According to comprehensive reports from Galaxy Digital and Sentora, decentralized finance (DeFi) lending achieved a historic milestone in the third quarter of 2025, overtaking centralized finance (CeFi) and reaching unprecedented heights. DeFi lending applications saw outstanding loans surge by $14.52 billion, or 54.84%, to $40.99 billion at the end of Q3, while total crypto-collateralized loans rose to $65.37 billion, marking a new all-time high and exceeding the previous peak from Q4 2021 by $11.93 billion.
The dominance of DeFi over CeFi venues climbed to a record 62.71% in Q3 2025, up from 59.83% in the previous quarter, with on-chain lending venues (including CDP-backed stablecoins) capturing 66.88% of the market share. This growth was driven by several factors, including the rise of points farming and airdrop incentive programs, which encouraged users to maintain loans even during market stress. Additionally, the increased use of advanced collateral assets such as Pendle Principal Tokens (PTs), liquid staking tokens (LSTs) like stETH and cbETH, and real-world-asset-backed tokens (RWAs) played a crucial role, alongside appreciating crypto asset prices that boosted borrowing capacity.
Despite volatile conditions, DeFi lending demonstrated resilience, with outstanding borrows peaking at a daily record of $43.82 billion on October 7 before moderating to $38.76 billion by October 31. The reports cautioned about potential double-counting in combined figures due to CeFi entities borrowing through DeFi protocols for off-chain clients, but the data unequivocally signals a structural shift toward on-chain credit, valued for its transparency, automated liquidations, and reduced counterparty risk.
In Q4, key industry moves further strengthened the ecosystem: Ripple partnered with Immunefi to enhance security for the proposed XRPL Lending Protocol through a global Attackathon, and Tether made a strategic investment in Ledn, a Bitcoin-backed lending platform, to promote self-custody and institutional adoption.
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