Core Insights - The value of loans on decentralized finance (DeFi) protocols surged 55% in Q3, reaching a record $41 billion, surpassing the previous peak in 2021 by over $4 billion [1] - A decisive shift is occurring from centralized lenders to transparent, automated onchain systems, with DeFi lending applications capturing over 50% of the $74 billion crypto-collateralized lending market, marking their largest share ever [2] Industry Developments - The new Plasma ecosystem, Aave's multi-chain expansion, and the resurgence of institutional platform Maple are identified as key drivers of the lending surge [2] - Traditional trading desks, funds, and corporates are re-entering the market as counterparty risk normalizes and reliable liquidity returns to top-tier borrowers, indicating a fundamental shift from the speculative credit boom of 2021 [3] Notable Performers - Plasma, a new blockchain from Tether's sister firm Bitfinex, has rapidly risen to become the eighth-largest blockchain by DeFi deposits, aiming to attract users from unstable local currencies [4] - Investors have borrowed over $3 billion on Plasma in the last five weeks, with Aave capturing nearly 70% of all borrows, making Plasma Aave's second-largest deployment [5] Market Strategies - Aave's v3 markets have seen significant expansion across new layer 2s, with investor deposits recovering as risk parameters were relaxed and demand for stablecoins and blue-chip collateral surged [7] - A basic looping strategy involves depositing a cryptocurrency and borrowing another asset against that deposit, which has contributed to Aave's resurgence after a period of stagnant growth [6]