In the crypto space, have you ever encountered a situation like this? Today you might be celebrating a hundredfold return, but tomorrow you could be facing bottomless losses. This high volatility is both the allure and the source of anxiety for many. Everyone is asking one question: aside from chasing trends and bearing immense risks, is there a way in the DeFi space to achieve relatively stable and predictable returns similar to bonds or fixed deposits in the traditional financial world?
For a long time, the answer seemed to be negative. However, with the continuous evolution of the DeFi ecosystem, some protocols focused on building underlying infrastructure have begun to attempt to solve this problem.
Before we dive deeper, let's take a look at what the financial returns in the real world are like. According to data from the past two years, the annualized return on cash management products from banks is around 1.88%, while fixed-income products with slightly higher risks, such as bond funds, have an average annualized return of about 3% to 4.5%. If you're willing to take on greater risks and invest in the stock market or equity funds, you might achieve returns of 7% to 12% over the long term, but this requires you to endure significant market volatility and hold for the long term.
These numbers are our familiar reference frame. Now, let's turn our attention back to DeFi.
Imagine if there were a protocol that does not rely on the explosive growth of new coins or high-risk liquidity mining, but instead creates earnings by capturing small price differences within the cryptocurrency market and utilizing the earning ability of the underlying assets. Doesn't that sound more robust?
Recently, I've noticed a project that is deeply exploring this direction. The core product it designed can be understood as a 'Treasury bond of the crypto world.' The operational principle is not complicated: you deposit mainstream interest-bearing assets, such as Ethereum (ETH) or liquid staking tokens (LST), and the protocol will automatically help you participate in a complex cross-market arbitrage strategy. The goal of this strategy is not to bet on direction, but to earn the 'price difference' generated by market inefficiencies, which we call market efficiency yield (MEY).
In this way, your final earnings consist of two parts: one part is the staking yield generated by the underlying asset itself, which is currently around 3-5%; the other part is the additional earnings earned through efficient arbitrage strategies, which can typically add another 1-5%. Together, the overall annualized yield (APY) can reach a range of 4% to 10%.
This number is very interesting. Its lower limit has already surpassed the returns of the vast majority of fixed-income products in traditional finance, while its upper limit is comparable to high-risk equity investments. More importantly, it provides a completely new source of income, one that does not rely entirely on the overall bull or bear market.
Of course, we must recognize that this is still DeFi, where risks and opportunities coexist. Vulnerabilities in smart contracts, price fluctuations of underlying assets, and the operational status of the protocol itself are all potential risk points. It is by no means a 'risk-free' investment in the traditional sense. Its risk level is closer to that of stocks or funds, but its underlying logic and sources of income are entirely different.
For those investors who seek returns above traditional fixed income without fully exposing themselves to the immense volatility of the cryptocurrency market, this may provide a new option worth exploring. It acts as a bridge, connecting our desire for stable returns with the efficient financial tools offered by the DeFi world.
This exploration marks an important step for DeFi as it evolves from pure speculation to a mature asset allocation tool. If you are also looking for the next possibility for asset allocation, perhaps you can pay attention to the development in this field.
