Depth Evolution of the DeFi Stablecoin Yield Ecosystem

The yield landscape of DeFi stablecoins is undergoing profound changes. A more mature, resilient, and institutionally aligned ecosystem is taking shape, marking a significant shift in the nature of on-chain yields. This report analyzes the key trends shaping on-chain stablecoin yields, covering institutional adoption, infrastructure development, user behavior evolution, and the rise of yield stacking strategies.

Institutional Adoption of DeFi: A Quietly Rising Trend

Even though the nominal DeFi yield rates of assets like stablecoins have adjusted relative to traditional markets, institutional interest in on-chain infrastructure is steadily growing. Protocols such as Aave, Morpho, and Euler are attracting attention and usage. This participation is driven more by the unique advantages of composable and transparent financial infrastructure, rather than merely pursuing the highest annualized yield, and these advantages are now being reinforced by continuously improving risk management tools. These platforms are not only yield platforms but are also evolving into modular financial networks, rapidly achieving institutionalization.

By June 2025, the TVL of collateralized lending platforms such as Aave, Spark, and Morpho will exceed 50 billion USD. On these platforms, the 30-day lending yield of USDC ranges between 4% and 9%, generally at or above the approximately 4.3% yield level of the 3-month U.S. Treasury bonds during the same period. Institutional capital is still exploring and integrating these Decentralized Finance protocols. Its lasting appeal lies in its unique advantages: a global market available around the clock, composable smart contracts that support automated strategies, and higher capital efficiency.

The Rise of Native Asset Management Companies in Cryptocurrency

A new class of "crypto-native" asset management firms is emerging, such as Re7, Gauntlet, and Steakhouse Financial. Since January 2025, the on-chain capital base in this space has grown from about $1 billion to over $4 billion. These management companies are deeply engaged in the on-chain ecosystem, quietly deploying funds into various investment opportunities, including advanced stablecoin strategies. In the Morpho protocol alone, the total locked value of major asset management firms has approached $2 billion. By introducing a professional capital allocation framework and actively adjusting the risk parameters of Decentralized Finance protocols, they are striving to become the next generation of leading asset management firms.

The competitive landscape among the management institutions of these native cryptocurrencies has begun to take shape, with Gauntlet and Steakhouse Financial controlling approximately 31% and 27% of the custody TVL market respectively, while Re7 occupies nearly 23% of the market share, and MEV Capital holds 15.4%.

( Regulatory Attitude Shift

As the infrastructure of Decentralized Finance matures, institutional attitudes are gradually shifting towards viewing DeFi as a configurable supplementary financial layer, rather than a disruptive and unregulated domain. Permissioned markets built on Euler, Morpho, and Aave reflect the active efforts made to meet institutional demands. These developments enable institutions to participate in on-chain markets while satisfying internal and external compliance requirements ), especially around KYC, AML, and counterparty risk ###.

Decentralized Finance基础设施:stablecoin收益的基础

The most significant advances in the DeFi field today are focused on infrastructure development. From tokenized RWA markets to modular lending protocols, a whole new DeFi stack is emerging that can serve fintech companies, custodians, and DAOs.

( 1. Mortgage Lending

This is one of the main sources of income. Users lend stablecoins ) such as USDC, USDT, DAI### to borrowers, who then provide other crypto assets ( such as ETH or BTC) as collateral, typically using an over-collateralization method. Lenders earn interest paid by borrowers, thereby laying the foundation for stablecoin income.

• Aave, Compound, and Sky Protocol ( launched liquidity pool lending and dynamic interest rate models after MakerDAO ). Maker introduced DAI, while Aave and Compound built scalable money markets.
• Recently, Morpho and Euler have transitioned to modular and isolated lending markets. Morpho has launched fully modular lending primitives that divide the market into configurable vaults, allowing protocols or asset managers to define their own parameters. Euler v2 supports isolated lending pairs and is equipped with advanced risk tools, showing significant momentum since the protocol's restart in 2024.

( 2. Tokenization of RWA

This involves bringing the returns of traditional off-chain assets ), especially U.S. Treasury bonds ###, into the blockchain network in the form of tokenized assets. These tokenized Treasury bonds can be held directly or integrated as collateral into other Decentralized Finance protocols.

• Tokenizing U.S. Treasury bonds through certain platforms, transforming traditional fixed income into programmable on-chain components. On-chain U.S. Treasury bonds surged from $4 billion in early 2025 to over $7 billion by June 2025. As tokenized bond products are adopted and integrated into the ecosystem, these products bring a new audience to Decentralized Finance.

( 3. Tokenization Strategy

This category encompasses more complex on-chain strategies, typically paying returns in the form of stablecoins. These strategies may include arbitrage opportunities, market-making activities, or structured products designed to generate returns on stablecoin capital while maintaining market neutrality.

• Yield-generating stablecoins: Some protocols are innovating stablecoins with native yield mechanisms. For example, a certain protocol's stablecoin generates yield through "cash and arbitrage" trading, which means shorting ETH perpetual contracts while holding spot ETH, with funding rates and staking rewards providing returns to stakers. In recent months, some yield-generating stablecoins have seen yields exceeding 8%.

) 4. Yield Trading Market

Yield trading introduces a novel primitive that separates future cash flows from principal, allowing floating rate instruments to be split into tradable fixed and floating components. This development adds Depth to DeFi financial instruments, aligning on-chain markets more closely with traditional fixed income structures. By transforming the yield itself into a tradable asset, these systems provide users with greater flexibility to manage interest rate risk and yield allocation.

• A leading protocol allows users to tokenize yield-bearing assets into principal tokens ###PT### and yield tokens (YT). PT holders earn fixed returns by purchasing discounted principal, while YT holders speculate on variable returns. As of June 2025, the protocol's TVL exceeds $4 billion, primarily composed of several yield-bearing stablecoins.

Overall, these primitives form the foundation of today's Decentralized Finance infrastructure and serve various use cases for crypto-native users and traditional financial applications.

Composability: Stack and Amplify stablecoin Returns

The "money Lego" feature of DeFi is reflected through its combinability, with the aforementioned primitives used to generate stablecoin yields becoming the foundation for constructing more complex strategies and products. This combinatorial approach can enhance yields, diversify risks ( or concentrate ), as well as customize financial solutions, all revolving around stablecoin capital.

( lending market for yield assets

Tokenized RWA or tokenized strategy tokens can become collateral in new lending markets. This allows for:

• Holders of these yield-bearing assets can use them as collateral to borrow stablecoins, thereby releasing liquidity.
• A lending market specifically created for these assets, where holders can further generate stablecoin yield by lending stablecoins to those who wish to borrow against their yield positions as collateral.

) integrates diversified sources of income into stablecoin strategies.

Although the ultimate goal is often stablecoin-dominated returns, the strategies to achieve this goal can incorporate other areas of DeFi, generating stablecoin yields through careful management. Delta neutral strategies involving the borrowing of non-USD tokens ###, such as liquid staking tokens LST or liquidity re-staking tokens LRT ###, can be constructed to generate yields denominated in stablecoins.

( Leverage Yield Strategy

Similar to arbitrage trading in traditional finance, users can deposit stablecoins into lending protocols, use that collateral to borrow other stablecoins, exchange the borrowed stablecoins back for the original asset ) or another stablecoin in the strategy ###, and then redeposit. Each round of "looping" increases exposure to the underlying stablecoin yield while also amplifying risks, including liquidation risk in the event of a decline in collateral value or a sudden spike in borrowing rates.

( stablecoin liquidity pool ) LP ###

• Stablecoins can be deposited into protocols like certain automated market makers (AMM), usually deposited alongside other stablecoins, earning returns through transaction fees, thus generating profits for the stablecoins.
• The LP tokens obtained from providing liquidity can be staked in other protocols or used as collateral for other vaults, thereby further increasing yields and ultimately enhancing the return on the initial stablecoin capital.

( Yield Aggregator and Auto Compounding Tool

The vault is a typical example of the composability of stablecoin yields. They deploy the stablecoins deposited by users to underlying yield sources, such as collateral lending markets or RWA protocols. Then, they:

• Automatic execution of harvesting rewards ) rewards may exist in another token form ### process.
• Exchange these rewards back to the initially deposited stablecoin ( or other desired stablecoin ).
• By reinvesting these rewards, you can automatically compound your returns, which can significantly increase your annualized return compared to manual withdrawals and reinvestments (APY).

The overall trend is to provide users with enhanced and diversified stablecoin returns, managed within established risk parameters, and simplified through smart accounts and a goal-oriented interface.

User Behavior: Earnings Are Not Everything

Although yield remains an important driver in the DeFi space, data shows that users' decisions regarding capital allocation are not solely driven by the highest annual percentage yield (APY). An increasing number of users weigh factors such as reliability, predictability, and overall user experience (UX). Platforms that simplify interactions and reduce friction (, such as those offering zero-fee transactions ) and build trust through reliability and transparency, often retain users better in the long term. In other words, a better user experience is becoming a key factor not only in driving initial adoption but also in enhancing the "stickiness" of capital within DeFi protocols.

( 1. Capital prioritizes stability and trust.

During periods of market volatility or downturns, capital often shifts towards mature "blue-chip" lending protocols and RWA vaults, even if their nominal yields are lower than those of newer, riskier options. This behavior reflects a risk-averse sentiment, driven by users' preferences for stability and trust.

Data consistently shows that during periods of market pressure, the total locked value of mature stablecoin vaults on well-known platforms, which is ) TVL ### shares, is higher than that of newly launched high-yield vaults. This "stickiness" reveals that trust is a key factor in user retention.

Loyalty to protocols also plays an important role. Users of certain mainstream platforms often prefer the native ecosystem treasury, even though the interest rates on other platforms may be slightly higher. This is similar to traditional financial models, where convenience, familiarity, and trust often outweigh small differences in returns. This is particularly evident in certain protocols, where despite yields dropping to historic lows, holders...