What is Real Yield?
Real Yield is called real income because the revenue is distributed in a dominant token, such as Ether (ETH) or USDC, which contrasts with the incentive model known as DeFi 2.0, where the revenue came in exchange for a token of the protocol itself. In this way it was possible to offer extremely high returns, but this was only possible by issuing new tokens, which ultimately inflated the economics of the project and reduced its value.
Real yield is very similar to a stock dividend. With real yield, you invest money in a DeFi protocol, and through that investment, the protocol is able to generate revenue from which it provides you a small share. Meanwhile, you of course still hang onto your investment as well.
In DeFi investors have noted that several projects offer substantial inflationary incentives, which decrease the price of their tokens without providing long-term benefits.
In this segment there are a few project tokens that are getting a lot of attention in the last months, for example:
Gains Network (GNS)
It’s a decentralized trading platform that runs on the Polygon network. It has a few differentiators that make it possible for traders to trade crypto-assets, Forex and stocks.
How does it work?
Gains Network allows users to do their own custody of their assets without the need to transfer funds to the platform, this makes the operation totally free of KYC (Know Your Custumer). This tends to generate demand from traders operating from countries that have restrictions against cryptos.
Trades are opened in DAI (stablecoin) as collateral, regardless of the trading pair. Leverage is provided by the liquidity of the native GNS token and the DAI stablecoin, which offers a low trading spread. Profits from trading are also paid out in DAI.
To receive the yield generated through the fees paid by traders, holders must stake the GNS token within the platform. In total 40% of the fees that are generated through market orders and 15% through limit orders will be distributed.
This is a decentralized exchange that runs through the Arbitrum network, which is one of Ethereum’s main Layer 2 and runs on the Avalanche network. On GMX the focus is on trading futures contracts leveraged up to 30 times through a fully decentralized environment. Because it runs on the Arbitrum network, the fees paid for trading are very low and the futures market is very liquid. Within the dApp itself is possible to stake the GMX token and receive rewards, a percentage is paid in the native token and the rest in WETH. Gmx holders receive 30% of the total revenue generated by the protocol.
Real yield is a welcome addition to the DeFi stable after a rough year of crypto price crashes that saw interest in governance token yield farming take a beating. It provides a more realistic and practical expectation for investors on their investment returns, and hopefully sustainable results. Just how sustainable, will be answered over the coming years.