The Five Most Influential Decentralized Finance (DeFi) Initiatives on Avalanche to Watch in 2025

The potential to revolutionize the conventional banking sector has positioned Decentralized Finance (DeFi) as an exciting realm for both investments and groundbreaking ideas. 

Over time, DeFi projects have surged in popularity, with numerous blockchain networks such as Ethereum and Solana hosting these initiatives, each offering distinct functionalities. 

Avalanche has emerged as a prominent DeFi hub in 2025, showcasing a variety of notable projects. Here are five that stand out:

GMX

GMX operates as a decentralized marketplace for cryptocurrencies, specializing in perpetual futures contracts.

What sets GMX apart is its model that allows liquidity providers to earn a share of the exchange’s trading fees, resulting in attractive yields.

Unlike conventional DEX frameworks that rely on dual token pools, GMX uses a single liquidity pool composed of half stablecoins and half various cryptocurrencies like ETH and BTC. All traders on the platform utilize this pool, supported by accurate pricing data from Chainlink oracles.

GMX features two tokens: GMX, which serves as both a utility and governance token, empowering holders to vote on governance matters and earn 30% of platform fees as an incentive. Those who stake their GMX can receive a secondary token, GLP, which grants them 70% of the fees.

GMX Advantages

High leverage

With GMX, users have the opportunity to leverage their trades up to 50x, which stands out even among its competitors.

Multi-chain compatibility

In addition to Avalanche, GMX operates on Arbitrum, offering quick and cost-effective transactions compared to other decentralized exchanges.

Single liquidity pool

GMX has shifted away from the typical dual pool design of DEXs, opting instead for a unified liquidity pool. 

Trader Joe

Taking a page from Uniswap, Trader Joe DEX has embraced Automated Market Maker (AMM) architecture, greatly simplifying the process for users to swap between different Avalanche tokens.  Trader Joe not only provides basic trading services but also offers advanced DeFi functionalities like yield farming, allowing JOE token holders and liquidity providers to earn additional rewards.

Besides its role as a trading medium, JOE gives its holders governance rights, enabling them to participate in important platform decisions.

Another interesting aspect is the Liquidity Book structure. This model employs a “bin” system to categorize price ranges, enabling liquidity providers to strategically select where to allocate their assets for optimal earnings instead of diffusing them across an endless spectrum. 

Trader Joe Advantages

Liquidity Book Model

The Liquidity Book empowers liquidity providers to maximize the efficiency of their staked funds, focusing on profitable price ranges.

Minimal slippage

By consolidating liquidity at predetermined intervals, the platform minimizes slippage on trades, ensuring minimal price impact. This feature is particularly beneficial for institutional traders and large-scale investors.

LayerZero partnership

The collaboration with this omnichain protocol allows traders to leverage JOE tokens across multiple blockchain networks.

Stargate

In terms of enhancing liquidity flow across various network layers, Stargate Finance has emerged as a significant player in the DeFi ecosystem. Similar to many DeFi projects, STG serves as both a utility and governance token, endowing holders with voting rights and staking incentives.

Stargate takes a unique approach to the ‘bridging trilemma’ via its innovative Delta Algorithm, which supports native assets, consolidates liquidity, and enables immediate transaction finality.

The operational backbone of Stargate Finance lies in its utilization of Layer Zero technology, a system designed to facilitate safe and quick cross-chain interactions. This foundational layer enables direct communication between diverse blockchain networks with minimal trust requirements. Thanks to this technology, Stargate Finance can achieve unparalleled speed and connectivity. 

Stargate Advantages

Cross-chain pools

Utilizing these pools allows users to store assets on one blockchain and seamlessly transfer them to another without engaging in complex and often costly bridging processes.

Layer Zero security

The Layer Zero technology empowers Stargate to enhance security and decentralization by distributing trust across multiple chains, reducing vulnerability to any single point of failure.

Instant Guaranteed Finality

To protect against liquidity or token compatibility issues that might lead to bridging disruptions, the platform ensures it rejects swap orders lacking adequate reserves. 

BENQI

BENQI is making waves by facilitating lending and liquid staking, enabling users to earn returns on their assets, solidifying its position as one of the top projects on Avalanche. 

The native utility token of BENQI, QI, yields staking rewards for its holders. Users can also stake QI in the liquid pool to earn veQI, the governance token, which allows them to play a role in shaping the future of the platform.

What makes the liquidity pool particularly intriguing is its integration of the best elements from both order book and AMM systems. This approach minimizes slippage and ensures optimal liquidity for trading higher-value assets. 

With the introduction of the BENQI Liquid Staking (BLS) solution, users can stake AVAX and receive a yield-bearing token known as sAVAX, which generates returns from Avalanche validator rewards. Anyone can leverage sAVAX across any DeFi application or trade it with others.

BENQI Advantages

Multi-chain interoperability

This platform stands at the forefront of interoperability solutions, enabling QI token holders to utilize their assets across different chains, thereby enhancing the utility and accessibility of their holdings.

Composability

BENQI operates under the principle of composability, empowering users to craft sophisticated financial tools by integrating various protocols. Owning QI tokens grants access to a flexible segment of the DeFi landscape, allowing users to expand their earning potentials and maintain control over their assets by weaving QI into their DeFi strategies. 

Democratic delegation

Thanks to veQI, users have the authority to endorse specific Avalanche validators with additional delegations, and they can vote on how much AVAX from the liquid staking pool is allocated to each validator.

WOOFi

The final standout project in the DeFi sphere is WOOFi, which innovatively utilizes synthetic assets and sophisticated pricing algorithms. The platform offers an enjoyable trading experience, appealing to both novice and expert traders, with minimal slippage and tight spreads.

WOOFi’s standout feature lies in its Synthetic Proactive Market Making (sPMM) algorithm, which is complemented by high-frequency on-chain oracles provided by WOOFi. This synergy enables experienced market makers to effectively model spreads and pricing akin to centralized exchanges.

Moreover, WOOFi distinguishes itself with its Supercharger Vaults, where users stake tokens to grant the sPMM pool manager control over liquidity. This structure allows users to only risk the tokens they deposit, freeing them from concerns over temporary losses. 

WOOFi Advantages

dApp rebates

As the sole decentralized exchange that offers dApp rebates, WOOFi rewards brokers with 20% of swap fees in stablecoins, incentivizing them to direct trades to the platform.

Multiplier Points (MP)

Much like GMX, this reward structure promotes long-term staking, offering 30% rewards for users. For instance, staking 300 WOO can yield around 100 MP tokens. 

Capital efficiency

When contrasted with traditional AMMs, WOOFi not only excels in execution quality but also operates with a significantly lower Total Value Locked (TVL), enabling traders to optimize the use of their capital.