A breakdown of DeFi’s yield sources reveals that borrowing demand, trading fees, and funding rates drove the bulk of returns, while more than half of stablecoin deposits in the Ethereum ecosystem are earning less than U.S. Treasuries.
Decentralized finance (DeFi) produced roughly $8 billion in onchain yield in 2025, according to a detailed analysis published by researcher Vadym that maps the full spectrum of where DeFi returns actually originate. The breakdown reveals that yield is abundant in aggregate but unevenly distributed, often circular, and in many cases difficult to package into structured products.
The findings land as yields across DeFi have dried up. Borrowing rates on major lending platforms have converged with the Federal Reserve’s policy rate, and “safe” stablecoin supply rates now average roughly 3% — below U.S. Treasuries and the Secured Overnight Financing Rate. On Aave, the 30-day average yield on USDC and USDT sits around 2%. Out of more than $20 billion in stablecoin vaults across Ethereum and its Layer 2s, 58% of TVL is earning under 3% APY, the report notes.
Where the $8 Billion Comes From
The analysis identifies five primary yield sources, each with distinct risk profiles and scalability constraints.
AMM trading fees were the largest single category at roughly $4.2 billion, with Uniswap, Meteora, and Raydium accounting for 62% of the total. But the analysis cautions that these fees are notoriously difficult to capture in structured products. Liquidity providers — particularly those using concentrated liquidity — frequently lose money to toxic order flow, and LP-manager vaults have failed to gain meaningful traction.
Borrow interest generated approximately $1.76 billion across money markets, including Aave, Morpho, Spark, Maple and Fluid. Money markets account for more than 60% of total DeFi TVL, making lending the sector’s economic backbone. However, the analysis found that roughly half of all borrowing demand is recursive — users borrowing to loop back into other yield sources, such as liquid staking tokens or yield-bearing stablecoins. On Aave’s Ethereum deployment, about 39% of borrowing demand goes toward leveraging ETH staking rewards, while another 11.6% loops Ethena’s sUSDe.
Perps funding fees, largely pioneered onchain by Ethena, contributed around $300 million. Ethena’s sUSDe derives its yield from staking rewards and short funding rates — a mechanism that drew both praise and alarm when it launched in 2024.
Real-world assets generated an estimated $600–900 million, with U.S. Treasuries holding the largest share of the RWA market at about 41% and private credit at 25%.
Network staking rewards and MEV comprise the remainder, with Ethereum’s issuance totaling roughly one million ETH in 2025. The MEV-derived portion of staking yield has been trending downward as private order flow routing — now handling about 90% of swaps — has reduced frontrunning opportunities.
Untapped and Underdeveloped Sources
The analysis also highlights categories where yield capture remains negligible. Insurance underwriting generated just $5.5 million in premiums in 2025, mostly through Nexus Mutual. Options — despite CeFi open interest of $30–50 billion — have roughly $1.8 billion in onchain OI with no breakout structured product. Volatility selling and protocol risk transfer remain largely untapped, which the analysis flags as a potential opportunity as risk curation grows more competitive.
Sky’s Balancing Act
As a case study in how protocols assemble these disparate yield sources, the analysis examines Sky (formerly MakerDAO), whose 3.75% USDS Savings Rate has attracted significant capital amid the compression. Sky’s TVL surged 38% in March, making it the fourth-largest DeFi protocol, with the sUSDS savings pool alone accounting for approximately $6.5 billion in deposits.
The breakdown reveals that approximately 70% of Sky’s income derives from offchain origination — 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% flows from onchain sources, with Spark acting as Sky’s primary allocation arm, routing capital into Sparklend, Maple’s institutional lending, Anchorage, and other yield-bearing opportunities depending on prevailing rates.
The implication, the analysis argues, is that even as TradFi yield increasingly flows through permissioned channels, its redistribution happens onchain, providing a floor for DeFi rates and potentially setting the stage for a next generation of yield derivatives, including fixed-rate products, interest-rate swaps and structured tranches.
This article was written with the assistance of AI workflows. All our stories are curated, edited and fact-checked by a human.
Source: https://thedefiant.io/news/research-and-opinion/defi-generated-usd8-billion-in-onchain-yield-in-2025-analysis
