Finding On-Chain Certainty Amid Macroeconomic Uncertainty: Analyzing Three Types of Encryption Income-Generating Assets

As the world becomes increasingly unstable, risk aversion is quietly making a comeback. From gold prices reaching new highs to Bitcoin returning above eighty thousand dollars, each time there is news of rising inflation expectations, escalating geopolitical tensions, or increasing trade barriers, it could serve as a catalyst for igniting market sentiment.

In this context, "determinism" has become a scarce asset. Investors not only pursue returns but also seek assets that can withstand volatility and have structural support. The "encryption interest-bearing assets" in the on-chain financial system may represent a new form of determinism.

These crypto assets with fixed or floating returns have re-entered investors' sights, becoming a beacon for seeking stable returns in turbulent market conditions. However, in the crypto world, "interest" is no longer just the time value of capital; it is often the product of both protocol design and market expectations. High yields may stem from real asset income or may hide complex incentive mechanisms. To find true "certainty" in the crypto market, investors need to deeply analyze 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 risk-free interest rate in the real world that long maintains at 4-5%, Crypto investors have started to reassess the sources of returns and the risk structure of on-chain assets. A new narrative is quietly taking shape — Yield-bearing Crypto Assets, which aims to create financial products "that compete with the macro interest rate environment" on-chain.

The sources of returns from different yield-bearing assets vary significantly. From the cash flow "generated" by the protocol itself, to the illusion of returns dependent on external incentives, and 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 classified 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 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 is instead filled with "incentive illusions." Just as early ride-sharing platforms used subsidies to attract users, after Compound launched "liquidity mining," multiple ecosystems subsequently introduced massive token incentives, attempting to capture user attention and lock-up assets through "yield distribution."

However, such subsidies are essentially more like 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 is Layer2, modular public chains, or LSDfi, SocialFi, the incentive logic is the same: relying on new capital inflow or token inflation, with a structure similar to a "Ponzi" scheme. The platform attracts users to deposit money with high returns, and then delays cashing out through complex "unlocking rules." Those annualized returns of hundreds or thousands are often just tokens "printed" out of thin air by the platform.

The Terra crash in 2022 was just like that: the ecosystem attracted a large number of users by offering up to 20% annualized returns on UST stablecoin deposits through the Anchor protocol. The returns relied mainly on external subsidies rather than real income from within the ecosystem.

Historical experience shows that once external incentives weaken, a large amount of subsidized tokens will be sold off, harming user confidence and causing TVL and token prices to often exhibit a death spiral decline. Data indicates that after the DeFi Summer craze faded in 2022, approximately 30% of DeFi projects saw their market value decline by over 90%, largely related to excessive 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 yield refers to the income earned and distributed to users by the protocol itself through actual business activities. It does not rely on issuing tokens to attract people or external subsidies, but is 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 referred to as "quasi-dividends" in the context of encryption cash flow.

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

Understanding its "hematopoietic" mechanism is essential for more accurately assessing the certainty of returns. Endogenous income can be divided into three prototypes:

1. "Lending Interest Rate Spread Type": This is the most common and easy-to-understand model in the early days of DeFi. Users deposit funds into lending protocols, which match borrowers and lenders and earn the interest rate spread. The essence is similar to the traditional bank "deposit and loan" model. This type of mechanism is structurally transparent and operates efficiently, but the level of returns is closely related to market sentiment.

2. "Fee Rebate Type": This type of mechanism is closer to the structure of traditional company dividends for shareholders or specific partners receiving returns based on revenue ratios. The protocol returns a portion of operational income (such as transaction fees) to participants who provide resource support, such as liquidity providers or token stakers. Their returns are directly linked to the protocol's business volume, and their stability and ability to resist cyclical risk are usually not as robust as those of lending models.

3. "Protocol Service Type" Income: This is the most structurally innovative type of endogenous income in crypto finance, with logic similar to that of traditional businesses where infrastructure service providers offer key services and charge fees. Taking EigenLayer as an example, the protocol provides security support for other systems through a "re-staking" mechanism and receives returns. This type of income comes from the market-based pricing of the protocol's service capabilities, reflecting the market value of on-chain infrastructure as a "public good." The forms of returns are diverse and may include token points, governance rights, etc., showcasing strong structural innovation and long-term viability.

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

Currently, more and more capital in the market is beginning to pursue 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.

At the same time, interest-bearing stablecoins, as a derivative form of RWA, have started to emerge. Unlike traditional stablecoins, these assets are not passively pegged to the dollar but actively integrate off-chain yields into the tokens themselves. Typical examples include USDM and USDY, which offer daily interest, with the yield sourced from short-term government bonds. By investing in U.S. Treasury bonds, they provide users with stable returns, with yields close to 4%, higher than traditional savings accounts.

They are trying 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 yield assets into payment tools, breaking the binary division between "assets" and "liquidity". On one hand, users can enjoy interest income while holding cryptocurrencies, and on the other hand, payment scenarios do not need to sacrifice capital efficiency. Such products not only enhance the attractiveness of cryptocurrencies in actual transactions but also open up new use cases for stablecoins—transforming from "dollars in the account" to "capital in active circulation".

Three Indicators for Finding Sustainable Income-Generating Assets

The logical evolution of "encryption "yield-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 number of protocols emphasizing their own self-sustaining capabilities and even connecting to off-chain yield curves, structural design is moving out of the rough stage of "involution-style capital absorption" towards a more transparent and refined risk pricing.

Especially in the current situation where macro interest rates remain high, encryption systems must establish stronger "return rationality" and "liquidity matching logic" in order to participate in global capital competition. 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 income-generating assets should have their returns originating from the protocol's own business, such as lending interest and transaction fees. If the returns mainly rely on short-term subsidies and incentives, it resembles "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, once it turns into long-term incentives, will deplete the project's funds and can easily lead to a death spiral of declining TVL and token price.

2. Is the structure transparent? On-chain trust comes from openness and transparency. When investors leave their familiar investment environment, 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, they will belong to a black box operation, exposing the system's vulnerabilities. A financial product with a clear structure and an on-chain, open, and traceable mechanism is the true underlying guarantee.

3. Are the returns worth the opportunity cost in reality? Against the backdrop of the Federal Reserve maintaining high interest rates, if the returns of on-chain products are lower than Treasury bond yields, it will undoubtedly be difficult to attract rational capital. If on-chain returns can be anchored to real benchmarks like T-Bills, 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. Regardless of how robust their yield structure is, one must remain vigilant about the technical, compliance, and liquidity risks within 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 the RWA are transparent and traceable, all of these factors determine whether the so-called "certain returns" have real redeemable capability.

Moreover, the future market for interest-bearing assets may represent a reconstruction of the "currency market structure" on-chain. In traditional finance, the money market plays a core role in fund pricing through its interest rate anchoring mechanism. Today, the on-chain world is gradually establishing its own concepts of "interest rate benchmarks" and "risk-free returns," leading to the emergence of a more robust financial order.