What is the DeFi Trinity?
The “DeFi Trinity” framework, pioneered by Sam Kazemian and successfully implemented by Frax Finance, offers DeFi builders a blueprint for creating a scalable and vertically integrated ecosystem through three key primitives:
- Stablecoins
- Decentralized exchanges
- Lending protocols
This framework can also be expanded horizontally across multiple blockchains, further enhancing interoperability with native dApps and assets in these ecosystems.
“There’s no difference between currency, liquidity, and lending. They’re all different parts of the same thing. That’s what the DeFi Trinity ultimately is” ~Sam Kazemian, Frax’s Co-founder.
1. Stablecoins
Stablecoins have become a cornerstone in DeFi. They provide non-volatile on-chain mediums for liquidity, value storage, instant settlement, and yield generation. As of Q2 ‘25, the US Dollar is both the world’s dominant reserve currency and stablecoin denomination, with more than $200 billion in USD-pegged stablecoin supplies—over 95% of the total market. Therefore, integrating USD stablecoins is critical for DeFi projects to attract users and TVL.
2. Decentralized Exchanges
DEXs enable digital asset trading through on-chain mechanisms, such as permissionless liquidity pools powered by AMMs. These pools can pair various tokens with stablecoins to facilitate low-slippage swaps and efficient price discovery. LPs who supply tokens/stablecoins to liquidity pools can earn swap fees and other incentives in return. DEXs also play an important role in supporting collateral liquidations for lending protocols, enabling composability and liquidity for advanced market operations.
3. Lending Protocols
Lending protocols are decentralized money markets where borrowers can obtain loans, often in stablecoins, against their digital assets. These protocols connect lenders who seek interest earnings on their capital with borrowers seeking liquidity or leverage. This creates a dynamic and trustless credit market secured by on-chain collateral, enabling more capital efficiency and yield opportunities. Similar to banks in TradFi, lending protocols also produce a money multiplier effect within a DeFi ecosystem via recursive lending, or “relending,” boosting overall economic activities and growth through credit expansion.
Learn more about Frax’s DeFi Trinity framework.