Author: Vadym
Compilation: Deep Tide TechFlow
Deep Tide Guide: This is the most complete breakdown of DeFi revenue sources to date—where the $80 billion comes from, which protocols it is distributed across, and how much is circular arbitrage.
The most noteworthy conclusion: about half of the lending demand is recursive, with users borrowing money to chase another revenue source; meanwhile, the 30-day average yield for USDC on Aave is only 2%, and 58% of stablecoin TVL has an annualized yield of less than 3%, lower than U.S. Treasury bonds.
This is the most direct data reference for evaluating the sustainability of current DeFi yields.
Full Text Below:
According to a detailed analysis released by researcher Vadym, DeFi generated approximately $80 billion in on-chain yield in 2025. The analysis provides a complete map of the true sources of DeFi returns. It reveals that yield is not scarce in aggregate, but it is extremely unevenly distributed, often circular, and in many cases difficult to package into structured products.
This result comes as yields across DeFi have narrowed significantly. Borrowing rates on major lending platforms have approached the Federal Reserve's policy rate, and the supply yield for "safe" stablecoins currently averages about 3%—lower than U.S. Treasury bonds and the Secured Overnight Financing Rate (SOFR). On Aave, the 30-day average yield for USDC and USDT is about 2%. The report points out that among the over $20 billion stablecoin pools on Ethereum and its L2s, 58% of the TVL has an annualized yield of less than 3%.
Where Does This $80 Billion Come From
The analysis identifies five main sources of yield, each with different risk characteristics and scale constraints.
AMM trading fees are the largest single category, reaching approximately $4.2 billion, with Uniswap, Meteora, and Raydium accounting for 62% of that total. However, the analysis warns that such fees are extremely difficult for structured products to capture. Liquidity providers—especially those using concentrated liquidity—frequently lose money due to toxic order flow, and LP manager pools have also failed to gain substantial market recognition.
Borrowing interest generated a total of about $1.76 billion across various money markets, involving Aave, Morpho, Spark, Maple, and Fluid. Money markets account for over 60% of DeFi's total TVL, making lending the economic backbone of the industry. However, the analysis found that about half of the lending demand is recursive—users borrow and then cycle into other yield sources, such as liquid staking tokens or yield-bearing stablecoins. In Aave's Ethereum deployment, about 39% of the borrowing demand is used to leverage ETH staking yield, with another 11.6% cycling Ethena's sUSDe.
Perpetual contract funding rates, pioneered on-chain primarily by Ethena, contributed approximately $300 million. Ethena's sUSDe derives yield from staking rewards and short funding rates—a mechanism that garnered both praise and caution when it launched in 2024.
Real-world assets generated an estimated yield of about $600 to $900 million, with U.S. Treasury bonds representing the largest share of the RWA market at about 41%, and private credit accounting for 25%.
Network staking rewards and MEV constitute the remainder, with Ethereum issuing approximately 1 million ETH in 2025. The portion of staking yield coming from MEV continues to decline—private order flow routing currently handles about 90% of swap volume, reducing opportunities for front-running.
Untapped Yield Sources
The analysis also points out several categories where yield capture remains minimal. Insurance underwriting generated only $5.5 million in premiums in 2025, primarily through Nexus Mutual. Options—despite having $30 to $50 billion in open interest on centralized exchanges—have about $1.8 billion in on-chain open interest, with no breakthrough structured products emerging. Volatility selling and protocol risk transfer are largely undeveloped, and the analysis sees this as a potential opportunity as risk management competition intensifies.
Sky's Yield Balancing Act
As a case study of how protocols integrate these disparate yield sources, the analysis examined Sky (formerly MakerDAO). Against the backdrop of yield, its 3.75% USDS savings rate has attracted significant capital. Sky's TVL surged 38% in March, making it the fourth-largest DeFi protocol, with the sUSDS savings pool alone absorbing about $6.5 billion in deposits.
The analysis reveals that about 70% of Sky's revenue comes from off-chain origins—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% comes from on-chain sources, with Spark, as Sky's primary capital allocator, directing funds into Sparklend, Maple institutional lending, Anchorage, and other yield-bearing opportunities based on current rates.
The analysis suggests the implication of this structure is: even as traditional finance yields increasingly flow through permissioned channels, their redistribution still occurs on-chain, providing a floor for DeFi interest rates and potentially creating conditions for the next generation of yield derivatives—including fixed-rate products, interest rate swaps, and structured tranche products.
