Decentralized Finance (DeFi) was once regarded as the pioneer of the financial revolution, but it now seems to be in an awkward situation. Recently, a report released by JPMorgan caused a stir in the crypto world, revealing the sharp contraction of the DeFi market. The total value locked (TVL) plummeted from $170 billion in 2021 to $48.4 billion, and even the Ethereum ecosystem has not been spared from this turmoil.

This phenomenon reflects a thought-provoking reality: the DeFi market is currently primarily supported by retail investors. Taking the TRON ecosystem as an example, its $4.8 billion TVL is backed by 2.3 million active addresses and 300 million on-chain accounts, demonstrating widespread participation from ordinary investors.

In stark contrast, traditional financial giants are cautious about public DeFi protocols. They are more inclined to issue their own stablecoins or establish private chains, rather than directly participating in the public DeFi ecosystem. This attitude largely stems from considerations of compliance costs and risks.

The tightening of the regulatory environment has further exacerbated the challenges faced by DeFi. The decision by the Monetary Authority of Singapore (MAS) to include decentralized exchanges (DEX) and stablecoins under its regulatory purview has led to a global DeFi TVL shrinkage of 18%. The proposed "GENIUS Act" in the United States has imposed stringent regulatory requirements on the DeFi front end, creating potential legal risks for developers.

In addition to regulatory pressure, technical vulnerabilities are also a significant challenge faced by Decentralized Finance. The frequent occurrence of security incidents not only harms the interests of investors but also undermines market confidence. These issues highlight that the technical architecture and security mechanisms of DeFi still need further improvement.

Despite the many challenges currently facing Decentralized Finance (DeFi), its core理念—financial democratization and Decentralization—still has strong appeal. In the future, whether DeFi can find a balance between regulatory requirements, technical security, and innovation will be key to determining its fate. Regardless, the development of DeFi has provided us with valuable experience and pointed to new possibilities for financial innovation.