THE STATE OF ONCHAIN YIELD

Summary from the TLDR Crypto newsletter

Galaxy Digital shared a comprehensive framework for evaluating onchain yield opportunities across five core engines: policy rate pass-through in tokenized cash, protocol rewards from staking and restaking, credit spreads in pooled lending, market microstructure fees from automated market makers, and structured wrappers that package or leverage these flows. The analysis progresses from zero-yield stablecoins like USDT (where Tether has earned approximately $12.6 billion in interest income over three years without passing any to holders) through increasingly complex strategies, including staked stablecoins, native staking, liquid restaking, lending markets, and activity-generated yield from liquidity provision. Galaxy's risk-adjusted efficiency analysis reveals that cash-like instruments score highest on return per unit of risk and complexity, with tokenized cash and fixed-income products like Pendle PT retaining strong efficiency, while active AMM liquidity provision shows the lowest efficiency due to path dependence and inventory effects. Every headline yield number should be evaluated through two critical lenses: what you earn for the risk taken, and what remains after accounting for the operational complexity involved.