In some ways, DeFi still feels like a solution in search of a problem. For most people, it doesn't serve a real-world use case yet. Which is why it's primarily used as a buzzword to peddle scam tokens and fleece the gullible at the moment. Conceptually, it's a fine idea, but I'm certain there's a long road ahead before people really need this technology. I wouldn't say it has "failed", just that it hasn't discovered its true purpose yet.
Exactly, for something to be implemented I'd like to see a problem that its directly correcting, or that it increases the quality of life of using Bitcoin. Smart contracts although being a good idea, aren't particularly useful for a majority of people. They have specific use cases, which are beneficial, but for anything to be successful it needs to be accessible to the general audience, and usable for them too. Complicating something, which many are never going to have a use for, could be detrimental to the adoption of Bitcoin. It also, doesn't mean something like DeFi will not be implemented in the future, but right now I don't see any glaring issues that it fixes.