On-chain Deterministic Exploration: Analysis of Three Types of Encryption Income-Generating Assets

In today's world full of uncertainty, investors are seeking assets that can navigate volatility and have structural support. Crypto yield-bearing assets, as a new form of on-chain financial system, are gradually becoming an anchor for investors looking for stable returns in turbulent market conditions. However, in the crypto world, "interest" represents not only the time value of capital but also a product of the interplay between protocol design and market expectations. To find true "certainty" in the crypto market, investors need to gain a deep understanding of the underlying mechanisms.

Currently, the income-generating assets of decentralized applications (DApps) can be roughly divided into three categories: external yield, internal yield, and real-world asset (RWA) pegging.

Exogenous Returns: Subsidy-Driven Interest Illusion

Exogenous returns are a reflection of the logic behind the rapid growth of DeFi in its early stages. In the absence of mature user demand and real cash flow, the market attracts users with an "incentive illusion." Many protocols offer substantial token incentives in exchange for user attention and locked assets. However, this type of subsidy is essentially more like a short-term operation where the capital market "pays" for growth metrics, rather than a sustainable revenue model.

This model relies on new capital inflows or token inflation, resembling a "Ponzi scheme". The platform attracts users to deposit money with high returns and then delays redemption through complex "unlocking rules". Those annual returns of hundreds or thousands are often 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. Data shows that after the DeFi boom faded in 2022, about 30% of DeFi projects saw their market value drop by over 90%, often related to excessive subsidies.

Investors seeking to find "stable cash flow" 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 revenue is the income generated naturally through real business activities by the protocol, such as lending interest, transaction fees, and even penalties in default liquidation. This type of revenue is characterized by its closed-loop nature and sustainability, with a clear profit-making logic and a healthier structure. As long as the protocol is operational and users are utilizing it, it can continuously generate income without relying on market hot money or inflation incentives to maintain its operation.

Endogenous returns can be divided into three types:

1. Interest Rate Spread Type: Similar to the traditional bank "deposit and loan" model, such as lending protocols Aave, Compound, etc. Revenue comes from the interest paid by borrowers, but it is easily influenced by market sentiment.

2. Fee rebate type: Similar to company shareholder dividends, the protocol returns a portion of the operating income (such as transaction fees) to participants who provide resource support. For example, a certain DEX allocates a portion of the fees generated by the exchange to liquidity providers. This type of revenue highly depends on the market activity of the protocol.

3. Protocol Service Type: The most innovative endogenous income, similar to the model in traditional business where infrastructure service providers offer critical services and charge fees. For example, EigenLayer provides security support to other systems through the "re-staking" mechanism and earns rewards. This type of income reflects the market value of on-chain infrastructure as a "public good."

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

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

At the same time, interest-bearing stablecoins, as a derivative form of RWA, are also beginning 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 "digital dollars," making them more like on-chain "interest accounts."

RWA+PayFi is also a future scenario worth paying attention to, as it directly embeds stable income assets into payment tools, breaking the binary division between "assets" and "liquidity". This not only enhances the attractiveness of cryptocurrency in real transactions but also opens up 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-generating assets should have their income derived from the protocol's own business.

2. Is the structure transparent? On-chain trust comes from openness and transparency. Is the flow of funds clear? Is the interest distribution verifiable? Is there a risk of centralized custody?

3. Is the return worth the opportunity cost in reality? In a high interest rate environment, the returns of on-chain products need to compete with traditional financial instruments such as government bonds.

However, even "yield-bearing assets" are not truly risk-free assets. They still need to be 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 RWA are transparent and traceable, all of these determine whether the so-called "certain returns" have real redeemable capability.

In the future, the interest-bearing asset market may become a reconstruction of the on-chain "money market structure." The on-chain world is gradually establishing its own "interest rate benchmark" and "risk-free return" concept, and a more robust financial order is taking shape.