Tokenized Real-World Assets Outperform DeFi Yields by 2.13%

Investors are increasingly recognizing the importance of portfolio diversification to achieve sustainable investment returns while mitigating risks. However, the integration of DeFi assets into portfolios presents unique challenges, particularly in calculating and understanding returns. DeFi assets are known for their unpredictable and highly variable returns, making it difficult to assess their performance compared to more traditional assets.

Return on Investment (ROI) is a fundamental metric for evaluating the performance of an asset. It is calculated by comparing the current value of an asset to its initial purchase price. While this calculation is straightforward for many asset types, it becomes more complex with DeFi assets. The inherent volatility of cryptocurrencies, which are often used to purchase DeFi assets, further complicates the process of determining ROI. The value of the cryptocurrency can fluctuate dramatically, making it difficult to accurately assess the returns on a DeFi investment.

Tokenized real-world assets (RWAs), such as real estate, fine art, and clean energy infrastructure, offer a more stable and predictable yield opportunity. These assets generate real revenue, which can be more easily measured and compared to other investment returns. EcoYield Energy, a platform that monetizes renewable energy projects, exemplifies this trend. The platform connects global investors with verified renewable energy projects, enabling them to finance solar and battery projects and access verifiable, on-chain yields. The Hull 100kW Rooftop Solar Project in the UK, for instance, offers stable returns with an estimated annual percentage yield (APY) of 25% and monthly stablecoin payouts.

EcoYield Energy aggregates funds in fiat or the stablecoin USDC, deploys these funds into verified battery energy storage and solar projects, collects real-world revenue, and distributes the returns back to users. The annual yield on EcoYield projects in USDC ranges from 10% to 25%, and staking $EYE tokens can further boost these rates. The platform aims to provide real revenue, real yield, and real environmental impact, distinguishing itself from the speculative nature of many DeFi projects.

Tokenized RWAs have shown to outperform the median DeFi yield. The average combined annual yield of tokenized RWAs is 10.13%, significantly higher than the 8% median DeFi yield. These projects have generated active loans of more than $12 billion and total lending of $22.42 billion. The returns on real estate-backed loans range from approximately 9% for short-term loans to 12.5% for loans with a term of three years. For investors with higher risk tolerance, the yield on junior tranches in real estate loans can be up to 48%.

The shift towards RWAs in DeFi is driven by the need for sustainable yield. Traditional DeFi projects often relied on unsustainable token emissions to offer high APYs, which collapsed once rewards dried up. In contrast, RWA projects generate yields from real-world revenue, such as green energy infrastructure, treasuries, and real estate. These projects focus on high-quality, risk-adjusted lending, offering more stable and considerable APYs. As a result, RWA projects are expected to dominate the next phase of DeFi, providing a more reliable and sustainable investment opportunity.