From Geek Toys to Wall Street Darling: The Rise of DeFi

In the past few years, DeFi( decentralized finance) has become a hot topic in the financial circle. From initially niche financial tools on Ethereum to the emerging field that now attracts the attention of Wall Street bigwigs, DeFi has undergone astonishing development.

From 2020 to 2021, the DeFi market rose rapidly. The total locked value (TVL) skyrocketed from over 1 billion dollars to a peak of 178 billion dollars. Protocols like Uniswap and Aave have emerged as star projects in the crypto space.

However, for ordinary investors, DeFi still feels like a maze. Complex wallet operations, obscure smart contracts, and security risks hinder widespread participation. Data shows that even though DeFi is so popular, the actual entry ratio of traditional financial institutions is less than 5%. Investors are both eager and hesitant.

Starting from 2021, a new tool called Decentralized ETF ( DeETF ) has emerged. It combines the concept of traditional ETFs with the transparency of blockchain, preserving the convenience of traditional funds while also accommodating the high growth potential of DeFi assets. The DeETF serves as a bridge, connecting the new land of DeFi with traditional investors.

DeFi to DeETF: The Development History of On-Chain ETFs

Early Exploration(2017-2019)

From 2017 to 2018, early projects like MakerDAO and Compound on Ethereum first demonstrated the possibilities of Decentralized Finance. By the end of 2018, the automated market maker (AMM) model launched by Uniswap significantly simplified on-chain trading. By the end of 2019, the TVL of DeFi had approached 600 million USD.

At the same time, some traditional financial institutions are starting to pay attention to blockchain technology, but they are still troubled by technical issues. Although the concept of "DeETF" has not yet been clearly proposed, the demand for bridging traditional funds and Decentralized Finance (DeFi) has begun to emerge.

Market Outbreak and Concept Formation(2020-2021)

In 2020, the pandemic drove a large influx of funds into the cryptocurrency market. DeFi experienced an explosion, with TVL skyrocketing from $1 billion to $178 billion. New models such as liquidity mining and yield farming emerged one after another, but at the same time, they also exposed significant user barriers.

Some traditional financial companies are keen to seize opportunities. For example, the Canadian listed company DeFi Technologies has transformed and launched financial products that track mainstream DeFi protocols, allowing users to participate in DeFi like buying and selling stocks. This marks the official emergence of the "DeETF" concept.

At the same time, decentralized platforms like DeETF.org have also begun to experiment with managing ETF portfolios using smart contracts, but they are still in the early stages.

Market Reshuffling and Model Maturity(2022-2023)

At the beginning of 2022, events such as the collapse of Terra and the bankruptcy of FTX severely impacted investor confidence, causing the DeFi market TVL to drop to $40 billion. However, the crisis also spurred the demand for safer and more transparent investment tools, promoting the development and maturity of DeETF.

During this period, "DeETF" developed two distinct models:

1. Strengthening traditional financial channels: Institutions like DeFi Technologies are expanding their product lines and listing more ETP products on traditional exchanges.

2. The rise of on-chain decentralized models: Platforms like DeETF.org and Sosovalue have launched, directly achieving asset management and portfolio trading through smart contracts.

The parallel development of these two models is gradually clarifying the DeETF track.

Advantages and Challenges of DeETF

DeETF shows unique advantages:

• High usability, significantly lowering the participation threshold
• More transparent and flexible investment
• Beneficial for risk control and investment diversification

At the same time, there are challenges:

• The regulatory environment is uncertain.
• Smart Contract Security Risks

Despite the challenges, DeETF is still regarded as an important innovation in the financial market, blurring the lines between traditional investments and the crypto market, and making asset management more democratic and intelligent.

The rise of emerging projects, the DeETF sector is flourishing.

From a Single Model to Diverse Exploration

After 2023, DeETF enters the "Hundred Flowers Bloom" stage, evolving along two paths:

1. Continue to use traditional financial logic to issue ETPs through formal exchanges.

2. A purely on-chain, decentralized DeETF platform where users only need a crypto wallet to self-create, trade, and manage asset portfolios.

On-chain native asset portfolio direction, platforms like DeETF.org and Sosovalue have become pioneering explorers. Sosovalue supports multiple thematic combination strategies, providing users with an "one-click purchase + trackable" ETF product experience.

In terms of institutional pathways, apart from DeFi Technologies, the RWA leader Securitize is also tokenizing traditional financial assets in a compliant manner, bringing in primary market investors.

Starting from 2023, DeETF has transformed from a singular attempt into a diverse competitive ecosystem, with various projects of different routes and positions flourishing.

New Trends in Smart Asset Portfolios

The DeETF track has evolved from "free combination" to "preset combination one-click purchase." However, projects that truly automate the handling of "portfolio strategies" with algorithms are still rare.

YAMA(Yamaswap) is precisely an explorer in this direction. It has built an AI-driven asset allocation recommendation system, where users only need to input their requirements, and the system will automatically generate recommended portfolios based on on-chain data.

YAMA chooses to run on Solana and Base, significantly reducing usage costs. Its smart contracts support on-chain public disclosure of components, weights, dynamic changes, etc., avoiding "black box configuration."

YAMA emphasizes a combination experience of "self-deployment" + "AI portfolio recommendation", which not only addresses the pain point of "not knowing how to invest" but also retains the transparency and self-management of "asset control rights". This may represent the direction of the DeETF platform moving from "structured tools" to "intelligent investment research assistants".

The Fork Evolution of the DeETF Track

As user demand shifts from trading to "portfolio management", the DeETF track is gradually diverging into several development routes:

• DeETF.org emphasizes user autonomy in configuration
• Sosovalue launched on-chain thematic ETFs
• Index Coop focuses on standard index products
• DeFi Technologies explores different compliance paths with Securitize.

The entire industry is beginning to show a trend towards smarter, automated asset allocation experiences. Some platforms are attempting to introduce AI models or rule engines to dynamically generate allocation suggestions based on user goals and on-chain data.

YAMA has made a structural integration between AI combination recommendations and on-chain self-deployment, using low-cost and high-performance public chain deployment, allowing ordinary users to complete asset allocation without complex operations.

More and more DeETF platforms are shifting from "pure tools" to "strategy providers," reflecting that the crypto asset management sector is moving towards a simplified and less professional barrier financial experience.

Conclusion: DeETF Reshaping the Future of On-Chain Asset Management

Looking back at the development of DeFi, one main line is evident: from the initial experiments with smart contracts, to the construction of open trading and lending protocols, and then to triggering large-scale capital flows, DeFi has completed in six or seven years what traditional finance took decades to achieve. Now, DeETF, as the "user experience upgrade version" of DeFi, is tasked with further popularizing and lowering the barriers.

According to the data, the DeFi market is expected to grow from $32.36 billion in 2025 to approximately $1.558 trillion in 2034, with a compound annual growth rate of 53.8%. This means that in the next five years, DeETF is likely to become one of the most important application scenarios for on-chain asset management.

Currently, we have seen different types of explorers:

• DeFi Technologies is entering traditional finance by issuing more compliant crypto ETP products.
• DeETF.org adheres to on-chain governance, emphasizing free combination and complete transparency.
• YAMA introduces AI-assisted portfolio construction, aiming to make on-chain asset management truly "intelligent and personalized".

Early DeFi addressed the question of "Can finance be decentralized?" while today's projects like DeETF and YAMA are working on the problem of "How can decentralized finance be made accessible and beneficial for more people?"

On-chain asset management in the future should become a capability that any ordinary investor can master. DeETF is that key.

From MakerDAO to Uniswap, from DeFi Technologies to YAMA, every advancement in Decentralized Finance refreshes the concepts of financial freedom, transparency, and inclusivity. Today, DeETF is redefining on-chain asset management, while innovative projects like YAMA are injecting new imagination into this path.

The story is far from over, but the future is taking shape.