Decentralized Finance: The Rise and Fall of the DeFi Revolution

MakerDAO launched on the Ethereum blockchain, creating the DAI stablecoin - a decentralized, collateral-backed cryptocurrency pegged to the US dollar. The protocol introduced collateralized debt positions (CDPs) and became the foundational "money lego" of the DeFi ecosystem.

Uniswap launched on Ethereum, introducing the automated market maker (AMM) model that allowed decentralized token swaps without an order book. Created by Hayden Adams, the protocol used liquidity pools and the constant product formula to enable permissionless trading.

Aave launched on the Ethereum mainnet, introducing flash loans - uncollateralized loans that must be repaid within a single transaction block. The protocol pioneered new forms of on-chain arbitrage, liquidation, and capital efficiency.

The Compound lending protocol distributed its COMP governance token to users, initiating the "yield farming" phenomenon. Total value locked in Compound quadrupled within a week, and DeFi TVL grew from under USD 1 billion to over USD 10 billion within three months.

Total value locked across DeFi protocols exceeded USD 1 billion for the first time, driven by yield farming demand on Compound, Aave, Uniswap, and Yearn Finance. The "DeFi summer" of 2020 brought mainstream attention to decentralized finance.

Uniswap launched the UNI governance token, retroactively distributing 400 UNI to every address that had ever used the protocol. The airdrop, worth thousands of dollars per recipient at peak prices, became one of the most significant token distributions in crypto history.

Total value locked across all DeFi protocols peaked at approximately USD 178 billion. The market was dominated by Curve Finance (stablecoin trading), MakerDAO (lending), Uniswap (DEX), and Aave (lending), reflecting peak speculative demand for decentralized financial services.

The algorithmic stablecoin TerraUSD (UST) lost its peg to the US dollar, triggering a death spiral that wiped out approximately USD 45 billion in market capitalization within a week. The collapse exposed critical vulnerabilities in algorithmic stablecoin designs and caused contagion across the DeFi ecosystem.

DeFi protocols began recovering from the 2022 crash, with a new focus on tokenizing real-world assets such as US Treasury bills, real estate, and carbon credits. MakerDAO and Centrifuge led institutional adoption of on-chain yield tied to off-chain assets.

MakerDAO rebranded as Sky, and its DAI stablecoin was renamed USDS. The rebranding marked a shift toward a dual-token model with Sky (SKY) governance token alongside the upgraded stablecoin, while maintaining compatibility with existing DeFi infrastructure.

Uniswap governance approved the "UNIfication" proposal, enabling protocol fees for the first time. The upgrade shifted v2 pool fees from 0.30% to 0.25% for liquidity providers plus 0.05% for the protocol, and included a one-time burn of 100 million UNI tokens.

On August 25, 2026, Galaxy Digital launched the GalaxyOne Crypto Portfolio Line of Credit, a revolving retail lending product backed by Bitcoin, Ether, Solana, and staked SOL. The product, available to eligible GalaxyOne users across 40 U.S. states, offers an 8.99 percent variable annual percentage rate, a 50 percent loan-to-value ratio, and no origination fee, with collateral not rehypothecated. Galaxy Digital, a publicly traded digital asset financial services firm, structured the product as a single combined line of credit accepting multiple crypto assets as collateral. The launch extends institutional-style balance-sheet lending to retail customers, joining a competitive field of consumer crypto lending products that includes Ledn, Coinbase, and Nexo.

A Balancer Treasury Council governance proposal published in mid-September 2026 called for an orderly wind-down of the five-year-old DeFi protocol and distribution of its roughly 9 million USD treasury to BAL holders. Monthly revenue had collapsed about 95 percent from its October 2025 peak of over 1 million USD, dropping below 60,000 USD in August, accelerating after a 128 million USD exploit in November 2025. A Snapshot vote on the wind-down was scheduled for September 25-29, 2026.