DeFi's $8B Yield Buffet: Turns Out Most of It Is Just People Borrowing to Buy More Crypto

Decentralized finance conjured up roughly $8 billion in onchain yield last year, according to researcher Vadym's autopsy of where the magic internet money actually originates. The findings reveal a feast that's plentiful overall but oddly circular—and about as easy to package into structured products as a soup sandwich, which is to say, a culinary disaster.

The report arrives just as DeFi yields have shifted from 'number go up' to 'number go sideways, maybe take a nap.' Borrowing rates on major platforms now cozy up to the Federal Reserve's policy rate, while 'safe' stablecoin supply rates average a sleepy 3%—below even boring old U.S. Treasuries, the financial equivalent of watching paint dry.

On Aave, the 30-day average yield for USDC and USDT hovers around 2%. Out of more than $20 billion parked in stablecoin vaults across Ethereum and its Layer 2s, a whopping 58% of that TVL is earning under 3% APY, a rate so low it barely justifies the gas fee to check it.

So where did the $8 billion come from? The analysis points to five main kitchens, each cooking its own special flavor of risk, some more appetizing than others.

AMM trading fees were the biggest dish, serving up roughly $4.2 billion. Uniswap, Meteora, and Raydium dished out 62% of that total. But the report notes these fees are notoriously slippery—LPs often get rekt by toxic order flow, and attempts to bundle them into vaults have mostly flopped, like trying to sell a sandwich made of soup.

Borrow interest chipped in about $1.76 billion across money markets like Aave, Morpho, and Spark. Lending is DeFi's economic spine, accounting for over 60% of total TVL. However, the analysis found a fun little ouroboros: roughly half of all borrowing demand is recursive, with users taking out loans just to loop back into other yield sources like liquid staking tokens or yield-bearing stablecoins, a classic degen move of borrowing money to buy more money.

On Aave's Ethereum deployment, about 39% of borrowing demand goes toward leveraging ETH staking rewards, while another 11.6% loops Ethena’s sUSDe, proving that in crypto, the best use of a loan is often to get another loan.

Perps funding fees, largely pioneered by Ethena, added around $300 million to the pot. Ethena's sUSDe yield comes from staking rewards and short funding rates—a mechanism that in 2024 inspired both 'this is genius' tweets and 'this is a ticking time bomb' threads, the crypto community's favorite binary reaction.

Real-world assets generated an estimated $600–900 million. U.S. Treasuries hold the largest slice of the RWA pie at about 41%, with private credit making up 25%, bringing a taste of TradFi's vanilla pudding to DeFi's spicy buffet.

Network staking rewards and MEV round out the rest. Ethereum's issuance totaled 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 the good old-fashioned frontrunning opportunities, leaving bots to fight over scraps.

The analysis also highlights yield sources that are still basically vaporware. Insurance underwriting generated a measly $5.5 million in premiums last year, mostly through Nexus Mutual. Options, despite CeFi open interest of $30–50 billion, have only about $1.8 billion in onchain OI with no breakout product in sight. Volatility selling and protocol risk transfer remain largely untapped—potential alpha for when risk curation gets more competitive, or for when degens get bored with current games.

As a case study in how to assemble this weird yield salad, the report looks at Sky (formerly MakerDAO). Its 3.75% USDS Savings Rate has attracted serious capital during the yield compression. Sky's TVL jumped 38% in March, making it the fourth-largest DeFi protocol, with its sUSDS savings pool alone holding about $6.5 billion, a sum that would make even a whale blush.

The breakdown shows that roughly 70% of Sky's income comes from offchain origination—primarily USDC earning Coinbase rewards via the peg stability module, and RWA exposure through products like BlackRock's BUIDL. The remaining 30% flows from onchain sources, with Spark acting as Sky's primary allocation arm, routing capital into Sparklend, Maple's institutional lending, and other opportunities, a sophisticated money router for a sophisticated salad.

The implication, the analysis argues, is that even as TradFi yield flows through permissioned channels, its redistribution happens onchain. This provides a floor for DeFi rates and could set the stage for a next generation of yield derivatives—think fixed-rate products, interest-rate swaps, and structured tranches, the financial engineering equivalent of putting the soup sandwich into a blender and selling it as a smoothie.