📰 The on-chain fixed-rate lending protocols from 2021 that once seemed everywhere have largely disappeared. Element.fi previously raised a $32 million round led by a16z Crypto and Polychain Capital, and Notional.finance also raised $10 million in a round led by Pantera Capital—but in the end, it still couldn’t hold up.
🔥 The reason is actually very straightforward: back then, what were called “yields” often came from protocol token incentives and leveraged loops, not from the assets themselves generating cash flow. Once users start exiting in large numbers, this kind of setup is easy to break. Honestly, products that rely on continuously rising prices look fine in a bull market, but once the market turns, they’re hard to sustain.
💡 The article argues that Pendle is one of the few protocols that has survived in the fixed-rate track. The key shift is that tokenized interest-bearing assets—such as tokenized U.S. Treasuries—have started appearing on-chain. Previously, when ETH was collateralized to borrow stablecoins, the collateral asset itself didn’t generate income. But once tokenized U.S. Treasuries were used, the product gained a more relatively independent source of cash flow.
Here’s an example from the article: a tokenized Treasury with a value of $10,000 and an annualized return of 4.5% can generate $450 in yield every year. If the borrowing cost is 3%, that corresponds to about $300, and the cash flow can cover the interest. No matter how market prices move, the bond coupon doesn’t simply vanish because BTC is up or down.
👀 This change is already reflected in scale: tokenized money market fund shares grew from $770 million at the end of 2023 to $14.82 billion as of October 5, 2026—about a 19x expansion in under three years. In the past, DeFi was more like patching high-volatility assets; now, interest-bearing assets are changing how products are designed. Do you think the next batch of DeFi protocols that can truly survive will all be inseparable from real cash flow?
#DeFi #RWA #Pendle #On-chain finance
🔥 The reason is actually very straightforward: back then, what were called “yields” often came from protocol token incentives and leveraged loops, not from the assets themselves generating cash flow. Once users start exiting in large numbers, this kind of setup is easy to break. Honestly, products that rely on continuously rising prices look fine in a bull market, but once the market turns, they’re hard to sustain.
💡 The article argues that Pendle is one of the few protocols that has survived in the fixed-rate track. The key shift is that tokenized interest-bearing assets—such as tokenized U.S. Treasuries—have started appearing on-chain. Previously, when ETH was collateralized to borrow stablecoins, the collateral asset itself didn’t generate income. But once tokenized U.S. Treasuries were used, the product gained a more relatively independent source of cash flow.
Here’s an example from the article: a tokenized Treasury with a value of $10,000 and an annualized return of 4.5% can generate $450 in yield every year. If the borrowing cost is 3%, that corresponds to about $300, and the cash flow can cover the interest. No matter how market prices move, the bond coupon doesn’t simply vanish because BTC is up or down.
👀 This change is already reflected in scale: tokenized money market fund shares grew from $770 million at the end of 2023 to $14.82 billion as of October 5, 2026—about a 19x expansion in under three years. In the past, DeFi was more like patching high-volatility assets; now, interest-bearing assets are changing how products are designed. Do you think the next batch of DeFi protocols that can truly survive will all be inseparable from real cash flow?
#DeFi #RWA #Pendle #On-chain finance