Onchain lending engines are humming louder than ever.
The value of loans on decentralised finance protocols surged 55% in the third quarter, driving DeFi lending to a record $41 billion, and clearing the 2021 top by over $4 billion.
That’s according to a new report by Galaxy Digital shared with DL News, which paints a bullish picture of an onchain credit market entering its strongest phase yet.
Galaxy cites the new Plasma ecosystem, lending platform Aave’s multi-chain expansion, and institutional onchain platform Maple’s renaissance as key drivers of the surge.
The report shows a decisive realignment of crypto credit away from centralised lenders and toward transparent, automated onchain systems. DeFi lending applications captured well over 50% of the entire $74 billion crypto-collateralised lending market, their largest share ever.
Galaxy noted that traditional trading desks, funds and corporates are re-entering the market now that counterparty risk has normalised more than before and reliable liquidity has returned to the top-tier borrowers.
The 2025 cycle looks fundamentally different from the speculative, opaque credit boom — and collapse — of 2021, the firm concluded.
The biggest winners
Galaxy said one of the quarter’s biggest surprises was the rapid rise of Plasma, the new blockchain from Tether’s sister firm Bitfinex.
It’s now the eighth-largest blockchain by DeFi deposits, DefiLlama shows.
Plasma aims to capture users exposed to shaky local currencies, providing an easy way for them to hold and spend US dollar stablecoins, Paul Faecks, Plasma’s CEO, told DL News earlier this year.
Galaxy highlighted that investors had borrowed more than $3 billion on Plasma over the last five weeks.
Aave alone captured nearly 70% of all borrows on Plasma, making the network Aave’s second-largest deployment and dethroning Ethererum layer 2 Arbitrum.
Plasma as a sign that borrowers are aggressively migrating to high-throughput environments where looped strategies and points’ incentives thrive, Galaxy said.
A basic looping strategy involves depositing a cryptocurrency, such as Ether, and then borrowing another asset against that deposit, such as a stablecoin. The trader then buys more Ether with that borrowed stablecoin to make one “loop.”
Indeed, after a long stretch of stagnant growth post-2022, Aave is back.
Galaxy highlights that Aave’s v3 markets saw sharp expansion across Base, Scroll, and new layer 2s, with investor deposits recovering as risk parameters were relaxed and demand for stablecoins and blue-chip collateral like Bitcoin and Ethereum surged.
