A Risk and Complexity Framework for Comparing Onchain Yield
Summary
The paper organizes onchain yield sources into a framework based on how returns are generated, which assets are involved, how variable the income is, and the risks and effort required. It progresses from stablecoins that pay holders nothing through platform-dependent rewards, debt-backed products, protocol yields such as staking and lending, structured strategies, and activity-based income from liquidity provision and incentives. It emphasizes distinguishing issuer-paid interest from venue rewards and promotional programs.
The framework’s central comparison is return against risk and operational complexity: each additional yield source may introduce credit, collateral, peg, market, protocol, leverage, or execution exposure. Examples include reserve-backed stablecoins, synthetic and overcollateralized dollars, staking, lending markets, and automated market maker fees. The document provides conceptual categories and examples rather than a standardized quantitative risk model or independently validated return analysis. Conditions and product terms can change, and advertised yields should not be treated as directly comparable without accounting for their source and associated risks.
Key ideas
- Stablecoin balances may earn no native yield even when a platform offers separate rewards.
- The source of a yield payment distinguishes issuer-funded income from platform programs and promotions.
- Onchain yield spans reserve-backed products, protocol mechanisms, structured strategies, and liquidity activity.
- Higher or more engineered returns can add risks and operational complexity.
- Comparisons should consider risk and effort alongside headline yield.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.