The State of Onchain Yield: From Stablecoins to DeFi and Beyond

In “The State of Onchain Yield,” Galaxy maps out the evolving landscape of DeFi yield, assessing various yield-generating strategies across stablecoins, staking, restaking, lending, and structured products. It presents a ladder of yield, from zero-return safe assets to more engineered, higher-risk yield streams.

Starting with stablecoins: non-yield-bearing centralized and decentralized dollar-pegged tokens produce no native income for holders. Platform-dependent yield stablecoins share issuer or reserve income only when held in specific custodial venues. There is a large opportunity cost to this zero-yield baseline.

Moving up, the report analyzes debt-based yield (e.g. staked stablecoins and fiat-collateralized tokens) and protocol-based yields such as native staking (PoS) and liquid staking / restaking. Native staking yields derive from issuance, transaction fees, priority fees, and MEV. Liquid staking adds composability, while restaking allows capital reuse across multiple services, stacking rewards.

The lending and borrowing sector is recovering strongly in TVL (supply) but remains under-utilized; interest/yield remains volatile and correlated with leverage and demand, rather than stable credit demand.

Finally, structured / managed yield (e.g. via Pendle V2, Boros) enables yield tokenization, fixed-return instruments, and leveraged carry strategies. These offer more customization but come with complexity, counterparty, regulatory, liquidity, and execution risks.

Main takeaways: yield increases with complexity, but so does risk. Users and institutions must evaluate returns not just on headline APRs but after adjusting for risk, lockups, liquidity, and governance. The onchain yield market is maturing, offering tools for higher capital efficiency—but with trade-offs that demand careful understanding.