Decentralized finance (DeFi) produced roughly $8 billion in onchain yield in 2025, according to a detailed analysis published by researcher Vadym that maps the full spectrum of where DeFi returns actually originate. The breakdown reveals that yield is abundant in aggregate but unevenly distributed, often circular, and in many cases difficult to package into structured products.

The findings land as yields across DeFi have dried up. Borrowing rates on major lending platforms have converged with the Federal Reserve’s policy rate, and “safe” stablecoin supply rates now average roughly 3% — below U.S. Treasuries and the Secured Overnight Financing Rate. On Aave, the 30-day average yield on USDC and USDT sits around 2%. Out of more than $20 billion in stablecoin vaults across Ethereum and its Layer 2s, 58% of TVL is earning under 3% APY, the report notes.

Where the $8 Billion Comes From

The analysis identifies five primary yield sources, each with distinct risk profiles and scalability constraints.

AMM trading fees were the largest single category at roughly $4.2 billion, with Uniswap, Meteora, and Raydium accounting for 62% of the total. But the analysis cautions that these fees are notoriously difficult to capture in structured products. Liquidity providers — particularly those using concentrated liquidity — frequently lose money to toxic order flow, and LP-manager vaults have failed to gain meaningful traction.

Borrow interest generated approximately $1.76 billion across money markets, including Aave, Morpho, Spark, Maple and Fluid. Money markets account for more than 60% of total DeFi TVL, making lending the sector’s economic backbone. However, the analysis found that roughly half of all borrowing demand is recursive — users borrowing to loop back into other yield sources, such as liquid staking tokens or yield-bearing stablecoins. On Aave’s Ethereum deployment, about 39% of borrowing demand goes toward leveraging ETH staking rewards, while another 11.6% loops Ethena’s sUSDe.

Perps funding fees, largely pioneered onchain by Ethena, contributed around $300 million. Ethena’s sUSDe derives its yield from staking rewards and short funding rates — a mechanism that drew both praise and alarm when it launched in 2024.

Real-world assets generated an estimated $600–900 million, with U.S. Treasuries holding the largest share of the RWA market at about 41% and private credit at 25%.

Network staking rewards and MEV comprise the remainder, with Ethereum’s issuance totaling roughly one million ETH in 2025. The MEV-derived portion of staking yield has been trending downward as private order flow routing — now handling about 90% of swaps — has reduced frontrunning opportunities.

Untapped and Underdeveloped Sources

The analysis also highlights categories where yield capture remains negligible. Insurance underwriting generated just $5.5 million in premiums in 2025, mostly through Nexus Mutual. Options — despite CeFi open interest of $30–50 billion — have roughly $1.8 billion in onchain OI with no breakout structured product. Volatility selling and protocol risk transfer remain largely untapped, which the analysis flags as a potential opportunity as risk curation grows more competitive.

Sky’s Balancing Act

As a case study in how protocols assemble these disparate yield sources, the analysis examines Sky (formerly MakerDAO), whose 3.75% USDS Savings Rate has attracted significant capital amid the compression. Sky’s TVL surged 38% in March, making it the fourth-largest DeFi protocol, with the sUSDS savings pool alone accounting for approximately $6.5 billion in deposits.

The breakdown reveals that approximately 70% of Sky’s income derives from offchain origination — primarily USDC earning Coinbase rewards through the peg stability module (PSM), and RWA exposure through products like BlackRock’s BUIDL and Janus Henderson funds. The remaining 30% flows from onchain sources, with Spark acting as Sky’s primary allocation arm, routing capital into Sparklend, Maple’s institutional lending, Anchorage, and other yield-bearing opportunities depending on prevailing rates.

The implication, the analysis argues, is that even as TradFi yield increasingly flows through permissioned channels, its redistribution happens onchain, providing a floor for DeFi rates and potentially setting the stage for a next generation of yield derivatives, including fixed-rate products, interest-rate swaps and structured tranches.

This article was written with the assistance of AI workflows. All our stories are curated, edited and fact-checked by a human.

Crypto industry executives on Wednesday told the US House of Representatives Committee on Financial Services that existing investor protections and financial surveillance regulations should apply to tokenized securities.

The hearing was held as legislators consider the Capital Markets Technology Modernization Act of 2026 and are exploring the impact of asset tokenization on capital markets and the “need to balance innovation with investor protection and market integrity,” according to a statement by panel chairman, Representative French Hill.

Tokenized real-world assets (RWA), traditional financial instruments represented by tokens on blockchain networks, reduce transaction costs and settlement times, Summer Mersinger, CEO of crypto advocacy organization Blockchain Association, told the committee.

“By replacing flawed manual record-keeping processes with more transparent timestamps and stamped records, tokenization lowers the cost and re-imagines US financial markets,” she said.  

Mersinger and the other witnesses agreed that existing securities laws apply to tokenized instruments, arguing that the technology and the medium used to record securities transactions do not fundamentally alter investor protection laws or jurisdictional oversight.

Supporters of RWA tokenization contend the technology removes intermediaries from the settlement and clearing process, reducing transaction costs and improving capital velocity by introducing near-instant settlement times. 

AML provisions and sanctions compliance remain lawmaker priority

Lawmakers questioned the panel about how tokenized asset issuers and platforms could enforce know-your-customer (KYC) checks, anti-money laundering provisions, and sanctions compliance.

Illinois Representative Bill Foster asked: “Once things are tokenized, are they going to be treated on a private, permissioned blockchain, or a variety of public blockchains, which often allow anonymous participation through self-hosted wallets?” 

John Zecca, Nasdaq executive vice president and global chief legal, risk, and regulatory officer, told Foster that the exchange can collect KYC information at the protocol level because its system runs on a permissioned blockchain network.

Christian Sabella, managing director and deputy general counsel of the Depository Trust and Clearing Corporation (DTCC), the world’s largest clearinghouse company, said it was also possible to embed identifying information at the token level.

These identifiers would be immutable and would remain regardless of whether the RWA token was trading on a permissioned or a permissionless network, Sabella added. 

Salman Banaei, general counsel for Plume Network, a permissionless RWA-focused blockchain, said the network embeds anti-money laundering (AML) and sanctions compliance checks at the token level, which allows tokens to be frozen.

However, Banaei told Foster that government regulators do not yet have a technological solution to identify wash trades or identify market participants with 100% confidence.

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