If you expected 2025 to be the year of the “user-owner” utopia, I have a bridge in the Metaverse to sell you. The dream of the 2020 DeFi Summer—where every token holder would be a mini-sovereign voting on every protocol tweak—is effectively dead. According to the latest “State of DeFi” report from DL News and DefiLlama, Decentralized Autonomous Organizations (DAOs) haven’t just gotten quieter; they’ve professionalized. Or, if you’re a purist, they’ve been captured.
The numbers are stark. Across the heavy hitters—Aave, Lido, Uniswap, Arbitrum, Balancer, and Frax—proposal volume didn’t just dip; it cratered, falling between 60% and 90% year-over-year. For those of us who survived the 2017 ICO madness and the 2022 leverage-induced apocalypse, this feels familiar. It’s the transition from a chaotic “movement” to a buttoned-up industry. The era of the “retail voter” is being replaced by the era of the “professional delegate.”
The Ghost Towns of Governance
In 2024, DAO governance was supposedly at a high-water mark. In 2025, the “State of DeFi” report suggests that the average token holder has finally realized that reading 50-page governance proposals on forum threads is, frankly, boring and unpaid work. Median voter participation fell at almost every major protocol analyzed, with the notable exception of Lido, which had to fundamentally rewrite its rules to keep people engaged.
But here is the twist: while the number of individual voters is shrinking, the total number of votes cast is actually rising. This isn’t a paradox; it’s the rise of the delegate class. Small fish are tired of the gas fees and the homework, so they are handing their voting power to “elected representatives”—protocol-aligned funds, professional delegates, and whales. It’s starting to look a lot like a corporate board of directors, just with more hoodies and fewer SEC filings.
- Capture Risk: When a small group of professional delegates controls the majority of the voting power, the “decentralized” part of DAO becomes a marketing term rather than a technical reality.
- Institutional Predictability: On the flip side, institutions love this. A small group of rational, professional actors is far more predictable than a chaotic mob of retail speculators. This “operational coherence” is what big money needs before it enters the pool.
- Minority Irrelevance: If you hold $1,000 worth of a governance token, your voice in 2025 is essentially non-existent. You are along for the ride, not driving the car.
The Dividend Era: Buybacks are the New Black
For years, the industry danced around the “S-word”—securities. During the Biden administration, Gary Gensler’s SEC made it clear that any token that looked, smelled, or acted like a dividend-paying stock was going to get a subpoena. Consequently, governance tokens became “valueless governance stickers”—assets that gave you the “right” to vote on code updates but no right to the protocol’s massive cash flows.
In 2025, the gloves are off. The share of protocols sharing revenue with token holders has tripled, jumping from 5% to 15%. Heavyweights like Aave and Lido have already moved forward with buyback programs. This shift is largely thanks to a 180-degree turn in US policy. With the current administration dropping investigations and lawmakers pushing bills to treat most tokens as commodities, the fear of “security” classification is fading into the background.
This is a massive shift in market psychology. We are moving away from speculative “ponzynomics” and toward traditional value metrics. When a protocol like Hyperliquid or Aave generates millions in fees and actually uses those fees to buy back tokens or reward holders, they start to look less like “crypto experiments” and more like high-margin fintech companies. For the cynical trader, this is the first time in years that “fundamental analysis” actually means something in crypto.
The Infrastructure Flip: Apps Eat the Layer 1s
One of the most profound technical shifts highlighted in the report is the changing relationship between applications and the blockchains they run on. Back in 2021, the blockchains (the “toll roads”) were the ones getting rich. They captured 54% of all user fees, while the apps captured only 34%. Ethereum was expensive, slow, and lucrative for its validators.
Fast forward to 2025: the script has flipped. Applications now capture a massive 66% of all fees, while blockchains have seen their share shrink to just 19%. This is the direct result of the scaling wars. With Ethereum transaction costs down 86% since 2021—largely due to Layer 2 adoption and scaling upgrades—the “base layer” has become a cheap commodity. The real value is being captured at the app level.
- Perpetual Dominance: Four perpetual exchanges, including Hyperliquid, now account for 7.5% of all DeFi fees. Their revenue is remarkably resilient, staying steady regardless of whether the market is pumping or dumping.
- The DEX Volatility Trap: Unlike perps, decentralized exchanges (DEXs) are still slaves to market volatility. When the market goes quiet, DEX fees dry up. When people gamble on perps, the house wins either way.
- Stablecoin Supremacy: Tether and Circle remain the undisputed kings, capturing 72% of all fees between them. They aren’t just protocols; they are the liquidity foundation of the entire ecosystem.
A Reality Check on the “Fairness” of the Future
While the diversification of revenue is a positive sign—the top 10 protocols now capture 60% of fees compared to the top six capturing 70% last year—the “wealth gap” in DeFi remains cavernous. The top 20 protocols still take 80% of the pie. We are seeing the formation of a “DeFi Aristocracy.”
Is this the future we were promised? Probably not. The vision was a flat, democratic system where everyone had a say. The reality of 2025 is a tiered system of professional delegates and high-margin financial applications that look increasingly like the Wall Street firms they were meant to replace. But from a trader’s perspective, this is the most “mature” the market has ever been. The fees are real, the revenue sharing is back, and the technical barriers to entry (gas fees) have been decimated.
The risk, of course, is that we’ve traded one set of middlemen for another. Instead of a bank CEO, you have a DAO delegate who controls 15% of the voting power. Instead of a clearinghouse, you have a perpetual exchange that captures more fees than the blockchain it sits on. It’s more efficient, sure. It’s cheaper, definitely. But don’t mistake this “State of DeFi” for a victory for the little guy. This is the institutionalization of the frontier, and the frontier is starting to look a lot like a boardroom.
Disclaimer: This analysis is for informational purposes only and does not constitute financial advice. The crypto market remains highly volatile and subject to rapid regulatory changes.
