its ability to evolve beyond basic caveman reward structures and isolated PvP yield battles. We can only recycle capital for so long before the ride isn’t fun anymore for anyone. Yield generation must become an active, adaptive process—one that integrates automation (even AI) and diversified income streams from asset classes that move at the speed of on-chain finance.
Without unlocking new asset exposure and utility on-chain, DeFi risks becoming a zero-sum game where capital comes in, but real returns stagnate, and the snake eats its own tail again and again. TradFi is already tokenizing yield products with institutional backing, and DeFi will rise to provide the new rides and rails in 2025.
So it’s up to DeFi builders to realize that we aren’t going to win PvP against one another. Eating our own tails is exhausting. It’s time to build new rides and new rails for trillions of financial assets to deliver on the promise of a more meritocratic system.
