Hybrid Finance Emerges as TradFi and DeFi Converge

The convergence of traditional finance (TradFi) and decentralized finance (DeFi) is gaining momentum, leading to the emergence of hybrid finance. This new market structure is characterized by the integration of settlement infrastructure, tokenization of traditional assets, and on-chain applications with sustainable revenue.

According to a report by CoinShares, prepared in collaboration with Token Terminal, hybrid finance is formed at the intersection of three components: settlement infrastructure capable of servicing real economic activity, tokenization of traditional assets such as treasury bonds, stocks, and commodities, and on-chain applications with sustainable revenue.

The largest sector of hybrid finance remains stablecoins, with a total supply reaching $297.6 billion in the first quarter, increasing by 37.2% year-on-year. Market leaders remain USDT from Tether and USDC from Circle.

Tokenized funds grew by 181% over 12 months to $9 billion, with a significant portion of demand for products backed by short-term US treasury bonds. The capitalization of digitized stocks increased from $27.6 million to $773.3 million, while commodities exceeded $4.9 billion.

On-chain applications and companies are generating the most revenue in hybrid finance, with leading businesses earning $587.9 million in revenue in the first quarter. Issuers form the second level of monetization, with Ethereum settling approximately $180 billion in stablecoins, potentially generating around $7 billion in annual revenue.

The report highlights a structural gap between the economic value serviced by blockchains and the revenue they actually receive. The Hyperliquid case study demonstrates that vertically integrated platforms can derive income directly from user activity, creating pressure on universal networks to move up the stack or integrate more closely with key protocols.