Seeking Certainty in Uncertainty: Analyzing Encryption Yielding Assets

As the global situation becomes turbulent, risk aversion sentiment is quietly returning. Gold prices are hitting new highs, and Bitcoin has returned above eighty thousand dollars. In this era full of uncertainty, "certainty" has become a scarce asset. Investors are not only pursuing returns but are also seeking assets that can withstand volatility and have structural support. The "encryption interest-bearing assets" in the on-chain financial system may represent this new form of certainty.

These crypto assets with fixed or floating returns have re-entered the investors' field of vision, becoming a anchor point for seeking stable returns in turbulent market conditions. However, in the crypto world, "interest" is not just the time value of capital; it is often the product of protocol design and market expectations working together. High yields may stem from real asset income, or they may conceal complex incentive mechanisms or subsidization behaviors. To find true "certainty" in the crypto market, investors need to delve into the underlying mechanisms, rather than just focusing on interest rate tables.

Since the Federal Reserve began its interest rate hike cycle in 2022, the concept of "on-chain interest rates" has gradually come into the public eye. In the face of the long-term risk-free rate in the real world maintaining at 4-5%, investors have started to reassess the sources of returns and the risk structure of on-chain assets. Encryption yield-bearing assets attempt to construct financial products "competing with the macro interest rate environment" on-chain.

However, the sources of income from income-generating assets vary widely. From the cash flow "generated" by the protocol itself, to the illusion of income relying on external incentives, and then to the grafting and transplantation of off-chain interest rate systems, the different structures reflect completely different sustainability and risk pricing mechanisms. Currently, income-generating assets in decentralized applications 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 rapid growth logic in the early development of DeFi. In the absence of mature user demand and real cash flow, the market substitutes it with "incentive illusion." Many platforms attract user attention and lock assets through the method of "yield farming."

However, such subsidies are essentially more like short-term operations where the capital market "pays for" growth indicators, rather than a sustainable profit model. It once became a standard configuration for the cold start of new protocols, but relies on new capital inflows or token inflation, with a structure resembling a "Ponzi" scheme. The annual yields of hundreds or thousands often are just tokens "printed" out of thin air by the platform.

Historical experience shows that once external incentives weaken, a large number of subsidized tokens will be sold off, damaging user confidence and causing a death spiral decline in TVL and token prices. After the DeFi boom faded in 2022, about 30% of DeFi projects saw a market capitalization decline of over 90%, often related to excessive subsidies.

If investors want to find a "stable cash flow", they must be wary of 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

Endogenous income refers to the revenue earned through "doing real business" as stipulated by the agreement and distributed to users. It does not rely on issuing tokens to attract users or external subsidies, but rather generates income naturally through real business activities, such as lending interest, transaction fees, and even penalties in default liquidations. This income is similar to "dividends" in traditional finance and is also referred to as "quasi-dividends" in the context of encryption cash flow.

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

Endogenous returns can be divided into three prototypes:

1. Interest Rate Spread Type: Users deposit funds into lending protocols, where the protocol matches borrowers and lenders to earn interest rate spreads. The structure is transparent and operates efficiently, but the level of returns is closely related to market sentiment.

2. Fee rebate type: The protocol will return part of the operating income (, such as transaction fees ), to participants who provide resource support. The income is directly linked to the protocol's business volume, and the ability to resist cyclical risks is relatively weak.

3. Service-oriented Protocol: The protocol provides security support to other systems and receives rewards in return. This type of revenue reflects the market value of on-chain infrastructure as a "public good", demonstrating strong structural innovation and long-term viability.

The Real Interest Rate on the Chain: The Rise of RWA and Interest-Bearing Stablecoins

More and more capital is beginning to pursue a more stable and predictable return mechanism: on-chain assets are anchored to real-world interest rates. This logic connects 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, gaining the certainty of traditional financial world interest rates while maintaining the flexibility of encryption assets.

At the same time, interest-bearing stablecoins as a derivative form of RWA have also begun to come to the forefront. These assets are not passively pegged to the US dollar but actively embed off-chain yields into the tokens themselves. They attempt to reshape the usage logic of the "digital dollar" 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, breaking the binary division between "assets" and "liquidity". This not only enhances the appeal of encryption in actual transactions but also opens new use cases for stablecoins.

Three Indicators for Finding Sustainable Income-Generating Assets

1. Is the source of income "endogenous" and sustainable? Truly competitive yield-bearing assets should derive their income from the protocol's own operations.

2. Is the structure transparent? Trust on the chain comes from openness and transparency. Are the fund flows clear? Is the interest distribution verifiable? Is there a risk of centralized custody?

3. Does the return justify the opportunity cost in reality? In the context of high interest rates, the returns of on-chain products need to match real benchmarks such as government bond yields.

However, even "yield-generating assets" are not truly risk-free assets. One must still be 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, to whether the asset custody arrangements behind RWA are transparent and traceable, all of these determine whether the so-called "certain returns" have real cash-out capability.

In the future, the interest-bearing asset market may reconstruct the "money market structure" on-chain. The on-chain world is gradually establishing its own concepts of "interest rate benchmarks" and "risk-free returns," creating a more robust financial order.