The Evolution of DeFi: Exploring On-Chain Derivatives and Emerging Market Sectors

As centralized exchanges face growing scrutiny, the crypto and DeFi markets are adapting to meet the changing landscape. On-chain derivatives are emerging as a significant growth sector within decentralized finance (DeFi). This article delves into the evolution of DeFi, highlighting the rise of on-chain derivatives and exploring two promising emerging market sectors: NFTFi and LSDFi.

The Rise of On-Chain Derivatives

The advent of decentralized spot exchanges took place approximately six years ago. While decentralized perpetuals and futures trading are relatively new, they present an exceptional growth opportunity within on-chain derivatives. Market share has steadily shifted from centralized exchanges to decentralized exchanges (DEXs), a trend that gained momentum after the FTX collapse in November last year.

During the meme-coin frenzy this past May, daily trading volume on DEXs, like Uniswap, briefly surpassed that of established centralized exchanges such as Coinbase. The momentum continued as trading volumes on DEXs surged over 400% on June 7, following the Securities and Exchange Commission’s crackdown on Binance and Coinbase.

Despite still holding a relatively small overall market share, Uniswap’s daily trading volume has exceeded that of Coinbase in the past year. Monthly spot volume on DEXs has consistently surpassed $50 billion, a remarkable achievement considering the circumstances.

On-Chain Derivatives in DeFi

In June, futures trading accounted for nearly 80% of the entire crypto market’s trading volume across centralized exchanges. This futures-heavy trend is expected to be replicated in DeFi as on-chain derivatives align perfectly with the market’s evolution. On-chain derivatives offer enhanced liquidity, transparency, and accessibility, making them a preferred choice for DeFi participants.

Emerging Market Sectors

Beyond decentralized derivatives, two emerging market sectors show immense promise: NFTFi and LSDFi.

NFTFi combines the realms of non-fungible tokens (NFTs) and DeFi, enabling investors to rent, borrow, fractionalize, create derivatives, and establish prediction markets based on NFTs. With its strong investment narrative, NFTFi is poised for wider adoption as investors increasingly explore the various functions of NFTs.

LSDFi focuses on leveraging the utility of liquid staking derivative (LSD) tokens, such as Lido Staked ETH (stETH) and Rocket Pool ETH (rETH). Investors can borrow, speculate, and hedge against their LSD tokens within this sector. The popularity of LSDs has grown rapidly, with LSD protocols surpassing DEXs in terms of total value locked (TVL) following Ethereum’s Shapella upgrade.

Innovations and Resiliency in the Crypto Space

Despite facing attacks from bad actors and regulatory challenges, the crypto and DeFi space continues to foster innovation. The constant evolution and resilience of the industry underline its potential for widespread adoption and long-term growth.


This article provides insights tailored for advanced investors within the crypto and DeFi space. If you find the concepts discussed confusing, Nexus offers a range of courses and memberships to help you gain a comprehensive understanding of these topics. By embracing the future of finance and staying ahead of the curve, you can unlock limitless opportunities in the cryptocurrency realm. Join Nexus, where cryptocurrency knowledge meets real-world application, and embark on your journey to master the crypto landscape today.

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