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Section 3 of 4

Stablecoins & DeFi Yields

· Updated daily at 15:20 UTC

On-chain lending yields are the single most important variable in stablecoin deployment decisions. A stablecoin held in a wallet earns nothing; a stablecoin deposited on Aave or Compound earns a variable APY set by pool utilisation. When that APY exceeds the risk-free Treasury yield, an institutional allocator is compensated for taking smart-contract risk in exchange for additional yield. When the T-bill wins, on-chain deployment is uncompensated risk — capital leaves DeFi, stablecoin supply shrinks, and aggregate market cap contracts. This is the documented transmission mechanism from BIS Working Paper 1068 (2023): the 2022–23 hike cycle pushed T-bills above 5% and drove stablecoin supply from ~$180B to ~$130B. The 2024 cutting cycle reversed it.

This section tracks lending rates across five major institutional venues — Aave V3 and Compound V3, on Ethereum and Arbitrum, across USDC, USDT, and DAI. Two charts cover the essentials: a single headline spread (Aave USDC vs 3-month T-bill) for the macro signal, and a multi-pool comparison for picking the highest-paying venue at any given time. Together they answer the two questions that matter for DeFi deployment: should I be on-chain at all? and which pool pays best?

Yield Indicators
DeFi vs T-bill
DeFi Yield Spread
Aave USDC APY minus 3-month T-bill rate. The single cleanest measure of on-chain vs off-chain yield competition. Above zero: DeFi premium. Below: T-bills win.
-0.45pp
Near Parity
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Multi-Pool Comparison
DeFi Lending Yields by Pool
Side-by-side base APY for 5 major institutional lending pools — Aave V3 Ethereum (USDC, USDT, DAI), Compound V3 Ethereum (USDC), Aave V3 Arbitrum (USDC). Shows where yield premia exist across pools.
2.88% avg
5 pools tracked
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How to Use This Section

Start with DeFi Yield Spread for the macro signal: it is positive when on-chain deployment is rewarded relative to T-bills, negative when capital should sit off-chain. Then drop into DeFi Lending Yields by Pool for venue selection: when pools diverge by more than ~30 bps, there is an arbitrage worth exploiting. The spread tells you whether to be in DeFi; the multi-pool view tells you where. Pair both with the SOFR & rates page to see what the Fed is doing on the macro side, and the redemption pressure gauge to see whether allocators are already acting on these spreads.

Methodology Summary

DeFi APY source: DeFiLlama pool-level base APY (no incentive tokens, no LP rewards). Updated daily at 15:20 UTC.

T-bill rate: FRED series DTB3 (3-Month Treasury Bill, secondary market rate, percent per annum). Daily, published with 1-business-day lag.

Spread definition: Aave V3 USDC supply APY on Ethereum minus DTB3. Positive = DeFi premium; negative = T-bills win.

Pools tracked: Aave V3 Ethereum (USDC, USDT, DAI), Compound V3 Ethereum (USDC), Aave V3 Arbitrum (USDC). Selected for TVL depth, contract maturity, and institutional usage.

What is excluded: Incentive tokens (AAVE, COMP, ARB rewards), leveraged positions, LP fee yields, lending-against-collateral strategies. Base APY only — the apples-to-apples comparison with T-bills.

Smoothing: Raw daily series shown on the DeFi Spread page; the multi-pool page offers 7D / 30D moving-average toggles to filter intraday utilisation noise.

Frequently Asked Questions
Why compare DeFi yields to T-bills rather than only to each other?
T-bills are the risk-free benchmark institutional capital uses for cash management. When a stablecoin lent on Aave yields more than a 3-month Treasury, on-chain deployment is rewarded for the smart-contract risk. When T-bills yield more, the carry is negative — capital should flow off-chain. This is the single cleanest signal for whether DeFi is attractive on a risk-adjusted basis. Comparing DeFi pools only to each other tells you which protocol is paying more; comparing to T-bills tells you whether to be in DeFi at all.
Why are USDC and USDT lending rates different across pools?
Pools differ in utilisation (how much of the supplied capital is currently borrowed), collateral mix, interest rate models, and network. Aave V3 on Ethereum quotes a different USDC rate than Compound V3 on Ethereum, and Aave V3 on Arbitrum differs again. The multi-pool view exposes these spreads — when they widen, arbitrage opportunities exist; when they compress, capital is well-deployed across venues.
What is a healthy DeFi-T-bill spread?
There is no single "healthy" level — it varies by Fed regime. In zero-rate regimes (2020-21) spreads of +500-1000bps were normal because T-bills paid nothing. In tightening regimes (2022-23) spreads compressed to near zero or turned negative as T-bills became competitive. The 2024-25 cutting cycle has restored a modest positive spread. The trend matters more than the absolute level.
How do you handle pool-specific risk in these comparisons?
These charts show base APY only — no incentive tokens, no leveraged positions, no LP fees. Risk-adjustment is left to the analyst. Aave V3 and Compound V3 have multi-year audit histories and battle-tested liquidation engines, but smart-contract risk is real. The Kelp DAO / Aave bad-debt incident illustrates how oracle and collateral risks can cascade. Treat DeFi yields as risk-bearing T-bill alternatives, not equivalents.
Which DeFi venues are tracked?
Five institutional pools: Aave V3 on Ethereum (USDC, USDT, DAI), Compound V3 on Ethereum (USDC), and Aave V3 on Arbitrum (USDC). These were chosen for TVL depth, contract maturity, and the dominance of these venues in institutional DeFi allocation. APY data is pulled daily from DeFiLlama; T-bill rates come from FRED (series DTB3, 3-Month Treasury Bill).
Related Reading
Insight
Aave Bad Debt Crisis: Kelp DAO & Stablecoin Liquidity
How an oracle exploit cascaded into bad debt and a liquidity squeeze on Aave — the practical reminder that DeFi yields carry smart-contract risk that T-bill yields do not.
Insight
BIS & the Stablecoin Fragmentation Debate
The institutional framework for thinking about stablecoins as monetary infrastructure — and why DeFi yield spreads are a transmission channel central bankers now watch.
Macro Environment
Short-Term Rates & Stablecoin Markets
SOFR and the rate-cycle context. The macro rate signal drives the T-bill yield that the DeFi spread is measured against.
Market Dynamics
Redemption Pressure Gauge
Per-coin 30-day flow analysis. Pairs with the DeFi spread to confirm whether on-chain allocation is already responding to the macro signal.