Seeking On-Chain Certainty Amid Uncertainty: Analyzing Three Types of Encryption Yield Assets

As risk aversion quietly returns, gold prices are hitting new highs, and Bitcoin has climbed back above eighty thousand dollars. In today's environment where macro uncertainty has become the norm, "certainty" has turned into a scarce asset. Investors are not only pursuing returns but are also seeking assets that can withstand volatility and have structural support. The "encryption income-generating assets" in the on-chain financial system may represent this new form of certainty.

These cryptocurrency assets with fixed or floating returns have re-entered the investors' view, becoming a stable anchor for seeking robust returns in turbulent market conditions. In the crypto world, "interest" is not just the time value of capital, but also a product of the interplay between protocol design and market expectations. High returns may stem from real asset income, or they may conceal complex incentive mechanisms or subsidy behaviors. To find true "certainty" in the crypto market, investors need to deeply understand the underlying mechanisms.

Since the Federal Reserve began its interest rate hike cycle in 2022, the concept of "on-chain interest rates" has gradually entered the public eye. In the face of a real-world risk-free interest rate that has long been maintained at 4-5%, crypto investors are starting to reassess the sources of returns and risk structures of on-chain assets. A new narrative is quietly taking shape—Yield-bearing Crypto Assets, which aim to construct financial products "that compete with the macro interest rate environment" on-chain.

The sources of income for yield-bearing assets vary greatly. From the cash flow "generated" by the protocol itself, to the illusion of income relying on external incentives, and then to the integration and transplantation of off-chain interest rate systems, the different structures reflect vastly different sustainability and risk pricing mechanisms. Currently, yield-bearing assets in decentralized applications (DApps) can be roughly divided into three categories: exogenous income, endogenous income, and real-world asset (RWA) linkage.

Exogenous Returns: Subsidy-Driven Interest Illusion

The rise of exogenous returns is a reflection of the early high-speed growth logic of DeFi. In the absence of mature user demand and real cash flow, the market has replaced it with "incentive illusion." Early ride-sharing platforms exchanged subsidies for users, and after Compound launched "liquidity mining," several ecosystems subsequently introduced huge token incentives, attempting to attract user attention and lock up assets through "yield delivery."

However, these types of subsidies are essentially short-term operations where the capital market "pays" for growth indicators, rather than a sustainable revenue model. It once became a standard configuration for the cold start of new protocols. Whether it's Layer2, modular public chains, LSDfi, or SocialFi, the incentive logic is the same: relying on new capital inflows or token inflation, with a structure similar to a "Ponzi" scheme. Platforms attract users to deposit money with high returns, then delay cashing out through complex "unlocking rules." Those annual returns of hundreds or thousands are often just tokens "printed" out of thin air by the platform.

The Terra crash in 2022 is such an example: the ecosystem offered annualized returns of up to 20% on UST stablecoin deposits through the Anchor protocol, attracting a large number of users. The returns were mainly reliant on external subsidies rather than genuine income from within the ecosystem.

Historical experience shows that once external incentives weaken, a large number of subsidized tokens will be sold off, damaging user confidence and leading to a death spiral decline in TVL and token prices. Data indicates that after the DeFi Summer craze faded in 2022, about 30% of DeFi projects saw a market cap decline of over 90%, often related to excessively high subsidies.

Investors looking for "stable cash flow" need to be more vigilant about whether there is a real value creation mechanism behind the returns. Using future inflation to promise today's returns is ultimately not a sustainable business model.

Endogenous Returns: Redistribution of Use Value

In short, endogenous income is the revenue earned by the protocol itself through "doing real work" and distributed to users. It does not rely on token issuance to attract users or external subsidies, but rather on revenue naturally generated through real business activities, such as lending interest, transaction fees, and even penalties in default liquidation. This income is similar to "dividends" in traditional finance and is also referred to as "stock-like" crypto cash flow.

The biggest characteristics of this type of income are its closed-loop nature and sustainability: the logic of making money is clear, and the structure is healthier. As long as the protocol is operational and there are users, it can continuously generate income without relying on market hot money or inflation incentives to maintain operation.

By understanding its "hematopoietic" mechanism, we can more accurately assess the certainty of returns. This type of income can be divided into three prototypes:

1. "Interest Rate Spread Type": This is the most common and easily understood model in the early days of DeFi. Users deposit funds into lending protocols, where the protocol matches borrowers and lenders, earning a spread from the interest. Its essence is similar to the traditional bank's "deposit and loan" model. This type of mechanism has a transparent structure and operates efficiently, but the level of returns is closely related to market sentiment.

2. "Fee Rebate Type": This mechanism is closer to the structure where traditional company shareholders participate in profit sharing or specific partners receive returns based on revenue ratios. The protocol returns part of the operational income (such as transaction fees) to the participants who provide resource support.

Taking a certain decentralized exchange as an example, the protocol will proportionally distribute a portion of the transaction fees generated by the exchange to users providing liquidity. In 2024, a certain lending protocol provided an annualized return of 5%-8% for stablecoin liquidity pools on the Ethereum mainnet, while its token stakers could earn over 10% annualized returns during certain periods. These revenues come entirely from the protocol's endogenous economic activities, without relying on external subsidies.

Compared to the "lending spread type", the "fee rebate type" returns are highly dependent on the market activity of the protocol itself. Its returns are directly linked to the transaction volume of the protocol; the more transactions there are, the higher the dividends, and when transactions decrease, income fluctuates accordingly. Therefore, its stability and ability to resist cyclical risks are often not as robust as that of the lending model.

3. "Protocol Service Type" Income: This is the most structurally innovative type of endogenous income in encryption finance, and its logic is similar to the model in traditional business where infrastructure service providers offer key services to clients and charge fees.

Taking a certain re-staking protocol as an example, it provides security support for other systems through the "re-staking" mechanism and thus earns rewards. Such earnings do not depend on lending interest or transaction fees, but rather come from the market pricing of the protocol's own service capabilities. It reflects the market value of on-chain infrastructure as a "public good." This form of reward is more diverse and may include token points, governance rights, and even future unrealized expected earnings, showcasing strong structural innovation and long-term nature.

In traditional industries, it can be likened to cloud service providers offering computing and security services to enterprises for a fee, or financial infrastructure institutions providing trust guarantees for systems and generating revenue. Although these services do not directly participate in terminal transactions, they are an indispensable underlying support for the entire system.

On-chain Real Interest Rates: The Rise of RWA and Interest-bearing Stablecoins

Currently, more and more capital in the market is pursuing a more stable and predictable return mechanism: on-chain assets anchored to real-world interest rates. The core of this logic lies in: connecting on-chain stablecoins or encryption assets to off-chain low-risk financial instruments, such as short-term government bonds, money market funds, or institutional credit, thereby obtaining "the certainty of interest rates in the traditional financial world" while maintaining the flexibility of encryption assets. Representative projects include a certain DAO's allocation to T-Bills, OUSG connected to BlackRock ETFs, SBTB, and Franklin Templeton's tokenized money market fund FOBXX, etc. These protocols attempt to "import the Federal Reserve's benchmark interest rate on-chain" as a fundamental yield structure.

At the same time, interest-bearing stablecoins, as a derivative form of RWA, are also beginning to come to the forefront. Unlike traditional stablecoins, these assets are not passively pegged to the US dollar, but actively embed off-chain returns into the tokens themselves. Examples include USDM and USDY, which offer daily interest with returns sourced from short-term government bonds. By investing in US government bonds, USDY provides users with stable returns, with an interest rate close to 4%, higher than the 0.5% of traditional savings accounts.

They are trying to reshape the usage logic of "digital dollars" to make it more like an on-chain "interest account".

Under the connectivity of RWA, RWA+PayFi is also a future scenario worth paying attention to: directly embedding stable yield assets into payment tools, breaking the binary division between "assets" and "liquidity". On 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 L2 launched by a certain exchange (similar to "USDC as a checking account") not only enhance the attractiveness of cryptocurrencies in actual transactions but also open new use cases for stablecoins—transforming from "dollars in an account" to "capital in active circulation".

Three Indicators for Finding Sustainable Income-Generating Assets

The logical evolution of "encryption" of "income-generating assets" actually reflects the market's gradual return to rationality and the redefinition of "sustainable returns". From the initial high inflation incentives and governance token subsidies to the increasing emphasis on self-sustainability and even the connection to off-chain return curves, the structural design is moving out of the rough stage of "involutionary capital absorption" towards a more transparent and refined risk pricing. Especially in the current context of high macro interest rates, if the encryption system wants to participate in global capital competition, it must build a stronger "return rationality" and "liquidity matching logic". For investors seeking stable returns, the following three indicators can effectively assess the sustainability of income-generating assets:

1. Is the source of income "endogenous" and sustainable? Truly competitive yield-generating assets should derive their returns from the protocol's own activities, such as lending interest and transaction fees. If returns mainly rely on short-term subsidies and incentives, it resembles a game of "passing the parcel": as long as subsidies are present, returns continue; once the subsidies cease, funds will leave. Such short-term "subsidy" actions, if turned into long-term incentives, will deplete project funds and can easily lead to a death spiral of decreasing TVL and token prices.

2. Is the structure transparent? On-chain trust comes from openness and transparency. When investors leave the familiar investment environment of traditional finance, which has intermediaries like banks as endorsements, how should they judge? Is the flow of funds on-chain clear? Is the interest distribution verifiable? Is there a risk of centralized custody? If these questions are not clarified, they will fall under black-box operations, exposing the system's vulnerabilities. A financial product with a clear structure and an on-chain public, traceable mechanism is the true underlying guarantee.

3. Is the return worth the opportunity cost in reality? Against the backdrop of the Federal Reserve maintaining high interest rates, if the returns on on-chain products are lower than the yields on government bonds, it will undoubtedly be difficult to attract rational funds. If we can anchor on-chain returns to a real benchmark like T-Bill, it would not only be more stable but could also become an "interest rate reference" on-chain.

However, even "yield-bearing assets" are never truly risk-free assets. No matter how robust their yield structure, one must remain vigilant about the technical, compliance, and liquidity risks in the on-chain structure. From whether the clearing logic is sufficient, to whether the protocol governance is centralized, and to whether the asset custody arrangements behind RWA are transparent and traceable, all of these determine whether the so-called "certain yield" has genuine redeemable capability. Furthermore, the market for yield-bearing assets in the future may represent a reconstruction of the on-chain "money market structure." In traditional finance, money markets fulfill the core function of fund pricing through their interest rate anchoring mechanism. Now, the on-chain world is gradually establishing its own "