Trumponomics #8: Finding On-Chain Certainty in the Chaos of “Trumponomics”: Analyzing Three Types of Yield-Bearing Crypto Assets | by OKG Research | The Capital | Apr, 2025

Since the Federal Reserve began its interest rate hike cycle in 2022, the concept of “on-chain interest rates” has gradually entered the mainstream. Faced with a risk-free rate of 4–5% in the real world, crypto investors have started reexamining the yield sources and risk structures of on-chain assets. A new narrative has quietly emerged — yield-bearing crypto assets — that seeks to create financial products on-chain to “compete with the macro interest rate environment.”

However, the yield sources of these assets vary widely. From cash flows generated by the protocol itself to yields based on external incentives, and even the incorporation of off-chain interest rate systems, the underlying structures reflect vastly different sustainability and risk pricing mechanisms. We can roughly categorize yield-bearing assets in decentralized applications (DApps) into three types: exogenous yields, endogenous yields, and those linked to real-world assets (RWA).

The rise of exogenous yields is a reflection of the early growth logic of DeFi — where, in the absence of mature user demand and real cash flow, the market substituted with “incentive illusions.” Much like early shared ride platforms that used subsidies to attract users, after Compound introduced “liquidity mining,” ecosystems like SushiSwap, Balancer, Curve, Avalanche, and Arbitrum launched massive token incentives to buy user attention and locked assets.

However, these subsidies are essentially short-term operations where capital markets pay for growth metrics, rather than a sustainable revenue model. They became the standard for the cold startup of new protocols — whether Layer 2, modular blockchains, or LSDfi and SocialFi — the incentive logic is the same: relying on new funds or token inflation, resembling a “Ponzi” structure. Platforms use high returns to attract deposits, then delay payout through complex “unlocking rules.” Those annualized yields of hundreds or thousands of percent were often just tokens “printed” by the platform.

The Terra collapse in 2022 was a prime example: the ecosystem offered up to 20% annual returns on UST stablecoin deposits through the Anchor protocol, attracting many users. The returns were primarily dependent on external subsidies (Luna Foundation Reserve and token rewards), not real income from the ecosystem.

From historical experience, once external incentives diminish, large amounts of subsidized tokens are sold, damaging user confidence, often leading to a downward spiral in TVL (Total Value Locked) and token prices. According to Dune data, following the DeFi Summer of 2022, approximately 30% of DeFi projects saw their market value drop by over 90%, often due to excessive subsidies.

If investors are to find “stable cash flows,” they must be cautious about whether a real value creation mechanism exists behind the yields. Promising future inflation to pay today’s returns is ultimately not a sustainable business model.

Simply put, protocols generate income through “real activities” and then redistribute that income to users. They do not rely on issuing tokens to attract users, nor do they depend on subsidies or external injections of capital. Instead, they earn revenue through actual business activities such as lending interest, transaction fees, or penalties from default liquidations. These income streams are somewhat similar to “dividends” in traditional finance, and are often referred to as “dividend-like” crypto cash flows.

The key feature of this type of yield is its closed-loop and sustainability: the logic of generating income is clear, and the structure is healthier. As long as the protocol is operational and has users, it will generate revenue without relying on market hot money or inflation incentives to maintain operations.

Therefore, understanding how a protocol “creates value” allows for a more accurate judgment of the certainty of its yields. We can categorize this type of income into three main archetypes:

1. Lending Spread Model: This is one of the most common and easily understood models in early DeFi. Users deposit funds into lending protocols like Aave or Compound, which match borrowers with lenders. The protocol earns the spread between borrowing and lending rates. This is essentially the same as the “deposit-loan” model in traditional banks — interest from borrowers is partially distributed to lenders as revenue. This mechanism is transparent and efficient, but its yield is closely tied to market sentiment. When overall risk appetite declines or market liquidity shrinks, interest rates and yields also tend to fall.
2. Fee-sharing Model: This yield mechanism is closer to a profit-sharing structure in traditional companies, where shareholders or specific partners receive returns based on revenue distribution. In this framework, the protocol shares part of its operating income (such as transaction fees) with users who provide resources to support the protocol, such as liquidity providers (LPs) or token stakers.

For example, decentralized exchanges like Uniswap distribute a portion of the transaction fees to users who provide liquidity. In 2024, Aave V3 on Ethereum’s mainnet provided an annualized return of 5%-8% for stablecoin liquidity pools, while AAVE stakers could earn over 10% annualized returns during certain periods. These revenues come entirely from the protocol’s internal economic activities, such as lending interest and transaction fees, without relying on external subsidies.

Compared to the “lending spread” model, the “fee-sharing” model is highly dependent on the protocol’s market activity. In other words, its returns are directly tied to the protocol’s business volume — the more trades, the higher the rewards; the fewer trades, the lower the income. Therefore, its stability and ability to withstand cyclical risks are often not as robust as the lending model.

3. Protocol Service Model: This is the most structurally innovative type of endogenous income in crypto finance, with logic similar to how traditional infrastructure service providers charge clients for key services.

For example, EigenLayer uses a “re-staking” mechanism to provide security support for other systems and receives compensation for doing so. This yield does not rely on lending interest or transaction fees but is derived from the market pricing of the protocol’s service capabilities. It reflects the market value of blockchain infrastructure as a “public good.” These returns are more diverse and may include token rewards, governance rights, and even future unrealized returns, showcasing strong structural innovation and long-term potential.

In traditional industries, this can be compared to cloud service providers (like AWS) charging enterprises for computing and security services, or financial infrastructure institutions (such as custodians, clearinghouses, and rating agencies) providing trust guarantees for systems and earning revenue. These services may not directly participate in end-user transactions but are essential to the overall system’s functioning.

On-Chain Real Interest Rates: The Rise of RWA and Interest-Bearing Stablecoins

More and more capital in the market is now seeking a more stable and predictable return mechanism: on-chain assets anchored to real-world interest rates. The core logic behind this is to link on-chain stablecoins or crypto assets to off-chain low-risk financial instruments, such as short-term government bonds, money market funds, or institutional credit, thus maintaining the flexibility of crypto assets while obtaining “certainty in interest rates from the traditional financial world.” Representative projects include MakerDAO’s allocation to T-Bills, Ondo Finance’s launch of OUSG (linked to BlackRock ETFs), Matrixdock’s SBTB, and Franklin Templeton’s tokenized money market fund FOBXX. These protocols attempt to “import” the Federal Reserve’s benchmark interest rates onto the blockchain as a foundational yield structure. This means that:

At the same time, interest-bearing stablecoins, as a derivative form of RWA, have also started to take center stage. Unlike traditional stablecoins, these assets are not passively pegged to the dollar but actively embed off-chain yields into the tokens themselves. Typical examples include Mountain Protocol’s USDM and Ondo Finance’s USDY, which provide daily interest and derive their yield from short-term government bonds. By investing in U.S. Treasury bills, USDY offers users a stable return, with an interest rate close to 4%, which is much higher than the 0.5% rate of traditional savings accounts.

These projects aim to reshape the logic of using the “digital dollar,” making it more like an on-chain “interest-bearing account.”

With the connectivity of RWA, RWA+PayFi is also a future scenario worth watching: directly embedding stable yield assets into payment tools, thus breaking the binary division between “assets” and “liquidity.” On the one hand, users can enjoy interest-bearing returns while holding cryptocurrencies, and on the other hand, payment scenarios do not need to sacrifice capital efficiency. Products like the USDC automatic yield account on Coinbase’s Base L2 (similar to a “USDC as a checking account”) not only increase the attractiveness of cryptocurrency in actual transactions but also open up new use cases for stablecoins — transforming them from “dollars in an account” to “capital in active circulation.”

The evolution of crypto “yield-bearing assets” reflects the market’s gradual return to rationality and a redefinition of “sustainable returns.” Initially driven by high inflation incentives and governance token subsidies, many protocols now focus on self-sustaining mechanisms and integrating off-chain yield curves. The design is moving away from a “capital-chasing” phase, towards more transparent and refined risk pricing. Especially with macro interest rates remaining high, crypto systems aiming to compete in the global capital market must build stronger “return rationality” and “liquidity matching logic.” For investors seeking stable returns, the following three indicators can effectively assess the sustainability of yield-bearing assets:

1. Is the source of returns inherently sustainable?
   Truly competitive yield-bearing assets should generate returns from the protocol’s core activities, such as lending interest or transaction fees. If the returns rely mainly on short-term subsidies or incentives, it becomes like a “game of musical chairs”: as long as the subsidies continue, returns remain; once they stop, funds leave. This type of short-term “subsidy” behavior, if turned into long-term incentives, can deplete project funds and easily lead to a downward spiral of decreasing TVL (Total Value Locked) and token prices.
2. Is the structure transparent?
   On-chain trust comes from transparency. When investors move away from the familiar environment of traditional finance, backed by intermediaries such as banks, how can they assess the situation? Is the flow of funds on-chain clear? Are interest distributions verifiable? Is there a risk of concentrated custody? If these issues are not clarified, it results in a “black-box” operation, exposing the system’s vulnerabilities. A financial product with a clear structure, publicly visible on-chain, and traceable mechanisms is the true underlying guarantee.
3. Do the returns justify the real-world opportunity cost?
   With the Federal Reserve maintaining high interest rates, if the returns of on-chain products are lower than Treasury bill yields, it will be difficult to attract rational capital. By anchoring on-chain returns to real-world benchmarks like T-Bills, the returns become not only more stable but could also serve as an “interest rate reference” on-chain.

However, even “yield-bearing assets” are never truly risk-free. Despite their stable return structures, they still require caution regarding technical, regulatory, and liquidity risks within the on-chain framework. From whether the liquidation logic is sufficient, to whether protocol governance is centralized, to whether the asset custody arrangements behind RWA (Real-World Assets) are transparent and traceable, these factors determine whether so-called “certain returns” can be reliably realized.

Moreover, the market for yield-bearing assets may represent a restructuring of the on-chain “money market structure.” In traditional finance, the money market plays a central role in funding pricing through its interest rate anchoring mechanism. Today, the on-chain world is gradually establishing its own “interest rate benchmarks” and “risk-free returns,” creating a deeper and more structured financial order.