DeFi Yield Compression Forces a Reckoning on Protocol Economics

Yields across major lending and liquidity protocols have compressed substantially as incentive emissions taper, exposing how much of the sector's headline return was subsidy rather than fee income.

The consequence is a rough repricing. Protocols generating genuine fee revenue have held up; those dependent on emissions have seen deposits leave quickly.

Several teams have responded by restructuring fee switches to direct revenue to token holders, a change that raises securities questions in most jurisdictions.