Top DeFi Cryptocurrencies to Watch in 2026: Why This Undervalued Project Could Outperform XRP and ADA

The DeFi landscape in 2025 has been a tale of two extremes: institutional-grade innovation and retail participation retrenchment. While total value locked (TVL) in DeFi contracts fell by 20.8% in November 2025 due to stablecoin de-pegs and hacks, the underlying infrastructure of Ethereum and Solana continued to dominate. XRP and ADA, meanwhile, have shown mixed signals-XRP's resurgence in cross-border payments and ADA's DeFi TVL growth-yet neither has fully capitalized on the DeFi renaissance. As we look ahead to 2026, the real opportunity lies in undervalued projects like Algorand (ALGO) and Hedera (HBAR), which are outpacing XRP and ADA in on-chain metrics and ecosystem adoption.

The DeFi Contraction and the Rise of Infrastructure Leaders

DeFi's TVL in 2025 hit $237 billion, but daily active wallets dropped 22% year-over-year, signaling a shift from retail speculation to institutional-grade utility. Ethereum maintained 49% of DeFi TVL ($119 billion), but its share declined as Layer 2 solutions like Optimism and Arbitrum absorbed 60% of scaling activity. Solana, with its 65,000 TPS architecture, emerged as a challenger, though its TVL ($13.8 billion) fell 33% due to memecoin fatigue.

XRP and ADA, however, lagged in DeFi metrics. XRP's TVL data remains opaque, but its RippleNet transaction throughput surged 250% in 2025, driven by CBDC partnerships. ADA's DeFi TVL rose 28.7% to $423.5 million in Q3 2025, yet its DApp activity-daily unique wallets-declined 22.4% quarter-over-quarter. This divergence highlights a critical trend: institutional liquidity is flowing into DeFi, but retail engagement is waning.

Why Algorand and Hedera Are Outpacing XRP and ADA

Algorand and Hedera have quietly built ecosystems that align with 2026's DeFi priorities: scalability, institutional adoption, and cross-chain interoperability.

Algorand (ALGO): The Carbon-Negative DeFi Powerhouse

Algorand's Q3 2025 TVL grew 15.5% to $69.1 million, driven by Folks Finance's 27.8% TVL increase. Its xGov framework, launched in August 2025, decentralized funding decisions and attracted institutional investors.

By 2025, Algorand's TVL surged 141% year-over-year to $208 million, outpacing ADA's 28.7% growth.

Algorand's carbon-negative footprint and sub-4-second transaction times position it as a green alternative to energy-intensive blockchains. Its partnerships with governments (e.g., India's UPI integration) and institutions (e.g., Fidelity Digital Assets) further solidify its appeal. In contrast, XRP's regulatory uncertainty and ADA's fragmented DApp ecosystem leave them vulnerable to competition.

Hedera (HBAR): Enterprise-Grade DeFi at Scale

Hedera's DeFi TVL exploded 53.4% QoQ to $113.5 million in Q3 2025, fueled by SaucerSwap's dominance in DEX liquidity. By October 2025, its TVL hit $208 million-a 141% YoY increase. Hedera's hashgraph consensus algorithm enables 3–5 second finality and minimal fees, making it ideal for enterprise use cases like supply chain management and tokenized assets.

HBAR's 297% YoY price surge reflects its adoption by Fortune 500 companies, including IBM and Google, which use Hedera for digital identity and asset tokenization. XRP, despite its 343% YoY gain, lacks the enterprise-grade infrastructure to match Hedera's institutional traction.

The XRP and ADA Dilemma: Strong Fundamentals, Weak Execution

XRP's 250% surge in RippleNet throughput underscores its role in cross-border payments, but its DeFi TVL remains unmeasured. ADA's 28.7% TVL growth is impressive, yet its DApp ecosystem-reliant on AI and SocialFi-has seen a 38% QoQ drop in DEX volumes. Both projects face headwinds from regulatory scrutiny and fragmented developer communities.

In contrast, Algorand and Hedera have prioritized technical robustness and ecosystem governance. Algorand's xGov framework and Hedera's hashgraph address scalability and decentralization, two pain points that have hindered XRP and ADA's DeFi adoption.

2026 Outlook: The Undervalued Projects to Watch

As DeFi enters 2026, the focus will shift from TVL to real-world utility and cross-chain interoperability. Algorand and Hedera are already ahead of the curve:
- Algorand plans to integrate with Ethereum's Layer 2 solutions, enabling seamless cross-chain DeFi.
- Hedera is expanding its tokenization capabilities, targeting $1 billion in tokenized assets by 2026.

XRP and ADA, while foundational in their niches, lack the infrastructure to compete with these undervalued leaders. For investors seeking 2026's next DeFi breakout, Algorand and Hedera offer a compelling case-backed by TVL growth, institutional adoption, and technical innovation.