Cryptocurrency-based yield products are still far behind their traditional financial counterparts (TradFi), but latest blockchain sectors resembling Liquid Staking Tokens (LSTs) and Real-World Assets (RWAs) are steadily closing the gap, in accordance with a brand new report co-authored by RedStone Oracles, Gauntlet, Stablewatch and the Tokenized Asset Coalition and shared with Cointelegraph.
Only 8% to 11% of cryptocurrencies offer passive yield models, indicating a big gap in comparison with 55% to 65% of TradFi assets, a few fivefold disparity, the report said. However, stablecoins, RWAs and “blue chip” yield tokens are quickly closing the passive income gap in decentralized finance (DeFi).
New regulations resembling the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act passed in July are helping the industry catch up, resulting in increasing demand for each high-yield stablecoins and RWAs, the report said. The GENIUS Act sets clear rules for collateralizing stablecoins and requires compliance with anti-money laundering laws.
“As clarity increases, high-yield stablecoins are exploding: market caps are up 300% year-over-year, and latest protocols are being launched every month to make the most of this chance.”
RWAs, that are tokenized versions of traditional assets resembling bonds or funds, are also opening up latest sources of passive income as large institutions realize the efficiency of on-chain settlement.
Ether and Solana LSTs are gaining traction
Blue-chip yield tokens like Ether (ETH) LSTs and Solana (SOL) LSTs are also gaining traction by creating greater capital efficiency for cryptocurrency stakers.
Ether Liquid Stake Token. Source: Redstone
The variety of ETH LSTs rose from six million to 16 million within the two years to November, reaching a notional value of $34 billion at today's prices.
LSTs like Lido's stETH (STETH) provide crypto stakers with an equivalent of the staked token that may be traded or staked in other DeFi protocols, creating greater capital efficiency.
Crypto yield investments are poised for “exponential growth” in the subsequent few months.
Crypto yield assets are poised for “exponential growth” in the approaching months and are expected to learn from the divide between DeFi and TradFi, says the report, calling it “crypto’s biggest opportunity.”
“As the 'crypto-as-infrastructure' thesis gains traction and on-chain financing demonstrates its superior capital efficiency, income-generating crypto assets are positioned for exponential growth” as institutional capital will seek greater “efficiency,” it said.
Yield-generating tokens resembling Solana LSTs are also becoming increasingly popular amongst institutions as they will generate a passive return of around 4% on top of their holdings.
Similar to Ether, the provision of Solana LSTs has doubled from 20 million in January 2024 to roughly 40 million on the time of writing, with a complete of 67% of the Solana token supply now tied to staking smart contracts.
