DeFi’s $8 Billion Revenue Masks Reliance on Leverage and Fee Concentration

Decentralized finance generated roughly $8 billion in onchain revenue in 2025, but a closer look at where that money came from suggests the sector’s earnings remain heavily concentrated—and in many cases dependent on circular leverage rather than durable, end-user demand.

The findings, compiled by onchain researcher Vadym, frame DeFi’s headline revenue figure as both a sign of resilience and a warning about the industry’s current limits. While protocols continue to monetize activity at scale, much of the yield is either difficult to package into stable, investor-friendly products or tied to strategies that can unwind quickly when market conditions change.

DeFi yields drift toward TradFi benchmarks

One key backdrop is the broad decline in DeFi interest rates. Vadym’s analysis shows major lending protocol rates in 2025 converged toward U.S. Federal Reserve policy levels, while stablecoin supply yields averaged around 3%—in many cases below comparable U.S. Treasury yields.

On Aave (AAVE), the 30-day average yield for supplying USD Coin (USDC) and Tether (USDT) hovered near 2%. Across Ethereum (ETH) and major Layer 2 networks, about 58% of roughly $20 billion in stablecoin deposits earned 3% APR or less, underscoring how much of DeFi’s core “risk-free-ish” yield has compressed.

Fees and lending dominate the revenue stack

Automated market maker (AMM) trading fees accounted for the single largest share of DeFi revenue—about $4.2 billion in 2025, or roughly half of the total in Vadym’s dataset. Uniswap, Meteora, and Raydium collectively represented about 62% of that AMM fee income.

However, the analysis argues that AMM fees are not easily transformed into consistent, scalable returns for passive capital. Liquidity providers frequently face losses driven by adverse trading flow and price movements, and attempts to broaden adoption through ‘managed LP’ products have struggled to gain lasting traction.

Lending interest contributed an estimated $1.76 billion, reinforcing borrowing markets as the backbone of DeFi’s economic activity. Aave (AAVE), Morpho, Spark, and Maple were highlighted among the major venues capturing that demand.

Yet Vadym’s central critique is that a significant portion of lending is not driven by real-world capital needs, but by ‘recursive borrowing’—users borrowing funds to loop into other yield strategies. On Ethereum specifically, about 39% of borrowing demand was used to leverage ETH staking returns, while roughly 11.6% was recycled into Ethena’s (ENA) sUSDe-based strategies, according to the report.

RWA, staking, and MEV add variety—but not a full solution

Outside core AMM and lending primitives, real-world asset (RWA) protocols generated an estimated $600 million to $900 million in revenue. Tokenized U.S. Treasuries made up about 41% of the RWA category, while private credit accounted for around 25%, reflecting how quickly Treasury-backed products have become DeFi’s preferred bridge to traditional rates.

Staking and MEV (maximal extractable value) remained meaningful contributors, but the report notes changing market structure is reshaping MEV economics. Ethereum issued around 1 million ETH in 2025, while MEV opportunity has been pressured by reduced front-running as transaction routing shifts. With roughly 90% of trades now executed through private order flow pathways, the “easy” MEV seen in earlier cycles appears to be fading.

Meanwhile, onchain insurance and options remain underdeveloped relative to DeFi’s larger sectors. The report estimates onchain insurance premiums totaled only about $5.5 million in 2025, while the onchain options market continues to lag far behind centralized derivatives venues in both liquidity and user adoption.

Sky becomes a case study in hybrid revenue models

The report points to Sky—the rebranded MakerDAO—as a practical snapshot of where DeFi revenue is heading: toward hybrid structures that combine onchain distribution with offchain yield engines.

Sky’s appeal has been driven in part by a 3.75% deposit rate for USDS, drawing capital and pushing total value locked higher. In March, Sky’s TVL rose 38%, lifting it into the top tier of DeFi protocols by size.

But Sky’s revenue mix also illustrates the industry’s reliance on offchain sources. Roughly 70% of its earnings are generated offchain, tied to assets and arrangements such as Coinbase-related USDC rewards and tokenized Treasury exposure via products like BlackRock’s BUIDL, as well as other fund allocations. The remaining 30% is generated onchain, with capital deployed through Spark into lending and other yield strategies.

A ‘floor’ for DeFi rates—and a prompt for the next phase

Vadym’s broader conclusion is that even when traditional financial yields enter crypto through regulated and offchain channels, DeFi remains the mechanism that redistributes those returns onchain—effectively helping define a ‘floor’ for crypto-native rates.

At the same time, the report argues that today’s fragmented and fee-heavy revenue model could set the stage for more mature financial engineering in DeFi—such as fixed-rate products, interest-rate swaps, and ‘structured tranche’ designs that repackage volatile cash flows into more predictable risk profiles.

For now, the headline $8 billion figure signals scale, but the concentration of revenue in AMM fees and leverage-driven lending highlights the sector’s challenge: converting onchain activity into sustainable, broadly accessible yield without relying on reflexive loops of borrowed capital.