Mapping the DeFi landscape – key players in lending and borrowing

In this article, Paula Albu and Mirela Ciobanu from The Paypers explore the foundational infrastructure of decentralised finance (DeFi), focusing on lending, borrowing, and related financial innovations. 

DeFi has rapidly become an essential component of the digital asset ecosystem, redefining how individuals and institutions access, transact, and manage financial assets. By optimising blockchain technology and smart contracts, DeFi platforms deliver decentralised services. Lending and borrowing protocols are key to this change, allowing users to lend or borrow digital assets directly without intermediaries. These platforms utilise blockchain technology and smart contracts to offer more accessible, efficient, and transparent financial services.

The article, part of an explanatory series based on The Paypers' Infographic included in the Web Payment Acceptance Report 2025, examines key players across the Web 3 payments landscape. Each article in the series includes an explanation of the main category and relevant subcategories, examples, brief descriptions of key players in the field, recent news, and concluding insights into current trends.

DeFi lending and borrowing: optimising financial access

DeFi lending and borrowing represent a core segment of the cryptocurrency ecosystem. These platforms enable users to lend or borrow digital assets without traditional financial intermediaries, using smart contracts to enforce loan agreements automatically. This system reduces reliance on banks and other middlemen, making financial services more accessible, transparent, and efficient.

Compared with conventional finance, DeFi uses blockchain technology and smart contracts to securely automate various financial products. This approach not only reduces costs but also accelerates transactions and extends financial services to unbanked populations worldwide. By 2026, DeFi lending has transitioned from a high-yield experiment to essential institutional infrastructure, with a heavy focus on combining blockchain speed with regulatory compliance.

A central element of this ecosystem is the liquidity pool model, in which lenders deposit their assets into pools, and borrowers can obtain overcollateralised loans from those pools. This structure increases capital efficiency and enables protocols to operate around the clock without human intervention, fostering a more inclusive and resilient financial landscape.

Some notable DeFi lending and borrowing platforms have emerged in the space. Compound, one of the earliest and most important lending protocols, upgraded to Compound III. Compound's latest version (v3 or ‘Comet’) shifted from a pooled-risk model to a more secure, single-borrowable-asset model (typically USDC), allowing users to supply various crypto assets as collateral without them being lent out to others.

In October 2025, Maple Finance and Aave announced a strategic partnership to integrate Maple's institutional-grade assets, specifically syrupUSDC and syrupUSDT, into Aave's markets. This integration enables Aave users to use these yield-bearing, overcollateralised stablecoins as collateral for the first time, bringing institutional credit exposure to Aave's lending pools.

TrueFi offers a modular infrastructure for on-chain credit. Recently, the company partnered with Keyring Network to enable a more optimal and privacy-preserving way for verified users to access tokenised real-world assets and institutional credit directly on-chain.

Yield aggregators explained

Yield aggregators are services that optimise yield farming strategies across multiple decentralised finance (DeFi) protocols to maximise returns for users. They simplify the often complex process by pooling user funds and deploying them via automated smart-contract strategies. These strategies include auto-compounding rewards, reallocating capital to higher-yield opportunities (depending on strategy design), and reducing the impact of gas fees through batching and automation.

By automating strategy selection and execution, yield aggregators enable users to capture complex DeFi returns without the need to manually manage individual positions. This automation not only saves time but also increases efficiency, making high-yield opportunities more accessible to a broader audience.

Among the leading players in this space are Beefy Finance, a decentralised, multichain yield optimiser that allows users to earn compound interest on their crypto holdings. The firm continues to expand its support across major blockchain networks, offering risk-rated strategies tailored for both beginners and advanced users. Similarly, Convex Finance focuses on optimising yield-farming opportunities for liquidity providers and CRV stakers on Curve Finance, thereby improving the earning potential of these assets.

The 2026 landscape is focusing on sustainable, risk-adjusted yields from Real-World Assets (RWA) and institutional credit markets. Furthermore, a new standard in 2026 is the use of AI-driven analytics to monitor protocol health and automatically rotate capital away from platforms showing signs of instability or impending ‘de-pegs’. Moreover, while they ‘maximise returns’, modern 2026 aggregators like Yearn and Beefy are now marketed as ‘yield-preservation’ tools that prioritise security as much as profit.

Together, these yield aggregators illustrate how automation is becoming an essential layer in the DeFi ecosystem. They are making optimal yield strategies more accessible, efficient, and scalable for users worldwide, ultimately driving broader adoption of decentralised finance applications and services.

How stablecoins drive DeFi

Decentralised stablecoins & algorithmic stablecoins are cryptocurrencies designed to maintain a peg to fiat currency, most commonly the US dollar. They achieve this either through on-chain collateral reserves or through algorithmic mechanisms, aiming to provide a reliable medium of exchange within the decentralised finance (DeFi) ecosystem.

Decentralised & hybrid stablecoins - these assets are backed by on-chain crypto-assets or tokenised real-world assets (RWAs). Examples include DAI, the most battle-tested decentralised stablecoin; LUSD, known for its pure, governance-free ETH backing; and Frax (FRAX). While Frax originated as a fractional-algorithmic model, it has evolved into a secure, fully collateralised protocol that integrates both crypto and institutional reserves. These models prioritise transparency and security to maintain their peg.

Algorithmic and synthetic stablecoins - this category focuses on capital efficiency, using market incentives and supply adjustments rather than 1:1 collateral. A prominent modern example is Ethena (USDe), a ‘synthetic dollar’ that maintains its peg through delta-neutral hedging (matching long crypto positions with short futures). Another example is USDD, which uses a mint-and-burn mechanism. While these models offer high scalability, they require sophisticated risk management to handle market volatility.

In conclusion, decentralised and algorithmic stablecoins form a core layer of the DeFi ecosystem. They enable efficient payments, lending, liquidity provision, and risk management, empowering users to transact and interact in the crypto economy without relying on centralised issuers.

Decentralised derivatives & options are platforms that offer financial instruments like futures, swaps, and options in a decentralised manner. Unlike traditional markets, these protocols rely on smart contracts to execute trades, manage collateral, and settle positions without intermediaries.

On these decentralised derivatives platforms, users can trade futures, perpetual contracts, and other derivatives via smart contracts. This new financial frontier is already populated by innovative protocols, including:

• dYdX, one of the main decentralised perpetual trading platforms, offering advanced order types and high liquidity. In October 2025, dYdX confirmed plans to re-enter the US market by the end of 2025. However, due to regulatory restrictions, they will initially offer spot trading only (e.g., Solana), while their signature perpetual futures remain barred for US users until further regulatory guidance is issued.
• Synthetix, which allows users to mint and trade synthetic assets mirroring real-world markets. Synthetix is currently expanding into Real-World Asset (RWA) perpetuals.
• GMX, a decentralised perpetual exchange known for its own-fee trading model and liquidity provider revenue-sharing.

Decentralised options refer to platforms that offer financial instruments such as futures, swaps, and options in a decentralised manner.

Examples include:

• Premia, which offers decentralised options markets with customisable expiries and strike prices.
• Hegic, a protocol for peer-to-pool options trading with automated pricing models.
• Opyn, one of the earliest DeFi options systems, offers robust risk management tools for options markets.

By removing barriers and gatekeepers, decentralised derivatives and options platforms are expanding access to complex financial instruments in DeFi, allowing users to mitigate risk, gain leveraged exposure, and build advanced trading strategies in an optimal and transparent environment.

Trends shaping the future of DeFi

In its early days, DeFi was viewed as an experimental corner of the crypto space, a playground for developers and risk-takers chasing yield. However, by 2026, the sector is transforming into a new layer of global financial infrastructure integrating lending, yield aggregation, stablecoins, and derivatives to create a decentralised alternative to traditional finance. This maturation is attracting a broader range of participants and setting new standards for both innovation and trust.

Key trends shaping DeFi’s next chapter include:

• Institutional adoption and compliance-ready credit frameworks, which are making DeFi more accessible to established financial institutions;
• Integration of real-world assets as collateral and yield sources, bridging the gap between blockchain and traditional finance;
• Automation and AI-driven optimisation for risk and capital efficiency, increasing the complexity of DeFi strategies;
• Sustainable and transparent yield models replacing unsustainable incentives, helping to ensure the sector’s long-term growth.

Looking ahead – the impact of DeFi

DeFi is no longer an experimental sector but an essential part of the digital economy, laying the groundwork for a programmable, borderless financial future. Its rapid evolution demonstrates the potential of open, programmable, and borderless financial systems to empower individuals and institutions alike.  

As adoption continues and the technology matures, DeFi aims to drive even greater change across global markets by fostering financial inclusion, accelerating innovation, and redefining the relationship between users and financial services.

A pivotal driver of this maturation is the GENIUS Act, which established the first comprehensive federal regulatory framework for payment stablecoins in the United States. By mandating 100% reserve backing in high-quality liquid assets like US Treasuries and enforcing monthly public disclosures, the Act has successfully de-risked stablecoins for institutional use. This legal clarity, which explicitly excludes permitted stablecoins from being classified as ‘securities’ or ‘commodities’, has effectively ended the era of ‘regulation by enforcement’, allowing traditional banks and asset managers to integrate on-chain settlement and tokenised collateral into their core operations with confidence.

The upcoming journey will involve overcoming regulatory, technological, and security challenges, but the direction is clear – DeFi is set to become a foundation for the future financial landscape.

 

This article is part of The Paypers’ Explainers section. To access other educational materials, click here. If you have suggestions about other topics that could be included in this section, we invite you to write to us at editor@thepaypers.com