2025 DeFi On-Chain Revenue $80 Billion Overview: Half of the lending demand is borrowers lending to themselves

Even as traditional financial yields increasingly flow through licensed channels, their redistribution still occurs on-chain, providing a floor for DeFi interest rates and potentially paving the way for the next generation of yield derivatives.

Author: Vadym

Translation: Deep潮 TechFlow

Deep潮 Overview: This is the most comprehensive breakdown of DeFi yield sources to date—where $8 billion comes from, how it’s distributed across protocols, and how much is recycled through nested loops.

The most notable conclusion is: about half of lending demand is recursive, with users borrowing money to chase other yield sources; meanwhile, the 30-day average yield on USDC on Aave is only 2%, and 58% of stablecoin TVL has an annualized yield below 3%, which is lower than U.S. Treasuries.

This is the most direct data reference for assessing the sustainability of current DeFi yields.

Full Text:

According to a detailed analysis published by researcher Vadym, DeFi generated approximately $8 billion in on-chain yields in 2025. The analysis maps out the true sources of DeFi returns. It reveals that while total yields are not scarce, their distribution is highly uneven, often cyclical, and in many cases cannot be packaged into structured products.

At the time of this release, DeFi yields have significantly narrowed. Major lending platforms’ borrowing rates are approaching the Federal Reserve’s policy rate, and the supply yields of “safe” stablecoins are currently averaging around 3%—below U.S. Treasuries and secured overnight financing rates (SOFR). On Aave, the 30-day average yields for USDC and USDT are about 2%. The report notes that in Ethereum and its Layer 2s, over $20 billion in stablecoin liquidity pools have an annualized yield below 3%.

Where does this $8 billion come from?

The analysis identifies five main sources of yield, each with different risk profiles and scale constraints.

AMM trading fees are the largest single category, totaling about $4.2 billion, with Uniswap, Meteora, and Raydium accounting for 62% of that. However, the analysis warns that such fees are very difficult to capture through structured products. Liquidity providers—especially those using concentrated liquidity—frequently suffer losses from toxic order flow, and LP management pools have not gained substantial market recognition.

Lending interest generated roughly $1.76 billion across markets involving Aave, Morpho, Spark, Maple, and Fluid. The money markets account for over 60% of DeFi’s total TVL, making lending the industry’s economic backbone. However, the analysis finds that about half of lending demand is recursive—users borrow and then cycle into other yield sources, such as liquidity-staked tokens or yield-bearing stablecoins. In Aave’s Ethereum deployment, approximately 39% of lending demand is used for leveraged ETH staking yields, with another 11.6% cycling into Ethena’s sUSDe.

Perpetual contract funding rates are mainly pioneered on-chain by Ethena, contributing about $300 million. Ethena’s sUSDe earns yield from staking rewards and short funding rates—this mechanism, launched in 2024, has been both praised and cautioned.

Real-world assets (RWA) generate an estimated $600 million to $900 million in yields, with U.S. Treasuries holding the largest share at around 41%, and private credit accounting for 25%.

Network staking rewards and MEV constitute the rest, with Ethereum’s 2025 issuance expected to add about 1 million ETH. The portion of staking yields derived from MEV has been declining—private order flow routing now handles about 90% of swaps, reducing front-running opportunities.

Unexploited Yield Sources

The analysis also highlights several categories where yield capture remains minimal. Insurance premiums in 2025 are only about $5.5 million, mainly via Nexus Mutual. Options—despite centralized exchanges holding open interest of $30–$50 billion—have only about $1.8 billion in open interest on-chain, with no breakthrough structured products yet. Volatility selling and protocol risk transfer are largely undeveloped; the analysis sees these as potential opportunities as risk management competition intensifies.

Sky’s Yield Balancing

As a case study of how protocols integrate these dispersed yield sources, the analysis examines Sky (formerly MakerDAO). Amid yield compression, its 3.75% USDS savings rate has attracted significant capital. Sky’s TVL surged 38% in March, becoming the fourth-largest DeFi protocol, with the sUSDS savings pool alone absorbing about $6.5 billion in deposits.

The analysis reveals that roughly 70% of Sky’s revenue comes from off-chain sources—mainly earning USDC via the Peg Stability Module (PSM) linked to Coinbase rewards, and exposure to RWAs through products like BUIDL by BlackRock and Janus Henderson funds. The remaining 30% comes from on-chain sources, with Spark as Sky’s primary capital allocator, directing funds into Sparklend, Maple institutional lending, Anchorage, and other yield-bearing opportunities based on current rates.

The implication of this structure is: even as traditional financial yields increasingly flow through licensed channels, their redistribution still occurs on-chain, providing a floor for DeFi interest rates and potentially enabling the next generation of yield derivatives—including fixed-rate products, interest rate swaps, and structured layered products.