Finding On-Chain Certainty Amid Uncertainty: An Analysis of Three Types of Encryption Yield Assets

As the world becomes increasingly turbulent, risk-averse sentiment is quietly returning. From gold prices reaching new highs to Bitcoin returning to elevated levels, investors are seeking assets that can withstand volatility and have structural support. Against this backdrop, "encryption interest-bearing assets" in the on-chain financial system may represent a new form of certainty.

These crypto assets with fixed or floating returns are re-entering the investors' field of vision, becoming a beacon for them to seek stable returns in turbulent market conditions. However, in the crypto world, "interest" is no longer just the time value of capital; it is often a product of protocol design and market expectations working together. High yields may come from real asset income, or they may conceal complex incentive mechanisms or subsidization behaviors. To find true "certainty" in the crypto market, investors need more than just interest rate tables; they require an in-depth analysis of the underlying mechanisms.

Since the Federal Reserve began its rate hike cycle in 2022, the concept of "on-chain interest rates" has gradually entered the public's view. In the face of a real-world risk-free interest rate that has long been maintained at 4-5%, crypto investors have started 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 aims to build financial products "competing with the macro interest rate environment" on-chain.

Currently, the income-generating assets of decentralized applications (DApps) can be roughly divided into three categories: exogenous returns, endogenous returns, and real-world asset (RWA) linkage.

Exogenous Returns: Subsidy-Driven Interest Illusion

The rise of exogenous returns is a microcosm of the rapid growth logic in the early development of DeFi. In the absence of mature user demand and real cash flow, the market has replaced it with "incentive illusion." Just like early ride-sharing platforms used subsidies to gain users, many DeFi projects have also introduced huge token incentives, attempting to buy user attention and locked assets through the method of "putting out returns."

However, this type of subsidy is essentially a short-term operation where the capital market "pays for" growth indicators, rather than a sustainable revenue model. It once became the standard 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 resembling a "Ponzi" scheme. Platforms attract users to deposit money with high returns, and then delay redemption through complex "unlocking rules". Those annualized returns in the hundreds or thousands are often just tokens "printed" out of thin air by the platform.

From historical experience, once external incentives weaken, a large number of subsidized tokens will be sold off, damaging user confidence, which can lead to a death spiral where TVL and token prices frequently decline. According to data statistics, after the DeFi Summer craze subsided in 2022, about 30% of DeFi projects saw a market value decline of over 90%, which is often related to excessive subsidies.

If investors want to find "stable cash flow" from it, they 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 simple terms, the protocol earns money by "doing real work" and then allocates it to users. It does not rely on issuing tokens to attract users, nor does it depend on subsidies or external funding, but rather generates income naturally through real business activities, such as lending interest, transaction fees, and even penalties in default settlements. This income is somewhat similar to "dividends" in traditional finance, and is therefore referred to as "quasi-dividends" of encryption cash flow.

The biggest characteristic of this type of income is its closed-loop nature and sustainability: the logic of making money is clear, and the structure is healthier. As long as the protocol is operating and there are users using it, there will be income coming in, without needing to rely on market hot money or inflation incentives to maintain operation.

We can classify this type of income into three prototypes:

1. "Lending Interest Spread Type": Users deposit funds into a lending protocol, which matches borrowers with lenders, and the protocol earns the interest spread. 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 its yield level is closely related to market sentiment.

2. "Fee rebate type": The protocol will return a portion of its operating income (such as transaction fees) to participants who provide resource support, such as liquidity providers (LP) or token stakers. The earnings of this type highly depend on the market activity of the protocol itself, and its stability and ability to resist cyclical risks are often not as robust as that of lending models.

3. "Protocol Service" Revenue: This is the most structurally innovative type of endogenous income in the field of encryption finance, whose logic is similar to the model where infrastructure service providers in traditional business offer key services to clients and charge fees. For example, a certain protocol provides security support to other systems through the "re-staking" mechanism and thus receives rewards. This type of revenue does not rely on lending interest or transaction fees, but rather comes from the market-based pricing of the protocol's own service capabilities.

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

Currently, more and more capital in the market is seeking a more stable and predictable return mechanism: on-chain assets anchored to real-world interest rates. The core of this logic is to connect 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. These protocols attempt to "import the Federal Reserve's benchmark interest rate on-chain" as a foundational 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. A typical example is the stablecoin of a certain protocol, which accrues interest daily, with returns coming from short-term government bonds. By investing in US Treasury bonds, it provides users with stable returns, with an interest rate close to 4%, higher than the traditional savings account rate of 0.5%.

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

Under the connectivity role of RWA, RWA+PayFi is also a future scenario worth paying attention to: directly embedding stable income assets into payment tools, thus breaking the binary division between "assets" and "liquidity". On one hand, users can enjoy interest income while holding cryptocurrency, and on the other hand, payment scenarios do not need to sacrifice capital efficiency. This type of product not only enhances the attractiveness of cryptocurrency in actual transactions but also opens up 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 "yield-generating assets" actually reflects the market's gradual return to rationality and the process of redefining "sustainable returns." From the initial high inflation incentives and governance token subsidies to the increasing emphasis by many protocols on their own self-sustaining capabilities and even connecting to off-chain yield curves, structural design is moving out of the rough phase of "involution-style capital extraction" towards more transparent and refined risk pricing. Especially in the current environment of high macro interest rates, for the encryption system to compete in the global capital market, it must build a stronger "yield rationality" and "liquidity matching logic." For investors seeking stable returns, the following three indicators can effectively assess the sustainability of yield-generating assets:

1. Is the source of the yield "endogenous" and sustainable? Truly competitive yield-bearing assets should derive their returns from the protocol's own operations, such as lending interest and transaction fees. If the returns primarily rely on short-term subsidies and incentives, it's like "passing the buck": as long as the subsidies are there, the returns are there; once the subsidies stop, the funds leave. This kind of short-term "subsidy" behavior, if it becomes a long-term incentive, will deplete the project's funds and can easily lead to a death spiral of declining TVL and token prices.

2. Is the structure transparent? Trust on-chain comes from being open and transparent. When investors leave the familiar investment environment of traditional finance, which has intermediaries like banks as endorsements, how should they discern? 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, it will all belong to black box operations, exposing the system's vulnerabilities. Only financial products with a clear structure and an on-chain, open, and traceable mechanism provide true underlying protection.

3. Does the return justify 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 Treasury bonds, it will undoubtedly be difficult to attract rational funds. If on-chain returns can be anchored to real benchmarks 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 within the on-chain structure. From whether the clearing logic is adequate, to whether the protocol governance is centralized, to whether the asset custody arrangements behind RWA are transparent and traceable, all these factors determine whether the so-called "certain yield" has real cash-out capability. Moreover, the market for yield-bearing assets in the future may represent a reconstruction of the on-chain "money market structure." In traditional finance, the money market plays a core role in pricing funds through its interest rate anchoring mechanism. Now, the on-chain world is gradually establishing its own concepts of "interest rate benchmarks" and "risk-free returns," generating a more substantial financial order.