History of Decentralized finance in Timeline

Decentralized Finance (DeFi) leverages smart contracts on blockchains to offer financial services without traditional intermediaries. Users can lend, borrow, trade cryptocurrencies, use derivatives, and earn interest. DeFi's layered architecture enables composability. High returns often come with high risks, including coding errors and hacks. DeFi protocols vary in decentralization; truly decentralized systems offer neutral infrastructure, while others risk manipulation, fraud, or regulation.

2009: Beginning of Decentralized Finance

In 2009, the evolution of Decentralized Finance (DeFi) began with Bitcoin.

2015: Ethereum’s launch

In 2015, Ethereum launched, introducing smart contracts and enabling decentralized applications, which matured DeFi.

2017: DeFi compared to initial coin offering craze

In 2017, DeFi has been compared to the initial coin offering craze, with inexperienced investors at particular risk of losing money because of the sophistication required to interact with DeFi platforms.

2017: Establishment of MakerDAO

In 2017, MakerDAO was established as a lending DeFi platform based on a stablecoin, allowing users to borrow DAI, a token pegged to the US dollar.

2017: Ethereum blockchain popularizes smart contracts

In 2017, the Ethereum blockchain gained prominence for popularizing smart contracts, which serve as the foundational technology for Decentralized Finance (DeFi).

July 2018: Bancor decentralized exchange hacked

In July 2018, the decentralized exchange Bancor was reportedly hacked and suffered a loss of $23.5M in assets before freezing funds.

November 2018: EtherDelta founder settles charges with the SEC

In November 2018, the founder of EtherDelta settled charges with the U.S. Securities and Exchange Commission over operating an unregistered securities exchange.

2018: Decentralized exchanges suffer from low trading volumes

As of 2018, there were signs that decentralized exchanges had been suffering from low trading volumes and reduced market liquidity. The 0x project attempted to solve this issue.

2018: Original implementation of flash loans

In 2018, Max Wolff is credited with the original invention of flash loans with the original implementation released by Marble Protocol.

June 2020: Compound Finance rewards lenders and borrowers with Comp

In June 2020, Compound Finance, a decentralized finance protocol, began rewarding lenders and borrowers with the cryptocurrency Comp. This led to the rise of yield farming and liquidity mining.

July 2020: The Washington Post describes decentralized finance techniques and the risks involved

In July 2020, The Washington Post published an article describing decentralized finance techniques and the risks involved.

September 2020: DeFi comprises two-thirds of the cryptocurrency market

In September 2020, Bloomberg reported that DeFi made up two-thirds of the cryptocurrency market in terms of price changes, with collateral levels reaching $9 billion.

2020: Uniswap pays users to form liquidity pools

As of 2020, Uniswap pays users to form liquidity pools in exchange for a percentage of the fees collected from traders swapping tokens in and out of the liquidity pools.

October 2021: FATF includes DeFi in guidance for crypto service providers

In October 2021, the FATF included DeFi in the guidance for crypto service providers, aiming to regulate this type of asset.

November 2021: DeFi protocols reach peak collateral levels

In November 2021, total collateral levels across DeFi protocols reached a peak of $178 billion.

2021: MakerDAO as a prominent lending DeFi platform

As of 2021, MakerDAO was a prominent lending DeFi platform that was based on a stablecoin. It allowed users to borrow DAI, a token pegged to the US dollar.

2021: DeFi protocols drive TVL to over $180 billion

By 2021, DeFi protocols such as MakerDAO, Compound, Aave, and Uniswap had driven total value locked (TVL) to over $180 billion.

2021: Half of cryptocurrency crime related to DeFi

In 2021, half of cryptocurrency crime was related to DeFi due to developer incompetence and poorly enforced regulations.

2022: The Economist analyzes the future of digital finance

In 2022, The Economist described the future of digital finance as a "three-way fight" between Big Tech, rich countries with digital currencies, and software developers building decentralized finance applications.

2022: Crypto market crash exposes vulnerabilities in DeFi space

The 2022 crypto market crash, which followed events like the collapse of Terra/LUNA and FTX, exposed critical vulnerabilities in the DeFi space and triggered a downturn.

2023: Decline in DeFi collateral levels

By 2023, DeFi collateral levels had declined to under $40 billion amid broader downturns in the cryptocurrency market.

2023: DeFi's transition to a more regulated and sophisticated system

From 2023, DeFi has shifted from a niche innovation to a more regulated, institutionally aware, and technologically sophisticated financial system.

2023: DeFi begins recovering

In 2023, DeFi began recovering, with a key trend being the tokenization of real-world assets (RWA) and the rise of Layer 2 scaling solutions.

September 2024: MakerDAO rebrands as Sky

In September 2024, MakerDAO rebranded as Sky, and its stablecoin DAI was renamed USDS.

2024: Regulatory developments shape DeFi's evolution

In 2024, regulatory developments, such as the European Union’s MiCA framework, shaped DeFi's evolution, leading to hybrid models combining decentralized architecture with off-chain compliance layers.

March 2025: Combined circulating supply of DAI and USDS

As of March 2025, the combined circulating supply of DAI and USDS stood at approximately $9 billion.

2025: Average weekly trading volume on decentralized exchanges (DEXs)

As of mid‑2025, weekly trading volume on decentralized exchanges (DEXs) averaged around $18.6 billion, with more than 9.7 million unique wallets interacting with DeFi protocols.

2025: AI-powered DeFi agents begin to make progress

By early 2025, AI-powered DeFi agents began to make progress, integrating with platforms like Yearn Finance and Aave to automate yield strategies, risk assessments, and portfolio rebalancing.