From Satoshi’s Bitcoin white paper in 2008 to today’s institutional capital inflows, DeFi has evolved from a cypherpunk dream of financial freedom to a global force. Yet, amid the noise of memecoins and on-chain speculation, its founding ideals of decentralisation and empowerment can feel distant. This rapid evolution, however, hints at a deeper pattern, one we’ll explore as crypto retraces the milestones of traditional finance (TradFi) at an unprecedented pace.

DeFi isn’t reinventing finance, it’s retracing TradFi’s evolution on a compressed timeline.

Coinage, credit, markets, derivatives: each DeFi primitive mirrors a historical milestone. Now, just like TradFi in the 1970s, crypto faces its compliance moment. Trust infrastructure, like emerging identity and compliance tools, is the inevitable next step to scale capital without compromising principles.

A Familiar Path, Accelerated

Morpheus’ words, underscore the natural progression of financial systems, a path both TradFi and DeFi have traced.

Finance has long evolved by fostering trust, expanding access, and simplifying complexity—from Mesopotamia’s coins to global markets, each step addressed a new challenge. Crypto accelerates this journey: Bitcoin established digital currency, MakerDAO pioneered permissionless lending, Uniswap opened global markets, Synthetix brought derivatives, and Pendle innovated yield strategies.

Like a system following the path of least action in physics, financial primitives emerge in a logical sequence driven by necessity rather than chance.

A Timeline of (De)Financial Evolution

It is remarkable that for each significant financial primitive, both the TradFi and DeFi equivalents became popularised in the same ordering. Looking at the dates each major protocol became a unicorn is an unbiased way of showing this relationship. The only major missing primitives are under-collateralised credit and insurance.

• 2000-600 BC: Coinage [DeFi: 2013-2018]
  TradFi: Coins in Mesopotamia and Lydia standardised trade, replacing barter with trusted money.
  DeFi: Bitcoin created a verifiable, decentralised digital currency, bypassing central banks.

  • Mar-2013 Bitcoin becomes a unicorn

  • May-2016 Ethereum becomes a unicorn

• 1200-1500s: Banking and Credit [DeFi: 2018-2020]
  TradFi: Over-collateralised loans and promissory notes enabled trade beyond physical coins.
  DeFi: MakerDAO’s DAI and AAVE’s pooled liquidity (aTokens) made credit permissionless and composable.

  • Jan-2018 Maker becomes a unicorn

  • Nov-2020 AAVE becomes a unicorn

  Note that this period, in DeFi terms, was rather extended due to the 2018 round tariffs, followed by Powell's comments “We’re a long way from neutral at this point, probably.” causing a sell off in the last quarter of 2018. Finally, even though markets had a 'Goldilocks' period through 2019, this was welcomed by the largest pandemic of modern times at the end of the year, disrupting markets until late 2020.

• 1600s-1800s: Capital Markets [DeFi: early 2021]
  TradFi: Stock markets and corporate bonds funded industrial growth. Central banks like Bank of England/Bank of Amsterdam provide asset custody (gold, securities etc.).
  DeFi: Uniswap’s 24/7 exchange. AAVE begins listing many "Altcoins" as collateral. FireBlocks MPC tech provides institutional self-custody.

  • Dec-2020 AAVE lists CRV as collateral. BAL & SUSHI follow

  • Jan-2021 Uniswap becomes a unicorn

  • Mar-2021 FireBlocks raise 133m (assuming 20% dilution and 5x token multiplier this makes Fireblocks a unicorn. They raised another true PE unicorn in December.)

• 1900s: Derivatives and Synthetics [DeFi: late 2021]
  TradFi: Futures, options, and mortgage-backed securities created layered risk strategies.
  DeFi: Synthetix derivative infrastructure and Securitize’s tokenised assets (RWAs) enable hedging and structured yield.

  • Jun-2021 Securitize raised 48m from MS (assuming 20% dilution and 5x token multiplier this makes Securitize a unicorn on a token equivalent basis)

  • Jul-2021 Synthetix becomes a unicorn

  This DeFi period faced severe disruption after the pandemic. COVID-era QE fuelled a spending glut, sparking rampant inflation and the fastest rate-hiking cycle in decades as central banks struggled to regain control. The fallout hit crypto markets hard: over-leveraged prime brokers and projects collapsed, culminating in FTX’s downfall. The Democrats, eager to distance themselves from a disgraced crypto industry, launched an unprecedented anti-industry crackdown nicknamed Operation Chokepoint 2.0. This, combined with the market’s implosion, stalled DeFi market growth for nearly two years.

• 1940s-1960s: Retail and Liquidity [DeFi: 2024-2025]
  TradFi: Mutual funds and credit cards brought finance to the masses, with Eurodollars creating offshore liquidity. Zero-coupon bonds gained popularity, offering yield curve exposure. Money Market Funds (MMFs) became mainstream.
  DeFi: Ondo built on Securitize and Blackrock's foundations to release the first major institutional MMF. Ethena creates the first major mutual fund, while stablecoins act as DeFi’s global liquidity engine. The new payments cards are technically short term credit cards but DeFi still struggles to capture a true retail credit card facility. Pendle captured the market of yield stripping.

  • Mar-2024 Ondo becomes a unicorn

  • Apr-2024 Ethena launches at >$1bn valuation

  • Apr-2024 Pendle becomes a unicorn

  • Apr-2024 1Inch launches 1Inch Card in cooperation with Mastercard

  • May-2024 Gnosis Pay powers a unicorn valuation for Gnosis in cooperation with Visa

• 1970s: Compliance and Trust [DeFi: expected late 2025-2026]
  TradFi: The Bank Secrecy Act and KYC rules gave markets ability to systematically scale under clear guidance. Negotiable Certificate of Deposits enabled banks to issue debt of varied duration to generate yield from Asset & Liability Management (ALM). Mortgage-Backed Securities (MBS) and Private Equity (PE) funds emerged.
  DeFi: Keyring Network creating trust infrastructure for compliance and security, unlocking institutional capital. InfiniFi are creating duration-driven yield with decentralised ALM.

  The current DeFi market is contending with macro headwinds, notably the renewal of tariffs and growing bond market concerns over the Federal Reserve’s independence. As in 2018, the hope is that the U.S. administration will move away from protectionist rhetoric, creating space to ease pressure on global markets and de-escalate tensions with the FED.

  There is a strong chance that the FED will hold off until at least Q3, both as a signal of institutional independence and, more critically, due to inflation risks. The University of Michigan Inflation Expectations index has surged from 2.6% to 5% since November 2024, echoing conditions in 2022 when the Fed adopted a hawkish stance in response to similar consumer sentiment data.

  

• 1980s: Swaps, Diversification and AML [DeFi: expected 2026/7]

  TradFi: Swaps enabled risk management via yield curves. CDOs pooled debt, amplifying returns and risks. ETFs offered retail diversification. FATF set global AML standards.
  DeFi: Lending apps figure out how to popularise over-collateralised swap rates. Synthetic assets tranche debt like CDOs. DeFi ETFs pool crypto for retail. On-chain compliance aligns with FATF standards.

• 1990s: Financial Engineering [DeFi: expected 2027/8]

  TradFi: REITs enabled retail real estate investment. Credit Default Swap (CDS) hedged credit risk. Structured products, driven by derivative pricing, offered tailored returns. Algorithmic trading. Travel Rule become adopted.
  DeFi: Tokenised real estate mimics REITs. Decentralised CDS might be tricky due to balance sheet requirements. Structured yield products use DeFi derivatives. Algo-bots optimise pools. On-chain AML enforces something that seems similar to Travel Rule.

Beyond the 1990s [DeFi: 2028], DeFi projections become too speculative, so we stop here.

Building Pressure for a Breakthrough

Crypto’s recent growth has been fuelled by consumer speculation, with platforms like pump.fun earning $600M in fees since January 2024. Yet, DeFi’s potential for composable markets and scalable capital is under pressure. Off-chain credit and identity challenges, especially in under-collateralised lending, create barriers. Compliance, identity, and trust gaps hinder anti-fraud and credit screening, delaying progress.

This tension is building toward a pivotal shift. Robust compliance infrastructure like, Keyring's verified markets, is emerging, redirecting focus to on-chain DeFi solutions. The result will be rapid and massive credit adoption, transforming the landscape. As DeFi matures along its historical timeline, it’s ready for a breakthrough.

Also, the rates market is poised to lead TradFi adoption in this new era. Here, DeFidollars (a parallel funding market of stablecoins and crypto-collateral, echoing Eurodollars) enable verifiable lending and borrowing. This marks the first wave of a seismic change which we will explore in our next post.

Embracing a Global Dawn

Crypto’s evolution follows a deterministic path, not by chance but by necessity, like a system optimising for efficiency. Each TradFi milestone: coinage, credit, derivatives, compliance, has a DeFi counterpart, emerging in sequence.

Now, at the compliance stage, crypto can scale to rival global markets. Emerging trust infrastructure is building the foundation for this leap: private identities enable secure access, composable compliance ensures regulatory alignment, and trustless systems unlock institutional capital. Imagine a DeFi ecosystem where a small business secures a loan via a compliant, decentralised platform, or an investor trades tokenised assets with verified identity, all without central intermediaries.

DeFi is not stuck in the 1970s, it’s poised to usher in a global era, redefining finance for the future.