As chains have become cheaper, applications have become more innovative and more willing to share revenue with tokenholders.
Decentralised autonomous organisations, or DAOs, grew quieter and less decentralised in 2025.
That’s according to “State of DeFi,” a new report from DL News and sister companies DL Research and DefiLlama.
DAOs are the crypto cooperatives that manage some of the largest and most successful blockchain-based applications, such as Aave and Uniswap.
The prior year had been a high-water mark for DAO governance, according to the report. This year, however, the number of proposals and the number of people voting on those proposals both fell sharply across several major DAOs.
The plunge is a troubling sign for crypto purists, who envision a future financial system free of middlemen, where business decisions are made not by fiat handed down by a small cadre of executives, but democratically, by thousands, if not millions of user-owners.
The report analysed the DAOs that govern Aave, Lido, Uniswap, Arbitrum, Balancer, and Frax.
Across all six, the number of proposals fell by at least 60% and as much as 90% year-over-year, the report found.
Median voter participation also fell at every protocol save Lido, which saw a boost in participation after implementing new rules.
DAO apathy is no secret — the cooperatives have been trying to boost tokenholder participation for years.
While the number of voters fell, the number of votes cast increased in all six DAOs, according to the report, suggesting an increasing number of voters are loaning their tokens to delegates — actors akin to elected representatives within the cooperatives.
“This pattern confirms a structural shift in DeFi governance away from broad, retail-style token participation toward a model dominated by a relatively small group of professional delegates, large liquidity providers, protocol-aligned funds, and long-term strategic token holders,” the report notes.
“From an institutional perspective, this transition improves governance predictability and operational coherence, but it also raises persistent questions around capture risk and minority tokenholder relevance.”
Here are some other trends that emerged in 2025, according to the report.
In decentralised finance, revenue has long been concentrated among a small crop of hyper-profitable businesses. In 2025, crypto wealth began to spread out — but just a little.
“Revenue expanded across nearly all major sectors, but the distribution of that growth revealed a clear structural pattern: a small group of protocols continues to dominate fee capture while a new wave of entrants reshapes competition within key verticals,” the report said.
This year, the top 10 protocols captured 60% of all fees, according to the report. The top 20 captured a whopping 80%.
But that’s actually an improvement from 2024, when the top six protocols captured 70% of all fees.
Stablecoin issuers Tether and Circle remain in a class of their own, capturing 54% and 18% of all fees, respectively.
Behind them, perpetual exchanges such as Hyperliquid surged to become one of the most lucrative businesses in DeFi.
Four perpetual exchanges accounted for 7.5% of all fees captured by DeFi protocols in 2025. More remarkably, their revenue held steady no matter the direction of the broader crypto markets, according to the report.
Decentralised exchanges, on the other hand, saw their fortunes tied to the volatility of crypto writ large, the report said.
Governance tokens were caught in a tough spot last year: they let users participate in DAO decision making, but nobody really wanted to immerse themselves in the weeds of protocol management.
That raised an uncomfortable question for investors who had bought those tokens: what were they really worth?
That started to change in 2025. This year, the share of protocols that distribute revenue among tokenholders has tripled, from 5% to 15%, according to the report.
Major protocols like Aave and Lido have approved buyback programmes this year.
“As competition intensifies and tokens increasingly resemble traditional financial assets, more protocols are expected to adopt similar approaches,” the report said.
One reason: the world’s largest economy has become more friend than foe, according to the report.
Under former President Joe Biden, the US’ top financial regulators seemed to think just about every crypto asset was an unregistered security. And making a token more security-like by incorporating dividend-like revenue distribution would only have invited scrutiny, according to crypto attorneys.
Under Biden’s successor, US policy has done a 180-degree turn. Open investigations have been dropped as lawmakers are debating a bill that could categorise most tokens as commodities, which are subject to less onerous regulations.
But there’s another reason for the change, according to the report.
Blockchains have become cheaper to use. Nowhere is the change more stark than in Ethereum, which has maintained its lead as the home of decentralised finance.
The average transaction cost on Ethereum has fallen 86% since 2021 even as the number of transactions has nearly tripled, according to the report.
In 2021, blockchains captured 54% of all user fees, while applications captured just 34%, the report said. In 2024, applications edged out the platforms on which they’re built, capturing 47% of all fees to blockchains’ 42%.
In 2025, applications rule in fee generation: they captured 66% of all fees. Blockchains, meanwhile, captured just 19%.
“Competition has played a central role in driving costs down,” the report said. “Solana’s rise in 2021 set a clear precedent by demonstrating that high throughput and low fees were achievable, pushing Ethereum and other ecosystems to accelerate their scaling roadmaps.”
That change has left many protocols cash-rich, allowing them to innovate and to direct some of their revenue to tokenholders.
