The Rise of Tokenized Collateral in DeFi Lending Markets

Decentralized finance is shrinking almost everywhere except in one corner: the growing pile of tokenized real-world assets sitting inside lending platforms as collateral. Between the second quarter of 2025 and the second quarter of 2026, total DeFi deposits fell by about 15%. Over that same period, deposits of tokenized real-world assets, or RWAs, more than tripled, climbing from $2.3 billion to $7.4 billion.

The figures come from The Growth of Hybrid Finance, a joint report published by asset manager CoinShares and on-chain data provider Token Terminal. It is the second such report from the pair, and it points to a market that is quietly splitting in two: a legacy DeFi sector built on crypto-native collateral that keeps contracting, and a newer segment built on tokenized treasuries, equities, and commodities that keeps growing.

A Shrinking Market With One Growing Corner

The divergence shows up clearly once trading activity is broken out. Aggregate spot volumes on decentralized exchanges fell by around 70% over the year covered by the report, while spot trading volumes in tokenized real-world assets rose by roughly 220%. On perpetual futures venues, both trading volumes and open interest in RWAs kept climbing straight through a broader slowdown that began in October 2025. RWA positions now make up more than a quarter of on-chain perpetuals open interest, a share that would have looked implausible two years ago.

The assets driving this activity are not exotic. According to the report, the most in-demand underlying instruments include oil, precious metals, stock indices, and shares in technology and semiconductor companies, traded through venues such as tradeXYZ within the Hyperliquid ecosystem, where volume has grown roughly 20-fold since launch.

Ethereum Still Dominates, But Newer Chains Are Catching Up

Ethereum hosts almost 70% of all real-world asset collateral deposited across DeFi lending platforms, the report shows, a reflection of the network's deep liquidity and the trust institutions have built in it over several years. That concentration is a basic feature of how DeFi collateral markets work: borrowers gravitate toward venues with deep liquidity, and lenders deploy capital where borrowing demand already exists. Newer blockchains are left competing to build both liquidity and trust from scratch, a much slower process.

Plasma and Solana Are Closing the Gap

Plasma, a newer network built around Aave's expansion beyond Ethereum, has become the second-largest ecosystem for real-world asset collateral. Solana's growth in the same category has been driven largely by Kamino, a lending platform built specifically to handle these assets. Investors looking for exposure to the blockchains underpinning this shift have started paying closer attention to products tracking these networks, including the low-fee Ether and Solana ETFs Morgan Stanley launched earlier this year.

Deposits across the sector remain concentrated on three platforms in particular: Aave, Morpho, and Kamino. That narrow concentration mirrors an earlier stage in the growth of stablecoins, where liquidity and trust also pooled around a small number of platforms before spreading more widely. A previously covered report on how stablecoins became the internet's settlement layer, a parallel that helps explain why RWA collateral is following a similar path toward concentration before eventual diversification.

Revenue Has Not Caught Up With Deposits

Growth in deposits and trading volume has not yet translated into growth in revenue for the applications hosting this activity. Revenues at lending and trading DeFi applications declined between the second quarter of 2025 and the same period in 2026, even as RWA deposits and trading volumes climbed. The report describes this as an early stage of adoption, where capital is flowing in faster than platforms can monetize it.

Hyperliquid stands out as the exception. It remained the largest platform by revenue among those reviewed in the report, a position the authors linked to high trading activity and to the fact that the platform earns revenue from both its exchange and its own settlement infrastructure, rather than from trading fees alone.

Yields across the products reviewed in the report ranged from about 3.2% to 5.5%, broadly in line with what investors could earn from short-term government debt over the same period, though yields vary by platform, asset type, and risk profile.

What the Split Says About DeFi's Next Phase

The pattern in this data suggests DeFi's growth is no longer coming from where it used to. Crypto-native lending and trading, the activity that defined the sector's earlier boom cycles, is contracting. What is expanding instead is the segment built around assets that already exist in traditional markets, wrapped in a blockchain-native format that makes them easier to move, post as collateral, and trade around the clock.

That does not mean legacy DeFi disappears. It means the growth story for the next phase of the sector is increasingly a story about how much of traditional finance's asset base migrates on-chain, and how quickly platforms can turn that migration into sustainable revenue rather than just deposits sitting on a balance sheet.