For years, decentralized finance has carried a yield-generation problem: most crypto assets simply didn’t produce sustainable passive income the way traditional finance (TradFi) products did. While bonds, treasuries, and structured products served as predictable yield engines in legacy markets, only a small fraction of crypto assets offered anything similar.

But that landscape is shifting fast.

A recent industry report shows that while only 8–11% of cryptocurrencies offer passive yield, new sectors — stablecoins, liquid staking tokens (LSTs), and real-world assets (RWAs) — are rapidly closing the yield gap with TradFi. What once seemed like parallel economic worlds are now moving toward convergence.

And the acceleration didn’t happen in a vacuum. The GENIUS Act, passed in the U.S. in July, created the clearest regulatory framework stablecoins have ever had. With rules around collateralization and compliance now formalized, confidence is flowing back into onchain yield markets — and innovators are finally shipping the products users have been waiting for.

1. Stablecoins Grow Up: From Utility Tokens to Yield Engines

Stablecoins have traditionally been seen as mere onchain cash — useful for transfers and settlements, but not much more. Yet the report highlights a dramatic shift:

Yield-bearing stablecoins are up over 300% year-over-year.

As regulatory clarity emerges, a new generation of stablecoins is being designed not only for stability, but for capital efficiency, offering returns generated from short-term treasury backing and other regulated financial instruments.

This matters because stablecoins are often the “first step” for new users entering the crypto economy. Turning passive stablecoins into productive assets brings DeFi one step closer to rivaling traditional savings and money markets.

2. RWAs: Bringing TradFi Onchain, One Asset at a Time

Real-world assets — tokenized versions of traditional instruments like bonds or credit portfolios — have quietly grown into one of crypto’s most important narratives.

Institutions are finally discovering that blockchains can move value faster, cheaper, and with more transparency than legacy rails. The result?

• New passive income streams tied to real economic activity
• Faster settlement cycles
• Lower operating and compliance overhead
• Higher liquidity by enabling global access, 24/7

RWAs aren’t just “bringing TradFi into crypto.” They’re rebuilding the financial backend into something leaner, more interoperable, and — eventually — more open to everyday participants.

The early signs are clear: RWAs are now one of the largest contributors to DeFi TVL growth.

3. LSTs: The Liquidity Layer Unlocking Crypto’s Native Yield

While RWAs bring traditional yield onchain, liquid staking tokens unlock crypto’s native yield.

ETH and SOL LSTs, for example, have exploded:

• ETH LSTs grew from 6M to 16M tokens in two years
• That’s $34B+ in value at today’s prices
• Solana LSTs doubled in 2024, reaching 40M tokens
• 67% of all SOL is now staked

Liquid staking converts passive staking positions into transferable assets, allowing users to:

• Hold exposure to the underlying token
• Earn staking rewards
• Deploy their LSTs into DeFi for additional yield

It’s capital efficiency at a scale TradFi simply can’t match.

And institutions are paying attention — especially when LSTs offer ~4% yield on top of the base asset.

4. Why Yields Are Set for Exponential Growth

The report frames the next few months as a tipping point:

“As the ‘crypto-as-infrastructure’ thesis grows, yield-generating assets are positioned for exponential growth.”

What this means is simple: once crypto is seen not just as an investment, but as digital infrastructure, capital will flow to the assets that make that infrastructure run — staking tokens, stablecoin treasuries, and tokenized economic products.

As this shift continues, the yield gap between crypto and TradFi isn’t just narrowing. It’s flipping.

Crypto’s unique efficiencies — composability, global access, programmable liquidity — create opportunities that simply don’t exist in legacy systems.

5. Under the Hood: The Tension Between Control and Decentralization

As yield-bearing digital assets rise, another discussion is gaining momentum: how decentralized are the chains supporting them?

A Bybit research team found that 16 blockchain networks have mechanisms that can freeze or restrict funds — some via:

• Hardcoded blacklist functions
• Validator-managed config files
• Smart contract–based freezing

Another 19 networks could adopt similar mechanisms with minor code changes.

While many of these features are intended to combat hacks or comply with regulations, they also highlight a deeper tension:

As blockchains integrate real-world compliance, how much decentralization are we willing to trade for security?

Not every chain agrees with Bybit’s findings — some quickly clarified that past interventions were community-approved, not protocol-level censorship.

Still, the debate reflects a maturing industry: building financial-grade infrastructure requires balancing freedom, safety, and global interoperability.

5. A Broader Pattern: The World Is Moving Onchain

Across all these developments — stablecoins, RWAs, staking tokens, governance debates — a larger shift is taking shape:

Financial infrastructure is slowly but unmistakably rewiring itself around open networks.

Where money flows, innovation follows.
Where innovation happens, new borders dissolve.

Communities gain direct access to assets once locked behind geography, privilege, or complex institutions. Builders experiment with systems where rules are transparent and change is collective. Global users interact with value at internet speed — not banking speed.

This new era blurs the lines between economies, industries, and borders. It’s not just finance evolving; it’s how people coordinate, collaborate, and create ownership across the world.

Some see this as disruption. Others see it as alignment — the world finally building systems that match how connected we’ve already become.

6. Final Words

The momentum behind yield-bearing stablecoins, tokenized assets, and liquid staking is more than a technical upgrade. It reflects a global desire for financial systems that are:

• More open
• More interoperable
• More transparent
• More efficient
• And accessible to anyone, anywhere

As blockchain and AI-driven infrastructures mature, they begin to resemble a new kind of digital environment — one where value, identity, and opportunity move freely across platforms and geographies.

A world where people can build, connect, and own without borders doesn’t arrive all at once. It starts with foundational layers like these: yield-generating assets, programmable money, and trust-minimized settlement.

We’re watching that foundation solidify right now.