DeFi's Walled Gardens: Centralized Protocols Erode Decentralization

The decentralized finance (DeFi) space has taken a significant turn from its initial promise of open, permissionless, and community-driven protocols. Instead, major ecosystems have shifted towards 'walled gardens' that prioritize efficiency for users at the cost of decentralization.

Protocols like Hyperliquid, Aave, and Polygon initially sold a vision of community-first tokenomics, but instead of sharing protocol fees with the public, they now hoard yield. For example, Hyperliquid funnels 99% of its trading fees into an internal Assistance Fund, creating a 'self-sustaining buyback engine' that keeps capital encased.

Aave has also started to funnel 100% of product revenue directly into the DAO treasury, generating $907 million in annualized revenue in 2025. This shift towards centralized models has led to 'structural walled gardens' with rigid ecosystems and a lack of external access.