📝 Editor's Note:

Happy 2026!

In today's issue we're focusing on yield, the flows of capital which have some active traders moving money on a daily basis, while others park their stablecoins for low-risk yield.

Leading off we have the vaults.fyi team, who index hundreds of opportunities to earn yield across crypto. We then have Alex, digging into Pendle, by far the largest and most impactful yield-splitting protocol in crypto. To close, Diego checked out Merkl, a project focused on distributing incentives.

Enjoy!

– ON Editorial Team

Sector Overview | Pendle | Merkl

• Vaults.fyi simplifies the yield landscape by bringing together hundreds of yields across protocols and chains into one place. Currently, the vaults.fyi “blue chip” stablecoin 30-day average benchmark yield has dipped to ~3.8%, marking a significant shift from the 10%+ highs seen in previous months, as demand for leverage has fallen across major lending markets.

• With the 1-month U.S. T-bill yielding 3.7%, USDC and USDT yields on Aave currently sit below TradFi’s risk-free rate. DeFi’s other largest stablecoin vaults from Sky and Ethena are only slightly higher, returning just over 4% APY during the past 30 days.

• Alpha still exists for active farmers. Vaults.fyi data currently shows several opportunities that have returned >10% APY over the past 30 days on large TVLs. Aave Horizon RLUSD and Turtle Avalanche USDC both offer double digit yields, driven heavily by incentives.

• Pendle is the largest onchain yield-trading protocol, separating principal and yield into distinct assets that let users trade, hedge or lock in fixed returns on DeFi yield. In early 2025, Pendle held $4.6B total value locked (TVL) across 4 chains. As demand for structured yield rose and the protocol expanded to 8 chains, and TVL peaked at $12.9B. As DeFi activity slowed and average DeFi yields compressed, capital rotated out of dated markets, pulling TVL down to roughly $3.5B by year-end.

• Pendle’s trading volume scaled sharply in 2025, peaking near $12B in September as activity clustered around major maturity cycles. Alongside automated market makers (AMMs) and limit orders, Pendle introduced Boros, enabling onchain trading of tokenized perpetual funding-rate exposure previously unavailable in DeFi.

• Pendle generated $34M in revenue in 2025, with monthly revenue consistently exceeding $1M throughout the year. Revenue scales with trading activity and maturity cycles, while a significant share is directed to vePENDLE holders, aligning protocol growth with long-term governance participants.

• Merkl is incentive infrastructure that allows protocols to distribute yield-based rewards for onchain activities such as liquidity provision and lending. Campaign creation on Merkl scaled sharply through 2025, peaking at ~2.6K new campaigns in July 2025. This sustained launch volume across multiple chains suggests that protocols are increasingly using yield as a programmable incentive to attract, redirect, and test the persistence of liquidity.

• User participation surged in 2025, with monthly reward claimers reaching a peak of ~310K in September. This rapid expansion highlights how incentives can attract users at scale, but also suggests demand that is highly responsive to reward availability rather than persistent, organic engagement.

• Merkl distributed ~$60M+ in cumulative rewards during 2025, with multiple months exceeding $10M in incentives. This sustained flow of rewards underscores the scale at which incentive infrastructure now operates, turning yield distribution itself into a measurable economic activity within DeFi.