Stablecoin Yield Guide: Analysis of 8 Types

Recently, the performance of the cryptocurrency market has been mediocre, and conservative and steady returns have once again become a market demand. This article will explore the classic yet evergreen topic of stablecoin yields, combining recent investment insights and research findings in the stablecoin field.

The stablecoins in the current cryptocurrency market are mainly divided into the following categories:

• The USDT with the highest market share but conditional compliance
• Compliant stablecoins pegged to fiat at a 1:1 ratio, such as USDC, PayPal USD, etc.
• Over-collateralized stablecoins, such as DAI, LUSD, etc.
• Synthetic asset stablecoin, such as USDe
• RWA project stablecoins backed by underlying assets such as US Treasuries, like USD0, USDY
• Algorithm stablecoin, such as FRAX
• Non-USD stablecoins, such as EURC, EURT, etc.

The main modes of earning yields through stablecoins currently are:

1. Stablecoin Lending

Lending is the most traditional financial revenue model, with the income coming from the interest paid by borrowers. It is necessary to consider the platform's security, the risk of borrower default, and the stability of returns. Main products include:

• Current financial management products from top exchanges
• DeFi protocols like Aave, Sky Protocol, Morpho Blue, etc.

During the bullish market, the demand for borrowing is strong, with returns reaching over 20%; during the calm period, it is around 2%-4%. Fixed-rate products sacrifice liquidity, usually offering higher returns than demand deposits.

There are still some innovations in the lending market, such as fixed-rate lending, interest rate layering, leveraged lending, and institutional lending.

2. Liquidity Mining Rewards

Represented by Curve, the yield comes from AMM trading fees and token rewards. Curve has high security but lower returns (0-2%). Other DEX stablecoin pools face similar issues. Currently, DeFi stablecoin pools are still primarily based on lending models.

3. Market Neutral Arbitrage Returns

Mainly includes:

• Funding Rate Arbitrage: Utilizing the price difference between perpetual contracts and spot prices
• Spot and futures arbitrage: utilizing the price difference between spot and futures.
• Cross-exchange arbitrage: Utilizing price differences between different exchanges.

Ethena has moved funding rate arbitrage on-chain, allowing ordinary users to participate. Other platforms like Pionex also offer term arbitrage products. However, overall, there are relatively few market-neutral arbitrage products aimed at retail.

4. US Treasury Yield RWA Project

U.S. Treasury bonds, as standardized high liquidity assets, are one of the few viable RWA products. Representative projects include:

• Ondo's USDY and OUSG, with an approximate yield of 4.25%
• Usual's USD0 and USD0++, the latter provides liquidity for US Treasuries

The yield of the US Treasury RWA project generally stabilizes around 4%, with additional high returns primarily coming from token incentives, which are not sustainable.

5. Structured Products of Options

Mainly using the strategy of selling put options ( Sell Put ) to earn option premiums. Suitable for range-bound markets, with higher risks in one-sided markets. Beginners are prone to falling into the trap of pursuing high option premiums while neglecting risks.

The Shark Fin strategy launched by OKX and others, which combines Bear Call Spread and Bull Put Spread, is suitable for users who prioritize capital safety.

On-chain options products such as Ribbon and Opyn are currently underdeveloped.

6. Tokenization of Earnings

The Pendle protocol splits yield-bearing assets into PT( principal ) and YT( yield ), supporting strategies such as fixed income, yield speculation, and risk hedging. Its stablecoin pool offers considerable returns, but they are mostly short to medium term, requiring frequent operations.

7. A Basket of Stablecoin Yield Products

Ether.Fi has launched the Market-Neutral USD pool, offering a diverse range of stablecoin yield products including lending, liquidity mining, funding rate arbitrage, and yield tokenization in the form of actively managed funds. It is suitable for users seeking stable returns but with limited capital.

8. Stablecoin Staking Yield

If the AO network accepts DAI on-chain staking, it can earn additional token rewards while ensuring the safety of DAI. The risk lies in the uncertainty of new project development.

In summary, understanding the sources of stablecoin yields and configuring them appropriately can provide a solid financial foundation for cryptocurrency investments.