Written by: Master Zuo

No matter how many lies are woven, the truth will shine out its bright outline.

Asset management giants are increasingly interested in on-chain vaults, the mainstreaming of the DeFi dream seems to be becoming a reality.

This is the best of times, BlackRock buying $UNI tokens, Apollo promising to buy over $100 million worth of $Morpho tokens, Wall Street is collectively optimistic about the future of DeFi.

This is the worst of times, BlackRock, Blackstone, and Blue Owl facing a wave of concentrated redemptions, Aave’s founder warns that Wall Street is using RWA as a liquidity exit channel.

Crises always contain rare bottom prices, in the face of future asset price inflation, rising powers are excited, completely disregarding the iceberg ahead.

Whatever you call it, DeFi/RWA/Vault, on-chain finance must swallow the candy coating while firing back, only by adeptly breaking an old world can a new Eden be built.

One can even embody this sweet apple—risk-free interest rate.

Dream of Risk-Free Interest Rate

Stablecoins based on on-chain assets, establish a risk-free interest rate market, only then can there be bargaining power facing traditional asset management giants.

We start with a question to determine the anchor point of discussion, why hasn't DeFi had a risk-free interest rate until now?

Or, in terms of how “U.S. Treasuries” can become the linear narrative of DeFi benchmark interest rates.

Image description: Chronicle of Stablecoins

Image source: @zuoyeweb3

Starting from the DeFi Summer of 2020, repeated failures have shaped resilience:

• Launched in 2018, DAI based on crypto assets lacked scale, and $USDS eventually became U.S. Treasury certificates
• Launched in 2021, the Ponzi-based $UST could not survive the 2022 bank run, and the story of rebuilding stable glory was discarded
• In 2022, stETH faced a PoS faith crisis after The Merge, Pendle ultimately abandoned LST to embrace USDe
• In 2023/24, the CDP stablecoins issued by DeFi giants like Aave/Curve are not recognized by other protocols
• In 2025, the market once thought Ethena's $USDe was unique, reviving on-chain glory, but yield-bearing stablecoins ultimately differentiated into deposits and yield-bearing activities, not challenging the dominance of USDT/USDC in their respective fields.

The facts are very clear, it is not USDT that is devouring users' profits, but DeFi's choice of the scale effect of USDT/USDC.

By exchanging the profits generated from $300 billion in treasury bonds for the trading basis of the entire market, DeFi and the crypto market cannot be said to be losing.

However, at what cost?

The cost is not the evil that yield-bearing stablecoin challengers claim Tether takes profits, or the selfish accusations from Coinbase and little Trump regarding the banking industry prohibiting yield.

The bitter fruit DeFi has ingested is that U.S. Treasuries, as a risk-free interest rate, are transmitted to the on-chain through stablecoins, but Treasury bonds are the assets of the U.S. government, which will not care about feelings on-chain.

This is also the fundamental reason for the bankruptcy of token economics, UNI relies on A16Z, A16Z relies on dollar financing, the dollar embodies U.S. Treasuries, which means UNI is just relying on the fourth derivative of U.S. Treasuries, so why not buy U.S. Treasuries directly, with no middleman earning the spread.

U.S. Treasuries are the de facto DeFi benchmark, but DeFi can only passively bear this, unable to interact with it bidirectionally, this is the root of all happiness or pain.

Image description: Comparison of annualized yields of on-chain stablecoins and U.S. Treasuries

Image source: @BarkerMoneyX

The effort to save DeFi has never stopped, although the bankruptcy of token economics and the collapse of DAO governance structures occurred, the overall direction of DeFi remains clear:

1. Fixed-rate financing, recognized risk grading systems, unsecured credit lending –> the next market axis, embedded with some form of universal product;
2. The expansion period of public chains, exchanges, and DeFi protocols has ended, new application forms are roughly defined as Vaults, it cannot be definitively said that Vaults are the form of universal products, but this is the starting point of a new phase.

It should be noted that public chains and exchanges are no longer the central links for value capture, but it does not mean a moment of zero, their asset price inflation period has ended, and only linear stable growth lies ahead.

This can also connect the progressive relationship between UNI and U.S. Treasuries, Aave/Morpho are closer to asset management itself, their business lacks much narrative space but is indispensable for the industry.

The true star products must be Vaults that are used by the public, based on public chains and DeFi protocols, decentralized and trigger asset price inflation mechanisms.

For public use, Curators choose to ally with exchanges, Morpho enters Coinbase via Stakehouse, Aave expands B-end users through Metamask and other U-cards.

Based on RWA assets, Curators cooperate with custodians like Galaxy to maneuver between crypto and real assets, such as Grove purchasing Galaxy's CLO bonds.

But what is missing is the Vault that triggers price inflation mechanisms, even before the massive on-chain launch of asset management, BlackRock's BUILD tokens have already gone live, and Circle's USYC also supports yield, but cannot replicate their success.

It is not important that Vault has no native token, asset price inflation is a mechanism, stocks, real estate, bonds, tulips, graphics cards, and Mac Minis all have their own price fluctuation cycles, but now Vault only has a yield black box, yet has not solved two problems:

1. Where does the high yield actually come from?
2. How is high risk managed?

Towards a New Financial System

The channel form is evolving, Vault is not the endpoint.

The evolution speed of the crypto industry is extremely fast, until this year, we would never have dared to imagine that the global financial system would really go on-chain, but today it is undoubtedly in progress.

It's not time for a celebration yet, RWA can only act as a source of funds, Vault is still a boring deposit game, various Curators have not demonstrated a brand effect, white-label Vaults like Veda are highly similar to SaaS, and the operators Curators only earn management fees.

There is completely no imagination of price inflation, if the traditional $20 trillion scale of asset management is subjected to cyclical torment, it is hard to imagine that Vault can withstand it.

Image description: Capital flow and value distribution

Image source: @zuoyeweb3

On-chain asset management is not driven by short-lived emotions, in some sense similar to the IOE of the banking industry, we cannot regress to the paper era, even Spark begins to unify the margin adjustments of CEX/DEX holdings, DeFi becomes the next step of TradFi.

Whether the Vault, after absorbing enough funds, will trigger the establishment of a risk-free interest rate is the biggest point of contention in this cycle.

In the previous DeFi Summer period, TVL was a decisive indicator, the amount of funds reflected the wealth multiplier of tokens, creating a mining frenzy that extended to brushing tokens, studios, and Binance Alpha, the core logic being "project teams need more funds to support token growth."

However, Vault has, for the first time, a huge demand for deposits but is unable to support its own token, even if Morpho captures more market share from Aave, it cannot trigger a token surge.

For promotion, Hyperliquid compared to Binance, Lighter compared to Hyperliquid, their market scales and token prices have massive inversions, this is a significant shift that DeFi has not experienced.

On one hand, the old infrastructure continues to suck blood, for instance, after the effect of listing coins fades $BNB should decline, but CEX still has a user base larger than the total on-chain + DeFi, a very ironic fact is that exchanges have retail investors, while DeFi protocols like Aave and Morpho have completely become territories for a few professionals.

In this context, the high risks of Vault and Curator stem from code and structure:

• The programming language of Curve's immutable contracts may have issues, the xUSD team may issue more tokens on their own
• Aave has ended the superficial harmony of DAO and development teams, Re7 has struck the credibility of on-chain asset management

In this context, what is the source of high returns for Vault and Curator?

I know it is not regulatory arbitrage, HLP, and other fees and token incentives, but many still cling to these three, believing that traditional finance’s compliance shapes a reputation that is large and cannot fail.

Forgetting entirely that token economics has already gone bankrupt, while the deposit amount in Vault has been continuously rising, Sky has deeply integrated into the Morpho system, the future of Aave V4 is also a parallel between institutionalization and modularization.

Moreover, this article continuously emphasizes that the capital scale of Vault has not triggered any price inflation mechanism, which is the structural dilemma of Vault.

The yield of Vault essentially comes from the trading efficiency of the global market; if CEX does not offer a certain type of Vault, then it is moved on-chain, and the personalized Curator just fits well to maneuver among various types of people.

The global market of TradFi, even for U.S. stocks, has to face the long opening of accounts, trading times, and procedural restrictions; one cannot say the gradual all-day trading of U.S. stocks and the on-chain DTCC is also to arbitrage, right?

The final question is, what mechanism can trigger the price inflation of assets, allowing the funds settled in Vault to create a legendary market rate.

In other words, what is missing from Vault to achieve asset price inflation?

Lacking channels, lacking the channels that couple funds together, the personalization of Curators obstructs the programming nature of DeFi Legos.

Currently, CEX serves as a placeholder, still being the fastest intertwined place for funds.

Referencing the evolution of Perp DEX, seizing market share from CEX contracts, the funding sources of RWA are all capturing the market of CEX.

CEX only has a stock of users; they cannot even solve the problem of acquiring new users, let alone help Vault expand to millions of users, Vault started by badge engineering and in the future will need to build super factories themselves.

I speculate that channels will take on some sort of Broker product form.

Under a high degree of social division of labor, exchanges, which integrate deposit and withdrawal, trading, custody, and clearing into a Super App, will gradually split their businesses; Binance's compliance framework in Abu Dhabi ADGM is an example of three-way segmentation.

This will fundamentally facilitate the professional degree of fund processing and utilize the unified ledger system of blockchain, and it will require the intermediary coordination of Vault and Curator.

Referencing Neobrokers like Robinhood/Trade Republic, attracting younger and retail users to participate in professional trading, thereby building asset management and wealth management business forms, where stablecoins serve as the front-end, and Curators manage Vault in a more efficient model.

In summary, Binance monopolizes the capital flow, BNB gains the strongest empowerment, next the Broker is responsible for capital interaction, some form of assets, or even purely business flows are highly profitable, after all, Robinhood is only a profitable market maker's small vest.

Conclusion

Compared to code and trading, regulation and tokens appear more stable.

Private credit and RWA cycle has come to a halt, the issuance of document 402 has a prophetic sense; DeFi is not unable to act as a liquidity exit channel, but lacks a mechanism for asset price inflation.

Asset management ≈ Aave/Morpho will gradually end their historical missions like public chains, they will exist long-term but only grow in scale and stabilize token prices;

Vault and Curator ≈ star fund managers, are rapidly acquiring customers and monopolizing the market, there are initial signs of becoming giants, but whether they can continue capturing value is highly doubtful;

Channels ≈ CEX (temporary) actually have the most innovative potential, facilitating the freedom of funds will always receive the highest rewards.

A highly efficient global market is operating on public chains that do not require traditional tokens; this is the proposition of the next era, and everyone must provide an answer.