Real Yield - DeFi 2.0
DeFi started to arrive as a concept in 2018, and 2020’s “DeFi summer” saw market entrants piling headfirst into DeFi to early mind-blowing returns of 1,000% a year for staking or using a protocol.
But these liquidity mining models were flawed because they were based on excessive emissions of protocols’ native tokens rather than sharing organic protocol profits.
Liquidity mining resulted in unsustainable growth, and when yields diminished, token prices dropped. Depleting DAO treasuries to supply rewards programs — or simply minting more and more tokens — for new joiners looked like a Ponzi scheme. Known as “yield farming” to some, others preferred to call it “ponzinomics.”
While recognizing these returns were unsustainable, many sophisticated investors became enthralled with staking (locking up tokens for rewards). The dangers of unsustainable yields were seen in mid-2022, when the DeFi ecosystem and much of the rest of crypto were gutted in a handful of days.
This has made people have started to pay more attention to the “real yield” methodology that rewards stakeholders based on the revenue generated recently.
Real yield is the percentage of a protocol’s revenue that may be earned by staking or locking their governance token. The system distributes revenue to users in the form of a dominant token. This is a DeFi 2.0 protocol.
With real yield, users will be sharing in platform revenue and will be paid with the tokens they want.
For a project to be considered “Real Yield,” higher inflation emissions/ APR are not necessary. They are projects that embrace the idea of giving value and using accumulating methods that rely on a genuine, consistent, and generally committed user base.
The ability to attract new users and grow revenue generation over time to compensate token holders is a prerequisite for the growth of cryptocurrency businesses that focus on genuine returns.
Last modified 4mo ago