Income stablecoins: The integration of traditional finance and decentralized finance

Original title: "Earning stablecoins: The integration of traditional finance and decentralized finance"

Original author: Amber Group

Stablecoins have become an important infrastructure for digital payments and transactions. In 2024, the total transaction volume of stablecoins reached US$27.6 trillion, exceeding the annual transaction volume of Visa and Mastercard. Currently, more than 90% of order book transactions with approximately 70% of on-chain settlements are conducted using stablecoins. The stablecoin market size grew from US$138 billion in February 2024 to more than US$230 billion in May 2025, establishing its position as an infrastructure in decentralized finance.

Recently, profitable stablecoins have emerged and quickly adopted in the market, with a 13-fold increase from US$660 million in August 2023 to approximately US$9 billion in May 2025, accounting for about 4% of the total stablecoin market. If this growth trend continues, the track is expected to account for 50% of the stablecoin market in the next few years, and the total locked position may reach hundreds of billions of dollars.

This report aims to explore the rise of income stablecoins and sort out its development path from its early form to its rapid growth today—a trajectory that is somewhat similar to the growth of traditional money market funds. We will also analyze the risks present in its design and focus on possible innovation directions in the future. By reviewing historical context and cutting-edge trends, this report hopes to provide a clear framework for understanding the evolving role of such stablecoins in the DeFi ecosystem.

Figure 1: The total market value of stablecoins has increased from US$5 billion in 2020 to over US$230 billion in May 2025, with significant fluctuations during the period 2022-2023, mainly affected by the FTX crash event

Current Stable Coin Market Overview

Before delving into profitable stablecoins, we first briefly review the overall situation of the current stablecoin market.

The stablecoin market has firmly established its position as the core pillar of digital finance, with its total market value achieving staggering growth – up more than 60% from US$138 billion in February 2024 to exceed US$230 billion in May 2025. Originally designed as a price-anchored asset against cryptocurrencies’ high volatility, stablecoins have become key tools to support trillions of dollars in trading activities around the world.

In 2024 alone, the total transaction volume of stablecoins reached US$27.6 trillion, exceeding the sum of annual transaction volumes between Visa and Mastercard, highlighting its key role as a medium of value transmission in the centralized and decentralized financial system.

Figure 2: In 2024, the total transaction volume of stablecoins processed was US$27.6 trillion, exceeding the sum of the annual transaction volume between Visa and Mastercard.

Total locked positions for stablecoins divided by blockchain

Figure 3: Ethereum dominates stablecoin issuance, carrying about 52% of existing stablecoins

Ethereum

Ethereum carries about $124 billion in stablecoin TVL, accounting for 52% of the entire market. Among them, USDC accounts for about 42%, USDT accounts for 34%, and DAI accounts for 18%. Its institutional-level adoption in decentralized finance protocols (such as Aave, which currently has approximately $40 billion in stablecoin deposits) is the main driver of its continued growth.

Tron

Tron's stablecoin TVL has expanded to $66.9 billion, dominated by USDT (89%) and is widely used in cross-border payments. The network handles 35% of stablecoin transactions worldwide, especially in emerging markets.

Solana

Solana's stablecoin TVL is approximately US$11.5 billion, and thanks to its high performance that can process 57.77 million transactions per day and costs less than $0.001 per transaction, it has become the first choice for the high-efficiency trading ecosystem.

BNB Chain

The stablecoin TVL on BNB Chain is US$9.2 billion, mainly composed of FDUSD (51%) and USDT (39%).

Arbitrum, Polygon and Avalanche

· Arbitrum: TVL is US$2.6 billion, with major stablecoins being USDC (52%) and DAI (31%).

· Polygon: TVL is US$1.8 billion, USDC accounts for 48.6%, and USDT accounts for 37.2%.

· Avalanche: TVL is US$1.5 billion, mainly USDT (67%) and USDC (28%).

Stablecoin user distribution divided by blockchain

Figure 4: Distribution of USDC and USDT users on various chains

The distribution of stablecoin users on different blockchains reveals the significant difference between the user adoption model and the total locked position. Some network users have a large number but relatively small amount of locked positions, while others carry disproportionately large-value TVLs with limited user base, reflecting the fundamental differences in user behavior, transaction characteristics and economic utility of each chain.

Tron: High-value, low-frequency trading lead

Tron ranked first with 3.1 million active stablecoin users per week, although the annual growth rate is milder than other competitors. Nevertheless, the network handles 41% of global stablecoin transactions, mainly due to its central role in high-value, low-frequency USDT transfers, with monthly transaction volumes of more than $500 billion. Tron’s infrastructure is crucial to institutional-level liquidity, balancing high transaction volumes and slower user growth.

BNB Chain: a trading center for retail users

BNB Chain has approximately 2 million active users per week, making it one of the most active networks for user interaction and once surpassed Tron in the number of active users this year. In the first quarter of 2025, the chain processed an average of about 1.2 million stablecoin transactions per day, an increase of 28% year-on-year. Its stablecoin TVL reached US$10.1 billion, accounting for about 4.4% of the market share, showing strong growth momentum. This growth is due to its zero-fee transactions and deep integration with the Binance ecosystem, making it a gathering place for traders and capital to pursue cost efficiency and professional infrastructure.

Solana: High throughput, microtransaction-oriented

Solana currently has about 800,000 active users per week, growing rapidly in the past two years. The network processes nearly 10 million stablecoin transactions per week, fully reflecting its high throughput, low-cost network architecture, and is suitable for micro-transaction-intensive use scenarios.

Ethereum: Institutional-level income engine

Ethereum has 600,000 active users per week. Although it lags behind emerging public chains in terms of user scale, its dominance in institutional capital and high-value transactions is still unshakable. Ethereum’s average stablecoin transaction amount is the highest among all mainstream blockchains: USDC averaged $97,900 and USDT $41,700, which is much higher than the average of less than $1,000 on the retail-oriented chain. This data reflects Ethereum's solid position as the core platform for large-scale institutional activities.

Layer 2: Emerging ecology grows rapidly

Layer 2 networks such as Arbitrum (250,000 daily active users) and Optimism (150,000 daily active users) are developing rapidly, although their total TVL is still relatively small at present. Currently, stablecoins have become the core component of multi-chain infrastructure and DeFi applications. The number of monthly active addresses reached 30 million, a year-on-year increase of 53%, and the monthly transaction amount reached trillions of dollars, further consolidating its fundamental position in the crypto ecosystem.

Growth potential of income stablecoins: Next-generation money market

funds

The previous article reviewed the scale and adoption of the stablecoin industry, but the most turning point in this field is not only the growth data itself, but the rise of income stablecoins - this is the core focus of this report. As an emerging financial hybrid tool, such assets are reshaping how users use their original "static" assets.

According to Stablewatch data, income stablecoins are experiencing explosive growth, with total supply surged from US$666 million in August 2023 to US$8.98 billion in May 2025, during which the peak occurred in February 2025 (US$10.8 billion). Although it still accounts for less than 5% of the entire stablecoin market, the segment achieved a 583% growth in just one year in 2024, mainly driven by the increasing demand for native cryptocurrency tools by institutions and the continuous improvement of decentralized financial infrastructure.

Unlike traditional stablecoins, yield-based stablecoins automatically embed income strategies through smart contracts, such as risk-neutral hedging transactions or tokenization of US Treasury bonds (the market itself grew 414% in 2024), achieving automatic value-added assets. By removing centralized intermediaries, this type of stablecoins has implemented DeFi's core concept of "autonomous, transparent, and permissionless access".

Regulatory trends also support its development, such as the SEC's approval of some income products and programmable currency frameworks, further demonstrating its feasibility and compliance as a next-generation financial instrument.

Figure 5: Total supply of income stablecoins increased from US$666 million in August 2023 to US$10.8 billion in May 2025, an increase of nearly 13 times

Analogy with money market funds

Figure 6: The growth trajectory of income-based stablecoins shows that their adoption speed is even higher than the development of traditional money market funds since their establishment in 1971

Earnings stablecoins are expanding rapidly along a development path far beyond traditional money market funds. Money Market Fund was launched in 1971 and has grown into a $7 trillion industry as of May 2025; similarly, income stablecoins are meeting the market's demand for automated returns on cash-equivalent assets.

Key similarities between the two include:

· Revenue demand: Both fill the gap between traditional savings interest rates and market yields

· Liquidity acquisition: Money market funds have enhanced liquidity by supporting check payments; income stablecoins have achieved efficient liquidity through on-chain instant redemption.

· Regulatory drivers: The rise of money market funds benefited from the Q Regulations' cap limit on bank deposit rates; today, regulatory clarity of stablecoins is supporting their development

JPMorgan Chase predicts that by 2030, earnings stablecoins are expected to account for 50% of the stablecoin market, and their size will grow from less than $10 billion to hundreds of billions of dollars.

The development history of income-based stablecoins and the main income

generation mechanism

Review of historical development

2017–2019: The basic stage of static stablecoins

Tether (USDT, 2014) and USD Coin (USDC, 2018) launched a centralized stablecoin supported by fiat currency, aiming to achieve price stability, but do not have native returns capabilities.

· DAI launched by MakerDAO in 2017 has realized a decentralized mortgage mechanism and is an important pioneer in this field, but the revenue function was not integrated in the early stage, with the focus on value anchoring and preservation

2020–2022: DeFi boom and early-stage profit exploration

· MakerDAO's DAI savings rate provides 3–8% annualized returns, which is realized through excessive mortgage lending, and is the first case to achieve decentralized returns integration.

Algorithm models such as TerraUSD (UST) try high-yield mechanisms, but ultimately fail due to lack of sustainability

· Frax Finance launches hybrid partial algorithm models to try to avoid the fragility exposed by pure algorithm models (such as UST) while improving capital efficiency.

2023: Institutional-level hybrid strategy and new entrants

Ondo Finance launches RWA-backed stablecoin (USDY) collateralized by tokenized US Treasury bonds, attracting institutional funds

Level Finance generates revenue through low-risk lending activities on mature DeFi protocols such as Aave

· Aave launched GHO, a decentralized, over-collateralized stablecoin in July 2023

2024: Mainstream adoption and rapid growth

· Ethena officially launched its synthetic stablecoin USDe on the Ethereum main network in February 2024

BlackRock launches BUIDL project, launching a tokenized Treasury bond fund for US$500 million, with an annualized yield of more than 5%, further verifying the feasibility of the RWA collateral model

· Usual's USD0 has grown rapidly since its launch in June 2024

Resolv introduces a risk-hierarchical income vault, allowing users to choose freely in conservative to leveraged (4.3%–15.2% APY) strategies

2025: Diversification, automation and regulatory clarity

· Sky Protocol introduces AI-driven revenue optimization strategies, and AI stablecoins and revenue management have become the key focus of the "DeFi + AI" boom in early 2025

· In February 2025, YLDS became the first earnings stablecoin approved by the U.S. Securities and Exchange Commission, with an annual interest rate of 3.85%.

· Aave proposed the sGHO savings token plan, aiming to expand the application scenarios of GHO and create low-risk returns stablecoins. The returns come from the native returns of USDC on Aave V3

· Stablecoin-related regulation is further clarified: At the beginning of 2025, the SEC approved the use of income stablecoins as securities regulation. At the same time, the introduction of the "STABLE" and the "GENIUS" also mark a further clarification of the stablecoin regulatory framework.

Core sources of income

Real-world assets RWA mortgage

These stablecoins are supported by traditional financial assets (most commonly US Treasury bonds) as collateral and generate returns through these assets. By March 2025, the tokenized US Treasury market size had reached US$5 billion, and the annualized yield of related products was between 4.8% and 6.8%. Due to its good compliance attributes and widespread acceptance by institutional investors, this segment is continuing to develop.

In this field, BlackRock's BUIDL ranks first with approximately US$1.7 billion in assets under management, followed by Ondo Finance's USDY, Mountain Protocol's USDM and Usual Money's USD0. Due to its high compatibility with traditional financial systems, the sector has a huge potential market space, and is expected to reach a scale of US$3.5 trillion to US$10 trillion by 2030.

Derivative Arbitrage

These stablecoins make profits through low-risk derivative transactions and usually rely on perpetual contracts to operate. For example, Ethena's sUSDe uses a Delta Neutral neutral hedging strategy to achieve an annualized rate of return of 10% to 27%, increasing its market capitalization from $65 million to $3.5 billion in one year.

However, there are inherent limitations on the growth potential of the track. Its earnings depend on limited holdings and volatile capital rates in the perpetual market, which make it significantly inferior to more stable sources of income such as tokenized Treasury bonds. At the same time, the regulatory environment also adds uncertainty to its prospects. Recent legislative trends such as the Genius Act and the Stable Act have classified such products as "non-compliant" and tend to support the regulated RWA tokenization path of real-world assets.

Therefore, although derivative arbitrage stablecoins may still serve specific high-end user groups as high-yield options, their market space is much smaller than RWA-supported stablecoins. The latter is more in line with institutional standards and global regulatory orientation and has trillions of dollars in growth potential.

DeFi lending, liquidity mining and automation income aggregation

Such agreements generate benefits by allocating capital to lending, liquidity mining and other automation strategies. Currently, the total locked position in this category is between hundreds of millions and billions of dollars, the annualized yield of lending strategies is about 3–12%, and liquidity mining can reach 5–20%+. As of April 2025, the total TVL of the DeFi lending and liquidity mining agreement was approximately US$42.7 billion. However, TVL, the stablecoin that generates benefits through these mechanisms, accounts for only a small fraction of it, and is currently estimated to be around hundreds of millions to billions of dollars.

This gap mainly stems from the following three reasons:

1. Most TVLs come from highly volatile assets (such as BTC and ETH), not stablecoins;

2. Stablecoins are more commonly used for lending rather than depositing to earn income;

3. Rewards for liquidity mining are usually issued in governance tokens rather than stablecoins themselves, which decouples TVL from the actual stablecoin income generated.

Therefore, although such strategies bring certain sources of income to stablecoins, there is still a significant gap between their overall scale and sustainability compared with RWA collateral or derivative arbitrage stablecoins.

Risk Management

Earning stablecoins face a series of specific risks and need to be effectively relieved through multi-dimensional means:

· Smart contract risk: reduce the impact of potential vulnerabilities through third-party audits, vulnerability bounty programs and formal verification methods.

· Regulatory risk: managed through active compliance, modular design and obtaining relevant licenses.

· Liquidity risk: Rely on high-quality reserve assets, diversified asset portfolios and sound redemption mechanisms for temporary release.

· Return sustainability risk: Ensure long-term and stable returns through diversified returns, hedging strategies and reserve funds.

· Collateral risk: Use conservative loan collateral ratio, high-quality collateral screening mechanism and efficient clearing system for management.

· Risks between counterparty and platform: Risk control is carried out through due diligence, security audits and transparent information disclosure mechanisms.

Frontiers of innovation

We believe that this field still has significant innovation potential in two key dimensions: the continuous evolution of infrastructure and the diversified expansion of revenue sources.

Infrastructure Innovation: Plasma

Plasma is a new public chain supported by Tether and designed specifically for stablecoins. Its launch marks an important leap in the income-based stablecoin infrastructure. Plasma combines Bitcoin-level security, zero-fee USDT transfers and fully compatible with EVMs, laying a strong foundation for the next stage of innovation in income-based stablecoin products and is expected to spawn a new category of income-generating models.

The current stablecoin ecosystem is built on a general infrastructure that is not optimized for its characteristics, which to some extent limits the innovation of the revenue model. Existing public chains usually treat stablecoins as no different from other tokens, neither optimizing their trading characteristics nor supporting more complex earning logic. Users need to manually deploy strategies through lending platforms or liquidity pools. The process is cumbersome, the handling fees are high, and the management is complex. Frequent strategy switching and transaction monitoring are also constantly eroding the final returns, hindering large-scale adoption.

Plasma has specially designed architecturally at the above pain points, including:

· Zero Fee USDT: Plasma's most transformative innovation is its USDT zero fee transfer function through delay-based prioritization. After eliminating transaction costs, the micro-return model that was originally unfeasible due to handling fees was implemented, such as frequent automatic position adjustments and hourly profit distribution.

· Flexible transaction cost system: Plasma provides customized Gas Token function, which supports users to pay handling fees using USDT or other assets without relying on exclusive tokens. This greatly simplifies the operation process, and users do not need to manage additional fees, and also provides an execution basis for complex, automated, and frequent transactions.

· Bitcoin-level security anchoring: Plasma regularly anchors state data to the Bitcoin blockchain, enabling permissionless endurance, greater censorship resistance, and a globally verifiable source of trust. This strong security design is of critical significance to promote institutional participation in complex revenue products

· EVM compatibility and innovation space: Plasma's native compatibility with Ethereum virtual machines enables the existing DeFi protocols and revenue mechanisms to be directly migrated, and accelerates ecological construction. At the same time, this compatibility also opens up space for native innovation, e.g.

· Programmable stablecoins: Automatically allocate funds to the optimal return strategy according to market conditions;

· Time-locked stablecoins: exchange for higher returns by locking the position;

· New revenue distribution and rebalancing mechanism: models that are not possible on high-cost chains will become possible.

In short, Plasma is a blockchain environment tailored to the needs of stablecoin characteristics and income generation. By removing handling fee friction, simplifying transaction execution, enhancing security and opening up deep customization capabilities, Plasma has the potential to completely reshape the design paradigm and application boundaries of income-based stablecoins.

Diversified sources of income

On-chain revenue source case: Unitas

Unitas is a decentralized multi-chain payment protocol with its core product being USDu, a revenue stablecoin based on a neutral hedging strategy. The key component of the ecosystem is JLP, the liquidity provider token of Jupiter perpetual contract platform, which represents the liquidity share provided by users on the Jupiter platform.

How JLP generates profits

· Income Sharing: JLP holders can obtain approximately 75% of the transaction fee income of Jupiter perpetual contract platform, including leveraged trading and redemption fees.

· Re-investment mechanism: The income will not be distributed directly in the form of stablecoins, but will automatically flow back to the JLP pool, thereby increasing the virtual price of JLP tokens and achieving compound interest growth.

· Market exposure: JLP tokens correspond to a basket of assets, including SOL, ETH, BTC, USDC and USDT, and holders will bear the risks and returns of price fluctuations in these assets.

· Yield range: Annualized yield changes weekly according to the platform's trading volume and market volatility. During periods of high trading activity and volatility, high double-digit returns have been achieved in history.

· Hedging relationship between trader 's returns and pool losses: When traders make profits, their profits come from liquidity pools, so JLP holders may face a decline in returns or even principal losses.

Unitas’ core innovations

Unitas combines a variety of sources of income, including fee income, pledge rewards, fund rate spread arbitrage and efficient collateral management for the perpetual contract trading platform to achieve optimized revenue performance

· Its core stablecoin USDu achieves profit acquisition by deploying neutral hedging strategies on multiple assets such as staking SOL, ETH and BTC.

· Dynamic multi-asset mortgage mechanism further enhances the stability and transparency of its anchoring and reduces the risks brought by price fluctuations

Unitas also integrates with real-world payment systems through Unitas Card, allowing users to easily consume credits backed by crypto assets.

· The agreement has good cross-ecological interoperability between centralized finance and decentralized finance, providing liquidity and practical application scenarios for institutions and individual users.

Unlike the traditional underlying pledge income model, Unitas adopts a hybrid income extraction strategy, relying on the two core mechanisms of the Jupiter perpetual contract platform: (1) accumulation of transaction fees; (2) opportunities for capital rate arbitrage

Since JLP is a passive asset basket, its asset composition will be constantly adjusted with market flow and trader profit and loss, the model requires more complex neutral hedging management, which is far more challenging than the static single asset mortgage model.

Unitas combines the above-mentioned income mechanism with payment and credit system, and strategically positiones it as a multi-functional crypto financial ecosystem integrating income, payment and credit, opening up the channel for on-chain income and real financial applications.

In addition, this model also reveals a broader potential direction: In the future, protocols can support new income stablecoins by unlocking more underutilized on-chain revenue sources (such as DEX fees, NFT royalties, etc.), and achieve the deep integration of DeFi innovation and scalable financial infrastructure.

Off-chain income sources potential innovation paths for income-based

stablecoins

Private Equity Credit and Asset-Backed Securities ABS as collateral

Incorporate tokenized private credit instruments and asset-backed securities into the stablecoin reserve system to obtain income through interest income from off-chain loans. For example, the stablecoin YLDS launched by Figure Markets, whose collateral includes securities similar to those held by high-quality money market funds, covering private equity assets such as ABS. This mortgage structure is different from the model in which most traditional stablecoins rely mainly on U.S. Treasury or fiat currency reserves, and also allows them to access higher-yield, but traditionally difficult to access credit markets.

GPU mining or computing resource revenue

Tokenize revenue from GPU mining farms or decentralized computing power networks and serve as collateral for stablecoins' income source. This method can convert the operating income generated by off-chain and hardware-intensive services into on-chain revenue. For example: GAIB will tokenize the ownership of GPUs such as NVIDIA H100, H200, GB200 and other GPUs and their future computing power income, and issue tradable income certificates; USD.ai also focuses on tokenizing AI infrastructure (such as computing power resources) and using it for stablecoin revenue generation. Although there is currently no agreement to directly support such computing power revenue as stablecoins for income, the above project verifies the feasibility of tokenizing off-chain computing power infrastructure revenue.

Insurance premiums and underwriting income

Premium income generated through underwriting activities of decentralized or traditional insurance is used as a source of income for stablecoins. Stable coins can be endorsed by the pool of assets that receive premium returns and distributes that income to the coin holder. This model connects insurance cash flow with stablecoin returns, expanding its source of income and no longer limits to financial markets. Although there is currently no agreement to issue stablecoins entirely with insurance premiums 1:1, designs such as BakUp's RLP model and Resolv's layered income structure have initially demonstrated how insurance income complements traditional collaterals such as Treasury bonds or pledged ETH.

These innovative paths are driving the income stablecoin model to expand from a single chain DeFi strategy to a wider real-world income stream and synthetic collateral, improving its stability, scalability and compliance-friendliness.

Conclusion: Finding a balance between innovation and stability

Earnings stablecoins represent an important evolution in the digital finance field, combining the stability of traditional assets with the efficiency of DeFi protocols. The track has achieved 13 times growth over the past two years and has received support from large institutions such as BlackRock, showing strong momentum for continued expansion. The key to achieving sustainable growth lies in the balance between earnings optimization and regulatory compliance. In the future, protocols that can effectively integrate institutional-level custodial mechanisms with DeFi native innovation may lead the evolution of financial infrastructure in the next stage. As the market gradually matures, income stablecoins are evolving from experimental products to the basic component of the global financial system, not only providing users with stability, but also meeting their demand for returns.