Decentralised finance produced enormous activity, a series of catastrophic failures, and a small residue of things that kept functioning through all of it. The residue is worth identifying.
What kept working
Automated exchange. Pools of two assets with an algorithm setting the price between them, letting anyone swap without a counterparty. Simple, well understood, and functioning continuously through multiple market collapses.
Overcollateralised lending. Deposit more value than you borrow, get liquidated automatically if the collateral falls. Restrictive, unglamorous, and it has never suffered the failure mode that destroyed the alternatives.
What failed repeatedly
Algorithmic stablecoins, maintaining a peg through mechanism rather than reserves. Each generation worked until confidence broke, then unwound completely and quickly. The failure mode is inherent to the design.
Yield products offering returns with no visible source. In every examined case the source was either new deposits or undisclosed risk.
Complex layered products, where each layer was individually sound and the combination had failure modes nobody had modelled.
The pattern
Simple mechanisms with visible risk survived. Complex mechanisms with hidden risk did not. That is not a crypto lesson; it is a finance lesson that gets relearned every generation.
The unsolved problem
Code is law until the code has a bug. Hundreds of millions have been lost to smart contract vulnerabilities, and there is no recourse. Audits help and do not guarantee.
Where it goes
Towards the boring parts, used as infrastructure by regulated institutions who want the settlement properties without the ideology. Which is a strange destination for a movement that defined itself against those institutions.