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Over the past five years, DeFi has grown from a niche concept into a functioning, if still volatile, alternative to parts of traditional finance. As of November 2025, its total value locked sits in a $100–$120 billion range, which is enough to confirm activity, but no longer enough to mean transformation.
Summary
- DeFi’s TVL has fallen from its 2021 peak because most early “yield” was synthetic — driven by token emissions rather than real economic activity — leading to an inevitable collapse once inflows slowed.
- The market reset has shifted focus to real yield, tied to genuine production such as Bitcoin mining; tokenized hashrate now connects physical energy-backed computation with on-chain finance.
- Looking ahead, PoW-based, production-driven models appear more resilient for DeFi’s next cycle, while Ethereum’s PoS yields risk stagnation as its base layer becomes more conservative.
Also, that figure is less than half of DeFi’s former peak in 2021 and early 2022. Back then, TVL exceeded $250 billion, which was the result of a simple mechanism working in full effect: mint tokens, call them rewards, and frame the outcome as sustainable yield. At the time, the model seemed promising. Tokens rose in price, early entrants profited simply by being first, and TVL kept growing. In other words, most protocols offered effortless returns, and users rushed to seize the opportunity.
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But what has gone wrong? Why is today’s TVL roughly half of its previous level? The answer lies in the nature of that yield, which, in economic terms, was never real.
DeFi’s synthetic phase collapsed, and real yield took its place
At its prime, DeFi looked unstoppable. But much of that growth relied on synthetic yield — returns generated by token incentives rather than genuine economic activity. In fact, emission-driven systems are fragile by design because token rewards only hold value when new capital keeps flowing in. Once inflows slow, tokens’ value depreciates, yields collapse, and users begin to exit.
That’s exactly what happened. Speculative assets lost popularity, one-time-wonder projects disappeared, liquidity contracted, and overall activity declined alongside the broader crypto downturn. So the market purified itself, causing a structural reset that was long overdue.
At the same time, a different kind of yield emerged — real yield. Unlike synthetic returns, real yield depends on actual demand. It reflects direct participation: transaction fees, protocol revenue, or productive computation instead of token emissions.
Naturally, this brings us to Bitcoin (BTC) and its network, one of the few networks where yield is tied to real production. Mining converts energy into verifiable computational work, and this process defines the network’s economic output. But what if users want access to this production layer without running mining infrastructure themselves? That’s where tokenized hashrate comes in.
Tokenized hashrate links physical energy and digital capital
In essence, hashrate tokenization means turning computing power into tradable digital assets. Instead of building infrastructure, concluding power contracts, or managing equipment, users hold tokens that give them a share of the actual work performed by a facility. As a result, they get access to Bitcoin’s industrial layer without the need to mine themselves.
The scale of Bitcoin mining is exactly what makes this model relevant now. In Texas alone, crypto-mining facilities surpassed 2,000 megawatts of registered power capacity in 2023, and within a year, that number rose to around 3,600 megawatts. These figures represent industrial-level demand for energy, and prove that mining has outgrown the “side activity” label it once carried.
At this stage, mining operates as a yield-generating industrial sector — capital-intensive, energy-consuming, and foundational to Bitcoin’s economic output. And this is exactly where tokenized hashrate becomes structurally important. It bridges two layers that were previously disconnected — physical production and digital finance.
Yet real production by itself doesn’t guarantee stability, even if we’re seeing its rapid development today. If the underlying network’s architecture can’t sustain this yield over time, the ecosystem risks being trapped in the same expansion-and-collapse cycle that drove the last downturn.
Proof-of-work vs proof-of-stake as competing yield architectures
Sustaining yield over time comes down to architecture, and in Bitcoin’s case, that foundation is proof-of-work. PoW secures the network through energy expenditure and computation, anchoring yield to a real-world input. That’s why it’s essential to production-based models — energy is converted into work, and that work produces measurable results. But stopping at Bitcoin alone would miss the point.
Ethereum (ETH) also deserves attention, not least because it’s been offering protocol-native returns for longer. Since its transition to proof-of-stake, ETH holders have been able to earn yield by locking assets and participating in network validation. This model is capital-efficient, less resource-intensive, and doesn’t require physical infrastructure. Yet it’s precisely this efficiency that reveals its limitations.
Once a network starts relying on a mature, low-risk validation mechanism, the room for notable innovation narrows. That’s what we’re seeing with Ethereum. Even Vitalik Buterin has said that Ethereum’s base layer should become more conservative, which means a slower, more incremental development phase. And when the architecture stops evolving, the yield it supports tends to stagnate too.
PoW, by contrast, is moving in the opposite direction. Value creation depends on real production, so the more the sector grows, the more visible and verifiable that output becomes. That’s why tokenized hashrate and other PoW-linked instruments, in my view, are far better positioned for the next cycle. Their returns are grounded in work that’s actually being done, and that makes them much more resilient.
What’s next for the DeFi cycle
At this point, the last cycle built on synthetic yield showed what happens when returns rely on leverage. The collapse cleared the path for production-based models, and tokenized hashrate is its most tangible result so far. I believe this is where DeFi’s future lies — in real yield, backed by output and infrastructure.
Ethereum’s system, in turn, is flattening. It may still be efficient, but if base-layer innovation slows, those returns risk becoming static, or worse — fragile. We’ve already seen what happens when yield detaches from real value. So, DeFi can’t afford to make that mistake again.
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Hunter Rogers
Hunter Rogers is the co-founder of the global Bitcoin yield protocol TeraHash. At TeraHash, Rogers leads ecosystem partnerships, institutional engagement, and community growth initiatives. Before joining TeraHash, Rogers worked at TRON DAO, one of the world’s largest blockchain networks, where he held the role of Senior Ecosystem Development and Investment Lead. During his tenure, Rogers closed several multimillion-dollar institutional deals and played a key role in scaling TRON’s global developer and user community to millions of participants. His focus is on establishing TeraHash as the institutional standard for Bitcoin-native yield, transforming physical hashrate into transparent, liquid, and composable financial products accessible to both institutional and individual participants.
