Earlier this year we published an analysis of 29 stablecoin vaults. We tracked what they advertised against what they actually paid depositors, measured directly from on-chain share price growth over sixteen months. The average gap was more than three percentage points. Only 8 of the 29 cleared 10% realized. The rest lived in a quieter kind of failure: dashboards that read one way and wallets that grew another.
The interesting cases weren’t just the outliers at either end, they were the vaults where for example, a 14% headline delivered 9% in the account. Not a trivial discrepancy.
This is the current state of yield in DeFi in 2026.
If you ask an allocator what share of a portfolio sits in equities, you get a number. Ask about credit, real estate, commodities, and you get a number for each. Ask what share sits in yield and the question falls apart. The reason for this isn’t far-fetched.
Yield is not something you hold. It is something your holdings do.
That has been true for as long as there has been finance and it is starting to change, faster than most allocators have noticed.
How yield came unbundled
For most of financial history, yield was a property of an instrument. A bond paid a coupon because it was a bond. Picking the instrument meant picking its yield.
DeFi broke that attachment. A dollar on a blockchain earns nothing by itself. What it earns depends on where it is routed, and the route can change without the dollar changing at all. Holding an asset and earning a return became separate decisions.
In principle, that makes yield something you can allocate to directly. In practice you can’t yet, and the reason is older than DeFi.
The three tests
People owned shares for centuries before equities became an asset class, and that’s a known fact, and it could only happen when three things arrived together:
• Returns measured on a consistent basis
• A vocabulary for classifying what you owned
• And enough dispersion data to prove the classification mattered. Sectors and value-versus-growth only meant something once decades of returns showed the categories behaved differently.
Unbundled yield has two of the three. Measurement is one of it.
Every ERC-4626 vault exposes a share price readable at any block, and the change in that price over a holding period is the realized return. Like a bond’s total return, it can’t be restated after the fact.
Dispersion is a second. The 29 vaults sold roughly the same product to roughly the same depositors, and their outcomes ranged from double-digit realized yield to missing their own headline by five points. That spread is exactly why a classification system is necessary.
What’s missing is vocabulary; a shared way to say where a yield comes from and what it’s exposed to when conditions change. “Stablecoin vault, 12% APY” describes a lending market and a leveraged emissions loop equally well.
This is why institutions tend to say DeFi yield can’t be modeled and skip the diligence. We argue that they’re half right.
On the returns they’re wrong: eight vaults clearing 10% over sixteen months is not a rumor. On the disclosure they’re correct. You cannot underwrite an exposure nobody has named.
Yield was always an asset class
Before DeFi existed, yield had been an asset class for centuries. Corporate bonds. Preferred equity. Money markets. Bank certificates of deposit. Private credit. Every one of these is a yield instrument, and every one of them cleared the three tests before it was investable at scale.
The infrastructure that made this work is so ambient in TradFi that it stops being visible. Bloomberg terminals cost around $35,000 a year per seat, and the reason serious capital allocators pay for them without complaint is that the terminal is the measurement layer. It’s the thing that makes yield comparable across issuers, tenors, structures, and jurisdictions.
Index providers, custodians, prime brokers, and rating agencies are the connective tissue that turns a coupon into an allocatable asset.
That infrastructure took decades to build, and most of it wasn’t built just for the fun of it. The infrastructure exists because capital wouldn’t allocate without it.
For instance, the rating agencies exist because pension funds couldn’t buy bonds without a standardized credit scale. The benchmark indices exist because portfolio managers couldn’t be evaluated without them. Continuous mark-to-market exists because risk desks couldn’t function on end-of-quarter snapshots.
None of this is glamorous, and it is the reason yield in TradFi is a $130 trillion market rather than a hobby.
DeFi unbundled the yield and left that layer behind. Six years in, it has built yield sources by the hundred and almost none of the infrastructure that would make them legible. That is what “forgot” means here.
Four generations, one recurring failure
Every generation of DeFi yield solved a real problem and broke one of the tests to do it.
Yield farming set the pattern. Compound’s COMP distribution in 2020 was the first liquidity mining program to attract serious capital, and its mechanic defined the next several years: deposit assets, earn a governance token, see its yield advertised at that day’s token price, and realize a different number entirely by the time you sell. It solved bootstrapping liquidity in a market with no incumbents, and it did that by breaking measurement. The vaults still doing this in 2026 are direct descendants.
Liquid staking tokens were the first honest attempt at measurement. Lido’s stETH accrues rewards through a daily rebase, so the holder’s balance grows. Its wrapped form, wstETH, holds the balance fixed and lets the exchange rate rise instead. Either way you can compare what went in against what came out with no interpretive ambiguity. This is the first generation of DeFi yield that would pass a traditional total-return audit at the instrument level.
What it did not fix was comparability. Your stETH yield was measurable. So was cbETH, and every other staking derivative. But there was no benchmark. No reporting layer that would let a depositor read a set of these yields and know which one was earning its risk. The instrument became rigorous while the market around it stayed illegible.
Restaking regressed on all three tests at once. The liquid restaking ecosystems turned yield into a promise: points now, tokens later, service revenue at some future date. Depositors could not measure realized return because the return had not been minted and they could not compare across restaking tokens because each ran its own points programme with its own multipliers. There was no continuous mark-to-market, because the yield was a claim on a future event rather than a stream from a present one.
A full generation of depositors ended up holding dated options they could not price.
Real-world asset yield is the current attempt, and it partially works. Tokenised treasuries have measurable underlyings because T-bills have known coupons, comparability because the Treasury curve and SOFR are the benchmarks, and continuity because the underlying reprices daily. On-chain money market funds are the first DeFi yield products that would pass a real institutional audit on all three tests at once.
But they solved it by importing traditional finance’s answers wholesale. They inherited someone else’s measurement layer rather than building DeFi’s. The moment a yield source is not a tokenised version of an off-chain instrument, the framework stops applying. Most of the interesting yield sources in DeFi are exactly that.
Each generation fixed the previous failure. Each broke a different property. Nobody has cleared all three tests at once for anything natively DeFi.
What is actually missing
DeFi isn’t short of yield sources, vaults, or curators and adding more without a measurement layer just extends the problem. What’s missing is infrastructure; realized return verified from source data, a vocabulary that names each exposure, and re-checking frequent enough that the number stays honest until someone acts on it.
Bond markets have been here before. Michael Bloomberg started his company in 1981 after leaving Salomon Brothers, and the first terminals reached Merrill Lynch’s bond desk in 1982. Nobody had asked for a machine that priced bonds on demand. But within a decade, nobody could work without one.
DeFi yield is at that point now. What comes next is that layer, or nothing that looks like a real asset class.
What we are building
Two outputs, one company.
AlphaYields runs one verification engine with two by-products. The research computes realized yield from on-chain share price and publishes it without sponsorship, which makes it a working draft of the vocabulary this market is missing.
ayTokens point the same engine at depositor capital, putting it to work across diversified yield sources that are continuously re-checked, so holders never have to watch a dashboard.
A dollar on a blockchain earns nothing by itself. It earns whatever it gets routed into, and right now most of the market picks that route off a dashboard. We’d rather it picked off the share price. That’s the layer we’re building, and we publish the receipts.
Frequently asked questions
Is DeFi yield an asset class yet?
Not yet. On-chain share prices make measurement possible, and the spread between vault outcomes supplies the dispersion data. What’s missing is a shared vocabulary for classifying what a yield exposure actually is.
Why is DeFi APY different from what I actually earn?
Advertised APY is a projection, and your earnings are what actually happened. The gap usually comes from reward tokens losing value before they’re sold, trailing averages that lag a strategy whose returns have already compressed, and differences in how aggregators and vaults calculate the number.
How do you calculate realized yield from a vault’s share price?
Divide the ending share price by the starting share price, then annualize: (end price / start price) ^ (365 / days held) — 1. For an ERC-4626 vault, the share price is what one share converts to through convertToAssets. A share price that rises from 1.0000 to 1.0200 over 90 days annualizes to about 8.4%. Short windows exaggerate noise, so longer ones give a truer read.
What is the difference between APY and APR in crypto?
APR is the simple annual rate, and APY includes compounding. A 10% APR compounded daily is about 10.52% APY. In DeFi, displayed APYs often assume rewards get reinvested at the same rate for a full year, which rarely happens.
What is yield farming?
Yield farming is depositing crypto into a protocol to earn rewards, usually paid partly in its governance token. It took off in June 2020 when Compound began distributing COMP, kicking off “DeFi Summer.” It bootstrapped liquidity fast and normalized advertising yield at the reward token’s current price, which is where much of today’s gap between advertised and realized yield began.
What is restaking and how does it generate yield?
Restaking lets staked ETH or liquid staking tokens secure additional services, called Actively Validated Services (AVSs), in exchange for extra rewards and extra slashing risk. EigenLayer popularized the model in 2023, and liquid restaking tokens (LRTs) keep restaked positions tradable. Early restaking yield was paid mostly in points redeemable for future tokens, which made realized return impossible to measure in advance.
Is a higher APY riskier in DeFi?
Not reliably. The more useful signal is the gap between advertised and realized yield. A 9% vault that consistently delivers 9% is often lower risk than a 14% vault that consistently delivers 9%, even though both paid the same. A persistent gap usually points to decaying reward tokens or a strategy whose returns have already compressed.
Sources
1. AlphaYields. “What 29 stablecoin vaults actually delivered over 16 months vs what they advertised.” Medium, 2026.
2. AlphaYields. “The Realized Yield Gap.” Medium, 2026.
3. Santoro, J. et al. “EIP-4626: Tokenized Vaults.” Ethereum Improvement Proposals, 2022. https://eips.ethereum.org/EIPS/eip-4626
4. DefiLlama. Yields dashboard. https://defillama.com/yields
5. SIFMA. Capital Markets Fact Book. https://www.sifma.org/resources/research/fact-book/
6. Bloomberg, M. R. Bloomberg by Bloomberg. Wiley, 1997.
7. Moody’s Corporation. Company history. https://www.moodys.com/
8. Federal Reserve Bank of New York. Secured Overnight Financing Rate (SOFR). https://www.newyorkfed.org/markets/reference-rates/sofr
9. Lido. Lido tokens integration guide (stETH and wstETH). https://docs.lido.fi/guides/lido-tokens-integration-guide
10. Coinbase. Coinbase Wrapped Staked ETH (cbETH) whitepaper. https://www.coinbase.com/cbeth/whitepaper
11. EigenLayer on liquid restaking risks: https://blog.eigencloud.xyz/liquid-restaking/
Was Yield Always an Asset Class? Or DeFi Just Forgot? was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.