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The Emergence of Real Yield

Evaluating DeFi protocols
Binance Research (Jie Xuan Chua, CFA)


  • Real yields are generated from tangible sources of revenue and are not solely reliant on inflationary token emissions.

  • This new narrative differs from what was observed during the height of DeFi summer, when astronomical annual percentage yields (“APYs”) were commonplace, and funded by high token emissions.

  • Yields are likely more sustainable if they are supported by real cash flows from protocols rather than inflationary token incentives.

  • When evaluating protocols, real yield is just one part of the equation. While protocols can design tokenomics in such a way that token holders receive real yield, the underlying drivers of revenue may be a result of artificial demand and thus, may not be sustainable.

  • Higher yields are not necessarily better as protocols need to take into account reinvestment needs. A protocol that pays out a higher proportion of fees has less to reinvest back into the protocol.

  • Investors should also consider profitability to assess long-term viability of the protocol. It does not matter whether a protocol is paying out real yield if it runs at a huge operating loss and is unable to sustain the payout in the long-term.

  • While a welcome development, at the end of the day, it is unlikely a wise choice to make investment decisions based on a single metric (i.e. real yield) alone.

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