As we enter Q2 of 2025, the decentralized finance (DeFi) sector is rethinking its approach. Smart Chain, it is now focusing on better security infrastructure, user experience, and cross-chain integrations following a brutal first quarter marked by heavy market fluctuations and shifting investor patterns. Recently, industry leaders have been emphasizing that decentralized stablecoins are the key. They further argue that interoperability represents the critical path to a future where DeFi has long-term success and resilience.

Q1 2025: A Quarter of Challenges and Opportunities

The first quarter of 2025 was a transitional time for DeFi, one full of immense potential yet overshadowed by several unfortunate pitfalls. Market volatility and geopolitical security issues led to further dramatic dips in Total Value Locked (TVL) on every leading chain.

The first quarter was challenging due to shifts in market behavior. We had a meme coin surge, especially on Solana and BNB Chain, which spiked interest but also led to a decline in organic on-chain activity by March. In response, we focused on improving the wallet experience to better navigate these fast-changing trends. - Eowyn Chen

Sergej Kunz, co-founder of 1inch, observed the market volatility and the subsequent decline in TVL on major chains, underscoring the need for robust security measures and innovative solutions to maintain user confidence.

Enhanced Security Measures

Security breaches have become a central focus for DeFi platforms. Trust Wallet, along with other wallet platforms, is focusing on building better security infrastructure to help users protect themselves and their assets.

Security is a top priority for us. In 2025, we’re improving threat detection systems, refining smart contract flows, and enhancing MEV protection. We’re also exploring how AI can help with scam detection and real-time risk alerts to further protect users. - Eowyn Chen

1inch is currently further developing 1inch Shield. As the first advanced transaction protection layer globally, it helps improve security across the entire Ethereum ecosystem — protecting these transactions across all DeFi protocols.

We’re developing 1inch Shield, an advanced transaction protection layer. This solution will provide additional security to the ecosystem and help safeguard transactions across various DeFi protocols. - Sergej Kunz

To address any security concerns, the dYdX Foundation recently released its Permissioned Keys feature. This innovation provides institutions with the granular controls to tailor access controls to their environment, increasing operational security while maintaining performance.

Our Permissioned Keys feature gives institutions the flexibility to configure access controls, such as limiting who can withdraw funds or trade specific assets, enhancing operational security while maintaining performance. - Chris Grundy

Cross-Chain Solutions and Interoperability

Zooming out from Cosmos, interoperability is quickly becoming a defining feature for the future potential and expansion of DeFi. Sid Powell, chief executive of decentralized finance firm Maple Finance, pointed out that interoperability these days isn’t an option but a requirement.

Interoperability is no longer just a feature—it’s a necessity. Capital and users are increasingly chain-agnostic, and platforms that can offer seamless cross-chain interactions will have a competitive advantage. - Sid Powell

Eowyn Chen of Trust Wallet put a fine point on why cross-chain access matters. She thinks that’s key to the next stage of DeFi’s expansion. 1inch is expanding its focus beyond Ethereum Virtual Machine (EVM) chains to include non-EVM chains, aiming to open up new ecosystems and user bases.

The volatility in DeFi activity posed a challenge, but we took action by enhancing our security infrastructure and expanding our Fusion+ cross-chain solution. We’re prioritizing safety while improving how we serve users with more secure cross-chain operations. - Eowyn Chen

At Maple Finance, we are building products to cater to this growing demand for interoperability. They are hoping to connect the world of traditional finance (or TradFi) and decentralized finance (DeFi).

The Rise of Decentralized Stablecoins

Decentralized stablecoins are becoming more widely seen as a key component to the long-term stability and success of DeFi. These new stablecoins will deliver the kind of stablecoin counter-cyclical and systemic resilience that’s required in times of systemic shocks. They provide a more transparent option to fiat-backed stablecoins.

Decentralized stablecoins are going to be foundational for DeFi’s long-term success. As the ecosystem matures, they’ll provide the resilience needed during systemic shocks and offer a more transparent alternative to fiat-backed stablecoins. - Sid Powell

According to Sergej Kunz of 1inch, decentralized stablecoins are becoming more essential. They have become essential liquidity providers across chains, creating a more fluid and efficient market. Trust Wallet is focusing on making stablecoin yield access more intuitive, aiming to enhance DeFi interactions without compromising decentralization.

In Q2, we’re working on refining the wallet experience even further, focusing on making stablecoin yield access more intuitive. We’re also exploring gas abstraction technologies, such as 7702, to reduce user friction and enhance DeFi interactions without compromising decentralization. - Eowyn Chen