A turning point for DeFi incentives

Curve Finance founder Michael Egorov argues that the old playbook of using token inflation to attract liquidity is no longer viable and that protocols must design products that generate real revenue. Markets have moved: speculative demand that once chased triple‑digit yields has faded, and many liquidity providers now evaluate protocols through a risk‑adjusted lens rather than chasing transient emissions.

Market evidence and capital flows

Data from analytics platforms show a substantial contraction in locked capital — a decline of roughly 38% in aggregate TVL over six months — while derivatives venues expanded, with perpetual futures activity reaching about $1.37 trillion in a recent month. That reallocation signals a preference for instruments offering leverage or spot accumulation, not short‑lived farm yields.

Egorov reframes tokens as tools for governance and decentralization rather than as mechanisms for creating yield; without governance utility, tokens risk being perceived as regulated financial instruments rather than protocol infrastructure. The practical implication: teams must either build fee‑generating features or forgo token launches altogether.

Proof points and emerging playbooks

Other industry voices and recent governance experiments bolster Egorov’s case but also complicate the expected outcomes. Asset managers and analytics firms (including commentary from Bitwise) highlight that a growing subset of protocols already produce measurable, recurring receipts and sustained user activity — metrics that make these protocols look more like conventional, revenue‑driven businesses than narrative‑led token plays.

Practical implementations are visible today: Aave generates annual protocol receipts in the low hundreds of millions and is debating proposals to funnel product revenue directly into DAO treasuries for buybacks, reserves and development. Those mechanisms would create clearer linkages between on‑chain economic performance and governance choices, but the Aave case also shows a gap between receipts and market pricing — its native token has slid roughly 50% year‑over‑year — underlining that revenue alone does not automatically re‑rate an asset.

Where revenue is concentrated

Broader fee tallies indicate that economic value is increasingly captured at the application and service layer — stablecoin rails, trading venues, wallets and user‑facing protocols now claim a growing share of transaction income that once skewed toward base layers. Niche verticals such as decentralized physical infrastructure networks (DePIN) are moving from narrative to measurable commerce (estimated at roughly $72 million in on‑chain revenue last year), and institutional pilots suggest approximately $1.4 billion in committed capital to targeted on‑chain growth rounds and custody-enabled deployments in early‑2026.

Technical and governance constraints

Sustaining on‑chain revenue changes the engineering and governance mandate: protocols must harden capital efficiency, invest in MEV‑resistant execution paths or private order routing, and clarify treasury policies that legally and operationally define "revenue." Implementation risks are material — messy governance rollouts, unclear accounting definitions, and concentrated custodial or counterparty exposures can delay or negate any re‑rating even when receipts exist.

What this means for builders and investors

For builders, the immediate priority is to design monetizable product flows (swap fees, subscription APIs, institutional services, or MEV capture) and to bake clearer capital‑policy primitives into token and treasury design. For allocators, custody, legal clarity and composability risk will determine whether revenue‑driven token allocations can scale into multi‑year positions. In short: protocols that can demonstrate repeatable, auditable income streams and credible capital policies will attract patient capital; emission‑dependent projects will face accelerated outflows or forced pivots over the next 6–12 months.