DeFi Shifts Toward Tokenized RWAs and Yield-Bearing Stablecoins as Returns Compress

DeFi’s era of eye-popping yields is fading, but on-chain finance is not shrinking—it's being rebuilt around tokenized 'real-world assets' (RWA) and 'yield-bearing stablecoins' (YBS) that draw returns from external cash flows rather than token emissions, according to a new report from Tiger Research.

The research argues that the post-2020 model—where protocols competed by offering high rates boosted by governance-token incentives—has largely run its course. In its place, the market is increasingly organized around on-chain representations of U.S. Treasuries, money market funds, private credit, and other off-chain instruments, alongside stablecoins that automatically accumulate yield from those underlying assets.

Yield compression changes DeFi’s value proposition

Tiger Research points to a stark reality: what once looked like a structural advantage versus traditional finance has narrowed to the point of irrelevance. As of April 2026, Aave (AAVE) V3’s interest rate for USDC deposits was around 2.7%, below the U.S. 10-year Treasury yield near 4.3%, the report said. Since 2022, the spread between on-chain lending yields and government bonds has trended toward zero, and at times inverted.

That shift matters because DeFi users typically shoulder risks that do not exist in regulated deposit products—smart contract vulnerabilities, hacks, counterparty risk embedded in complex protocol integrations, and stablecoin depegs. If headline yields are no longer compensating for those risks, the “why DeFi?” question becomes unavoidable.

Yet Tiger Research’s central conclusion is that the market did not simply deflate; it rotated. While surface-level lending yields cooled, tokenized RWA and stablecoin primitives expanded into a multi-tens-of-billions-of-dollars category, supported by demand for transparent settlement, programmable collateral, and composable liquidity.

What DeFi learned from its first growth wave

The report frames DeFi’s first major expansion as a period dominated by token incentives—an approach that proved effective at attracting liquidity but difficult to sustain.

Compound (COMP) pioneered the playbook in 2020 by distributing COMP to both suppliers and borrowers, at times enabling a dynamic where users could effectively profit by borrowing due to rewards outpacing interest costs. The model helped ignite “DeFi Summer,” but it also highlighted the fragility of incentives backed primarily by self-referential token emissions: when rewards declined or new inflows slowed, liquidity often exited quickly.

Curve (CRV) explored a different axis—governance power. Its 'veCRV' model rewarded long-term lockups with greater voting influence and reward allocation, spawning a competitive arena where the prize was not only yield, but control over yield distribution. The rise of meta-protocols such as Convex further concentrated those rights, underscoring that even decentralized governance can become centralized in practice when incentives favor aggregation.

OlympusDAO (OHM) represented an extreme iteration. With protocol-owned liquidity, game-theoretic messaging, and APYs that reached extraordinary levels, it became a symbol of the “dopamine” phase of DeFi. But its reliance on ongoing token issuance—and the subsequent collapse in OHM’s price—helped shift market psychology from “how high is the yield?” to “where does the yield come from?”

From horizontal farming to vertical leverage

As the incentives-led era cooled, user behavior evolved. In earlier cycles, “horizontal” yield farming—spreading capital across multiple protocols to chase rewards—dominated. But as emissions models weakened and airdrop competition intensified, simply deploying assets across protocols became less reliable as a return strategy.

Tiger Research says “vertical” strategies gained ground: reusing the same underlying collateral through multiple layers to improve capital efficiency. EigenLayer is cited as a key example, using 'restaking' mechanics to extend the utility of staked Ethereum (ETH) or liquid staking tokens. The report notes that EigenLayer’s total value locked jumped from under $400 million to about $18.8 billion in roughly six months. Pendle is highlighted for splitting yield-bearing assets into principal and yield components, enabling trading of points and future yield and giving rise to new derivatives-style farming approaches.

The broader implication, the report argues, is that DeFi is evolving from a high-interest deposit alternative into a more structured, capital-markets-like system—one where leverage, term structure, and collateral design matter as much as headline APY.

RWA and yield-bearing stablecoins redesign on-chain income

The report identifies RWA as the dominant theme in the next phase of on-chain finance. Traditional financial institutions are increasingly treating blockchains less as an ideological alternative and more as a new distribution rail for familiar assets. Products referenced include BlackRock’s BUIDL and Franklin Templeton’s BENJI, vehicles designed to bring Treasury-like exposure and money-market-style yield into token form. Tiger Research noted that BENJI has positioned itself with a relatively lower barrier to entry, broadening retail accessibility.

Institutional participation, however, carries requirements that clash with DeFi’s original permissionless ethos. KYC/AML controls, qualified custody, legal jurisdiction, and risk-management frameworks become central when off-chain instruments are tokenized and circulated on-chain, pushing the ecosystem toward hybrid architectures that blend compliance with composability.

Parallel to that trend, 'yield-bearing stablecoins' have become a fast-growing primitive. Tiger Research names Ondo’s USDY, Sky’s sUSDS, Ethena’s sUSDe, and BlackRock’s BUIDL among the leading examples. These instruments embed yield accrual into the token itself, drawing returns from sources such as U.S. Treasuries, funding rates, staking rewards, or money market funds—offering a different design than stablecoins that merely maintain a peg without inherent yield.

Crucially, the report emphasizes composability: once an RWA-backed instrument exists on-chain, it can be used as collateral, packaged into structured products, or plugged into lending markets. Tiger Research points to an example in which BUIDL reportedly comprises around 90% of the reserves for Ethena’s USDtb, with USDtb then used as collateral on Aave (AAVE). The structure illustrates how tokenized real-world yield can become a base layer for on-chain liquidity, rather than a standalone “mirror” of off-chain exposure.

Building the “power grid” for on-chain finance

Tiger Research uses an analogy to describe the transition: early DeFi resembled a multi-plug power strip without an outlet—recycling internally generated incentives to support layers of leverage and derivatives. In that framing, the system’s weakness was its limited access to durable external cash flows. RWA, by contrast, acts more like a power grid, connecting on-chain markets to interest payments, rents, and credit income generated in the real economy.

The report also maps emerging roles in this RWA stack. Theo is described as an asset-selector layer, choosing which instruments to bring on-chain. Its flagship product, thBILL, is positioned as an institutional-grade basket of tokenized short-term U.S. Treasuries, with the firm signaling potential expansion into gold-linked assets and YBS structures.

Plume is presented as infrastructure spanning issuance, compliance, distribution, and yield productization. On Plume, a vault structure called Nest is described as offering institutional-grade RWA yields to on-chain users in a stablecoin-deposit format. The report notes growing participation from traditional finance names including WisdomTree, Apollo Global, and Invesco.

Morpho is characterized as the connective tissue between tokenized assets and on-chain credit. By enabling borrowing against instruments such as Apollo’s ACRED, the protocol helps transform tokenized private-credit exposure from a passive holding into usable DeFi collateral, expanding the practical utility of institutional assets in on-chain markets.

From “dopamine” to accountability

Tiger Research argues that the declining prominence of flashy yields may look like a loss of appeal, but it also signals maturation. As on-chain finance moves closer to handling real balance-sheet risk, accountability and backstop mechanisms are becoming more visible.

The report highlights a recent example following an incident involving Kelp DAO’s rsETH, where an ad hoc coalition known as 'DeFi United' coordinated with Aave (AAVE) in a response framed around loss coverage and shared responsibility. As of April 28, 2026 UTC, the initiative had raised more than $300 million—exceeding a reported outflow figure of $190 million—according to Tiger Research.

In the report’s conclusion, Tiger Research suggests that “DeFi” as a monolithic narrative is losing force, but the underlying building blocks—lending, stablecoins, restaking, on-chain credit, and RWA—are evolving into more specific verticals that increasingly resemble real financial infrastructure. In that sense, the DeFi era is not ending; rather, the period in which “tokens propped up tokens” is giving way to a model anchored by external cash flows and more explicit risk design.