Real Yield: 7 DeFi protocols with actual value

In the field of Decentralized Finance, many projects attract liquidity through large token rewards. Although this practice can bring about TVL growth in the short term, there are two main issues: first, excessive issuance of tokens without value creation may lead to system collapse; second, user loyalty is low, and once incentives decrease, users will shift to other new projects.

If a high token issuance coincides with low income from the protocol, the token price is likely to drop. DeFi users are gradually realizing that what they need are valuable tokens, not worthless air tokens. If a protocol can generate actual cash flow, users will naturally want to share in the profits.

So, what kind of protocol can be considered to have real yield? There are mainly the following criteria:

1. The product has a high degree of market fit, and user usage is not affected by market conditions or token incentives.

2. The protocol generates income on-chain through its own products.

3. Revenue greater than operating costs and token issuance volume, moderate token issuance is acceptable.

4. Pay yields with reliable assets such as ETH or stablecoins.

The following 7 protocols meet the above standards:

1. BTRFLY (Redacted Cartel)

BTRFLY has launched its V2 version, transitioning from a dilution model to a real yield model. Users can lock BTRFLY to earn rlBTRFLY, thereby earning income distributed in ETH. This income comes from its capital and product ecosystem.

2. Gains Network (Polygon)

This is a decentralized leverage trading platform that offers up to 150x leverage for cryptocurrencies, stocks, and forex. Currently, it provides DAI Vault and GNS-DAI LP, with single asset GNS staking coming soon.

3. Umami (Arbitrum)

Users can deposit UMAMI into mUMAMI to earn approximately 5% annual interest in WETH passive income from the protocol/treasury income. Additionally, there is a GLP/TCR USDC pool with an annual yield of about 20%. This pool charges fees through GMX and hedges market fluctuations through TracerDao.

4. Kujira (Cosmos L1)

Kujira offers a variety of products, including Orca( discount liquidation), Fin( decentralized order book trading), Blue( ecosystem core), and USK( decentralized stablecoin). Staking KUJI can earn a share of the protocol revenue, with the current annualized yield at 0.49%. As the adoption rate increases and more dApps are launched, the yield is expected to rise.

5. Trader Joe (Avalanche)

As the number one DEX on Avalanche, Trader Joe allows users to stake JOE for sJOE and earn USDC rewards. A fee of 0.05% is charged for each swap, which is distributed to the sJOE pool every 24 hours after being converted into stablecoins.

6. Synthetix (Ethereum / Optimism)

As one of the most innovative projects in the field of Decentralized Finance, Synthetix allows users to create synthetic assets through Kentra, trading real-world assets on-chain including cryptocurrencies, forex, precious metals, and more. Staking SNX can yield two types of rewards: sUSD( from traders, its native stablecoin ), and SNX inflation rewards.

7. GMX (Arbitrum / Avax)

GMX is a decentralized exchange that offers up to 30x leverage. It extracts a 30% fee from swaps and leveraged trades, converting it into ETH/AVAX and distributing it to staked GMX token holders. GMX has performed excellently during bear markets and is the number one dApp on Arbitrum, with usage continuously rising.

Practical Tools for Research Projects

• TokenTerminal / CryptoFees: Find sources of income
• Dune Analytics: provides analysis dashboards for protocols such as GMX and Gains
• Messari: Get token supply information
• Protocol Data: View the protocol internal data panel

When evaluating a project, it is important to consider the following key issues:

• What is the source of income?
• How much actual income did the protocol generate?
• What is the supply and issuance of the native token?
• What tokens are used to pay rewards?
• What is the core appeal of the protocol?

Potential Risks

1. Due to the revenue-sharing model, certain protocols may face regulatory risks.

2. Some protocols are based on financial engineering ( such as contracts and options ), which carry certain risks.