Crypto analyst Tanaka says DeFi's next rally will reward strong protocols with real products, steady revenue, and lasting user demand—not just token incentives.
After spending much of the last market cycle in the shadows, DeFi blue chips could finally be preparing for a comeback. Crypto analyst Tanaka says the sector is entering a new phase where only protocols with real products, sustainable revenue, and strong user demand are likely to outperform.
Unlike the 2021 DeFi boom, where almost every protocol rallied because of liquidity mining rewards, Tanaka says the next cycle will be much more selective.
His focus remains on established names like Aave (AAVE), Uniswap (UNI), Sky (formerly MakerDAO), Curve (CRV), Lido (LDO), and Pendle (PENDLE).
According to Tanaka, several trends are starting to support the DeFi sector.
The first is liquidity slowly rotating back into Ethereum, which remains the home of most major DeFi applications.
Second, the rapid growth of stablecoins and real-world assets (RWAs) is increasing on-chain activity. As more money moves through blockchain-based lending, trading, and asset management platforms, demand for established DeFi protocols could continue growing.
Third, decentralized finance is gradually winning back users from centralized exchanges in areas like lending and perpetual futures trading.
Tanaka also points to discussions around fee switches, token buybacks, and token burns, which could allow protocols to share more value with token holders.
Finally, many DeFi projects are improving their tokenomics, reducing what he calls the "governance-only discount" that has weighed on many DeFi tokens for years.
Tanaka says the biggest difference between today's market and the previous DeFi cycle is that investors are no longer chasing token rewards alone.
Instead, the focus is shifting toward protocols that generate steady revenue from products that people actually use rather than paying high incentives to attract temporary liquidity.
As he puts it, "The market won't pump everything just because it's DeFi season." Projects with strong product-market fit are likely to stand out this time.
Tanaka says the strongest protocols are those that sit at the center of DeFi's core services.
For lending, he highlights Aave (AAVE). For decentralized trading, Uniswap (UNI) remains one of the leaders. Sky (SKY) continues to play a key role in stablecoin infrastructure, while Lido (LDO) remains the largest liquid staking protocol.
He also points to several newer projects that are already generating healthy fee revenue. These include Hyperliquid (HYPE) for on-chain perpetual trading; Jupiter (JUP) as Solana's trading hub; Kamino (KMNO) for Solana lending; Morpho (MORPHO) for permissionless lending; Ondo Finance (ONDO) for tokenized real-world assets; and Ethena (ENA) for stable yield products.
Rather than looking only at total value locked (TVL), Tanaka says investors should pay closer attention to where protocol revenue comes from.
The strongest income sources include borrowing interest, liquidation fees, trading fees, staking commissions, stablecoin revenue, and vault management fees.
At the same time, he warns that high revenue alone doesn't always mean a project is healthy. Some protocols still depend heavily on token rewards, leveraged trading, or short-term incentives to keep users engaged.
For Tanaka, the real test begins when token incentives slow down.
He says investors should watch whether protocols can keep users without constant airdrops, maintain liquidity after rewards are reduced, generate revenue during weaker markets, operate securely, and continue creating value for token holders.
According to Tanaka, the next DeFi winners won't necessarily be the ones offering the highest APY. Instead, they will be the protocols people continue using long after the rewards disappear, showing that real demand, not incentives, is what builds long-term value.
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