Written by: Vadym
Compiled by: Luffy, Foresight Information
It is now an indisputable fact that on-chain yields have typically declined, and associated discussions have been widespread. Lending charges are converging with Federal Reserve charges, and “protected” deposit charges common solely round 3%, decrease than US Treasury bonds and the Secured In a single day Financing Price (SOFR). It is value noting that on the time of writing, USDC and USDT yields on Aave are round 2%, Steakhouse and Gauntlet Prime supply round 3.2% (on-chain yields are extra aggressive), and sUSDe yields 3.5%.
Of the over $20 billion in vault belongings on Ethereum and L2 networks, 58% of stablecoin whole worth locked (TVL) has an annualized yield under 3%, and 35% is between 3% and 5%. This makes Sky’s USDS financial savings product, providing a yield of 3.75%-4%, a extremely enticing protected haven. However the query stays: how can Sky supply above-average rates of interest whereas possessing such a big TVL?
Knowledge supply: Galaxy Analysis, https://app.vaults.fyi/
After all, instantly evaluating Sky’s financial savings charges with Aave or Morpho’s lending charges is not completely correct. The latter’s returns are completely primarily based on borrowing demand and capital utilization, whereas Sky’s return mechanism is completely different:
- The rate of interest (stability charge/secure financial savings charge, SSR) is about by the governance physique.
- Sky can settle for any collateral it approves for lending, together with financing initiated from off-chain belongings (nevertheless, this mannequin is a double-edged sword, as lending charges inside its ecosystem are much less versatile and costlier).
However, all initiatives stay in competitors on the funding provide aspect. Sky acts equally to a central financial institution, taking part within the overwhelming majority of income streams by issuing unsecured credit score strains to numerous entities. Due to this fact, exploring the character of its income streams, the proportion of on-chain and real-world asset revenues, and the correlation and scalability of varied income streams is of nice worth.
As Sky co-founder Rune himself stated, “At the moment, stablecoins value over $300 billion will not be producing any returns”… However how a lot of this enormous potential demand can truly be absorbed?
On-chain income overview
Earlier than delving into Sky’s stability sheet and monetary scenario, let’s briefly define how on-chain income is generated and the general income scale in 2025.
Simplified on-chain income sources
Mortgage curiosity
Like conventional finance, the cash market can be on the core of DeFi, accounting for over 60% of the overall TVL (TVL) of DeFi. In 2025, whole lending curiosity income (together with collateralized debt positions and uncollateralized/low-collateralized lending) was roughly $1.76 billion. So what’s the core motivation for customers to borrow? At the moment, there are three most important lending fashions: unified liquidity swimming pools like Aave v3, segregated swimming pools with threat managers like Morpho, and the central financial institution mannequin of Sky and its associated ecosystem. We are going to break them down one after the other.
High 15 debtors on Ethereum Aave v3
Morpho’s High 15 Debtors
There are three most important varieties of eventualities driving lending demand:
- Revolving lending. This includes borrowing associated belongings and revolving them to maximise the returns on interest-bearing belongings. At the moment, in Ethereum Aave v3, roughly 39% of lending demand is used to amplify ETH staking rewards, with Fluid, EtherFi, and Lido being the primary contributors, traditionally exceeding 45%; sUSDe revolving lending demand accounts for roughly 11.6%. On Morpho, a minimum of 27% of lending is instantly used for USD revolving methods inside the protocol, incomes returns on belongings corresponding to sUSDS, syrupUSDC, and sUSDe; roughly 5% is used for ETH-related methods.
- Unfold buying and selling and leverage. Roughly 45% of Aave lending demand falls into this class: customers borrow stablecoins utilizing non-stable belongings corresponding to BTC and ETH as collateral, after which make investments the funds in different channels to earn curiosity spreads, bettering capital effectivity. For instance, the biggest borrower on Morpho (6.5%) borrows USDC and deposits it into Sky Financial savings merchandise. One other main situation is spot leveraged lengthy positions (prime debtors on Aave, 0x54d25, xed0c6, 0x28a55, and 0x741aa, all use this technique), or borrowing stablecoins for different functions whereas sustaining collateral publicity. At the moment, on Morpho, roughly 40% of curiosity earnings comes from lending utilizing cbBTC as collateral (excluding the biggest borrower), with a good portion of these funds originating from Coinbase customers.
- Different secondary wants embody borrowing non-stable belongings as collateral to quick promote utilizing stablecoins, or funding methods primarily based on different buying and selling pairs.
As we will see, about half of the borrowing actions are basically aimed toward leveraging different sources of earnings. This raises two core questions: Where does this curiosity come from? And what alternate options can be found as soon as current methods are exhausted?
Public blockchain community staking rewards
The staking rewards for native belongings on public blockchains are primarily divided into two classes: community issuance rewards and MEV rewards (precedence charges + bribes).
Knowledge sources: Dune, Helius, Blockworks
Ethereum’s staking rewards primarily come from community inflation, with a most every day issuance of roughly 2,700 ETH, totaling round 1 million ETH by 2025. Solana’s annual issuance is roughly 24-25 million SOL. The benefit of this kind of reward is its excessive stability, however the principal worth fluctuates considerably.
Of the staking rewards, 5%-20% (5%-30% on Solana) comes from on-chain exercise (precedence charges and MEV), a proportion that has been declining since Ethereum merged. It is because roughly half of MEV income comes from arbitrage and half from front-running; the latter has been considerably lowered as a result of widespread adoption of anti-MEV instruments corresponding to OFA and solvers (at the moment, about 90% of transactions are non-public routes); the previous was as soon as monopolized by non-neutral searchers and block builders, however is now extremely depending on market situations and extremely aggressive.
Funding charges
Ethena pioneered the on-chain perpetual contract funding charge income mannequin, producing roughly $240 million in charge income in 2025 (90% of which got here from funding charges), with whole income from this mannequin reaching roughly $300 million. The distinctive worth of this kind of income lies in:
- Introducing new income streams to DeFi by way of tokenization and composability;
- Income are simple to seize;
- It has sustainability, even with vital market volatility (16% return in 2021, 0.6% in 2022, roughly 9% in 2023, and roughly 13% in 2024).
This makes it an splendid underlying asset for derivatives corresponding to fixed-rate merchandise and rate of interest swaps, and associated merchandise have already been launched on Pendle.
Whereas its scalability stays to be seen, BTC perpetual contract open curiosity is projected to be between $35 billion and $65 billion in 2025, whereas ETH perpetual contract open curiosity is estimated at round $20 billion to $40 billion. By early 2026, the overall market open curiosity for perpetual contracts is anticipated to achieve roughly $75 billion, with Ethena at the moment accounting for about 1.8%.
Transaction charges
Token swaps stay one of the core actions on the blockchain, offering infrastructure for merchants and gathering transaction charges—a secure path to profitability. In 2025, automated market maker (AMM) liquidity suppliers generated roughly $4.2 billion in transaction charges, with 62% coming from Uniswap, Meteora, and Raydium.
Nevertheless, capturing these advantages by way of structured merchandise isn’t simple:
- Liquidity suppliers (LPs) usually face losses: liquidity swimming pools are weak to malicious order flows, and centralized liquidity suppliers are significantly susceptible to losses, normally solely skilled gamers take part; the market acceptance of Uniswap LP administration merchandise can be not excessive.
- Restricted composability: Restricted software eventualities for LP positions as collateral.
- Income are concentrated in a number of belongings: A big portion of transaction charges come from area of interest belongings, making it troublesome to adapt to merchandise with bizarre returns. In 2025, roughly 25% of Ethereum’s buying and selling quantity got here from ETH-stablecoin buying and selling pairs (at the moment round 60%), and 41% from USD buying and selling pairs; on Solana, 50% of buying and selling quantity got here from SOL-USD buying and selling pairs, Meme coin accounted for 30%, and stablecoin buying and selling pairs accounted for under 5% (at the moment a ratio of roughly 62:12:17).
- The battle between AMMs and PMMs: The scalability of AMMs stays controversial. Though most front-end buying and selling quantity is routed by way of the solver community, solely about 11% is accomplished by way of Skilled Market Makers (PMMs), with the rest nonetheless dealt with by AMMs. Solana’s devoted AMMs had a 30% market share in 2025, which has now risen to 60%, dominating the SOL-USD buying and selling pair, with a peak market share of 86%.
However, there are nonetheless some buying and selling technique vaults on Gauntlet, and Sky, the core topic of this examine, additionally holds some AMM liquidity supplier positions.
With the rising reputation of DeFi perpetual contracts, their market-making vaults (HLP, LLP, and so forth.) may be seen as an different to Uniswap LP administration merchandise. LP returns are average (roughly $130 million), with JLP contributing an further $670 million. Threat managers are carefully monitoring this space, whose threat traits may be summarized as follows: “Merchandise corresponding to HLP, LLP, Giga Vault, and OLP have skilled most drawdowns of 5%-9%, and have seen consecutive months of floating losses; every day returns conform to market-making traits, with most displaying small income, some breaking even, and occasional giant losses; risk-adjusted returns are wonderful, however the distribution of returns is uneven and path-dependent.”
Threat switch advantages
There are 3 ways to handle threat: retention, mitigation, and switch. At the moment, most contributors primarily select to retain threat and make use of superior mitigation instruments. Nevertheless, the channels for transferring volatility threat or protocol threat (technical, financial, and governance dangers) stay very restricted, and the related premium features are negligible. This may increasingly signify an untapped blue ocean market.
Decentralized choices will not be a brand new idea; the DeFi area has seen quite a few makes an attempt, together with choices AMMs, perpetual choices, and choices vaults (DOV), however most merchandise have failed to face the take a look at of time. Nevertheless, groups proceed to develop on this space, and extra tokenizable volatility-yielding merchandise are anticipated to emerge sooner or later.
From a market alternative perspective, CeFi choices and perpetual contracts face fierce competitors. CeFi choices open curiosity is projected to be between $30 billion and $50 billion in 2025, with present on-chain choices open curiosity at roughly $1.8 billion (primarily from Derive). Choice premiums, like funding charges, are persistent, however capturing and packaging them is extraordinarily troublesome. It is value noting that as threat managers’ asset allocation turns into extra subtle and competitors intensifies, vaults could incorporate choices into their portfolios to take care of a aggressive edge.
Premium earnings from insurance coverage underwriting stays minimal, with the overwhelming majority coming from established initiatives like Nexus Mutual. In 2025, the platform generated over $5.5 million in income for insurance coverage sellers, with threat publicity primarily concentrated in on-chain merchandise corresponding to Fasanara, Infinifi, and Dialectic. In the present low-yield atmosphere, on-chain threat pricing is extraordinarily advanced, and the insurance coverage sector remains to be in its early phases. Demand could develop as income sources diversify and protocols mature. Oblique mechanisms corresponding to Aave’s Umbrella insurance coverage and extracting reserves from transaction charges can mitigate the insolvency threat of a single protocol, however they’re troublesome to adapt to structured merchandise.
Actual-world belongings (RWA)
This text goals to research the sources of on-chain income; subsequently, the introduction to RWA is just a tough estimate for market reference. Based on knowledge from rwa.xyz, RWA’s whole worth has grown from roughly $5.6 billion in 2025 to the present $27 billion, with US Treasury bonds accounting for the biggest share (roughly 41%) and personal credit score accounting for roughly 25%. By making use of standard yields to the common dimension of varied asset courses in 2025 and together with interest-bearing commodities and actual property earnings, RWA’s whole annual income is estimated to be roughly $600-900 million.
In abstract, the overall on-chain income in 2025 was roughly $8 billion, however the distribution of income sources was uneven, and a few revenues, even when out there, have been troublesome to seize reliably (corresponding to AMM charges and volatility returns), whereas the potential for safe returns was much more restricted. Nevertheless, with the continued innovation in DeFi and the emergence of crypto-native alternatives, extra on-chain charge and income seize mechanisms are anticipated to look sooner or later.
Again to Sky
Let’s get again to the primary subject and discover how Sky integrates varied income streams to kind a coherent and secure technique by analyzing its efficiency in 2025 and its present structure.
Sky’s Monetary Briefing for 2025-Early 2026. Knowledge supply: Dune, Sky Discussion board.
Simplified asset overview and projected return construction. Knowledge supply: Sky Official.
At the moment, Sky derives roughly 55% of its income from its direct lending enterprise (PSM, crypto vault, conventional RWA, and SKY token collateralized lending), with the remaining 45% coming from uncollateralized credit score strains issued to its affiliated ecosystem.
PSM (Pegged Steady Module) stays the biggest supply of income, contributing roughly 44% of whole earnings. In 2025, roughly 27% of PSM’s whole income will come from USDC deposits on Coinbase.
The returns from crypto vaults are average, with ETH and WSETH collateralized belongings contributing probably the most.
Excluding PSM, direct publicity to conventional RWA has continued to say no, and income is at the moment primarily generated by way of the newly launched ecosystem companion Grove Finance. Of its cumulative income, 47% comes from Janus Henderson JAAA (cash-like devices and mortgage-backed securities), 16.7% from Janus Henderson JTRSY (US short-term Treasury securities), and 15.2% from BlackRock BUIDL-I (cash-like devices).
Obex is a brand new credit score line companion, with roughly $600 million at the moment allotted to syrupUSD, and plans to develop into the core allocation platform for structured interest-bearing merchandise sooner or later.
Spark’s income and asset share have steadily elevated since April 2025, surpassing the d3m lending mannequin to develop into a core allocation channel, contributing 20%-65% of income. Spark acts as each an asset supervisor and a threat supervisor.
- Function its personal lending protocol Sparklend (an Aave v3 fork).
- Throughout the threat framework, flexibly allocate interest-earning alternatives which are larger than the borrowing price (SSR + 0.3%).
So, where precisely does the income flowing into Spark come from?
Knowledge supply: Dune, Spark official web site
Sparklend lending is the biggest asset in Spark’s liquidity layer, contributing 37% of whole gross income (excluding reward distribution) in February 2026, largely in keeping with the degrees within the third and fourth quarters (33.4% and 37.8%, respectively). Why do customers lend and borrow on Sparklend?
Sparklend’s High 15 Debtors
Since solely WSETH is an interest-bearing token that can be utilized as collateral, its core use is the basic revolving technique, accounting for about 50% of the overall lending quantity and being the primary supply of reserve earnings. Main contributors embody establishments corresponding to Ipor, Threehouse, Mellow, and Summerfi.
The bulk of the remaining loans are in stablecoins. Solely USDT’s rate of interest mannequin is unbiased of SSR, primarily based on capital utilization, which can clarify its place because the second-largest lending asset (roughly 25%). Why are customers prepared to borrow different stablecoins at charges larger than the market common? The explanations are unclear. For instance, the highest lending addresses on Spark are related to 7 Siblings, accounting for a minimum of 15% of whole lending (and holding a whole bunch of idle ETH). Their latest actions embody leveraged lengthy positions in ETH and SKY and participation in SKY staking; inside capital reuse, income sharing, and SPK mining are seemingly the first motivations. The second-largest borrower constantly buys and stakes SKY utilizing the time-weighted common worth (TWAP).
Greater than half of the income comes from different earnings sources, with particular investments dynamically adjusted primarily based on present market returns. For instance, a good portion of the income within the third and fourth quarters got here from Morpho, Maple, and Ethena; at the moment, every day income comes from Maple (10.6%), Anchorage (11.2%), and PayPal deposit earnings (30%).
So how does Maple generate returns? Roughly 28% of the funds are used to concern collateralized loans to institutional debtors at an annualized rate of interest of 6%-9% (collateral being blue-chip belongings corresponding to BTC, XRP, and SOL). The remaining funds are then allotted to interest-bearing belongings, with one-third flowing again into USDS financial savings merchandise and the rest invested in Aave, PYUSD, Superstate, and syrupUSD liquidity swimming pools.
What about Anchorage? They provide BTC-secured loans to establishments at rates of interest under 6.5%.
What about Morpho and Ethena? Their income logic has been analyzed intimately within the earlier article.
Lastly, a short abstract of Sky’s monetary scenario: Whole income in 2025 was $338 million, with $194 million paid out to financial savings customers. The present financial savings pool of $6.7 billion in USDS has a payout charge of 3.75%, distributing roughly $688,000 in every day dividends and yielding roughly $1.17 million in every day returns. Based mostly on the present projected income construction, Spark’s income is roughly 50:50 between on-chain and off-chain sources, whereas roughly 70% of Sky’s total income comes from off-chain sources. What does this imply for the whole market?
Regardless of where the returns originate, a sustainable supply of earnings has emerged on-chain, exhibiting decrease dependence on market exercise and leverage demand, and weaker correlation with conventional on-chain returns, offering a secure protected haven for people and protocols. For Sky, its diversified and versatile allocation technique permits for fast changes when on-chain threat urge for food recovers. Moreover, with USDS turning into the biggest interest-bearing stablecoin in phrases of real-time quantity, mixed with the habits of main debtors, it may be seen that Sky not directly helps different protocols preserve rate of interest ranges.
Some argue that conventional finance is swallowing DeFi, and certainly, many tokenized RWAs have entry restrictions, making participation troublesome for bizarre customers. Nevertheless, though yields are generated off-chain, they finally circulation again to on-chain for distribution. This pattern is essential, bringing liquidity and diversified yields to DeFi, permitting permissionless protocols to learn. Moreover, this will drive the implementation and large-scale growth of next-generation yield derivatives corresponding to fixed-rate merchandise, rate of interest swaps, threat stratification, and structured merchandise. Is a real DeFi renaissance imminent?
