#How Are Stablecoins Evolving to Generate Yield?
Stablecoins are undergoing a significant transformation, creating opportunities for users to earn income while maintaining stability. The latest generation introduces advanced on-chain strategies that pass earnings directly to holders. This article examines five leading yield-generating protocols in 2025, each feature stable tokens aimed at a $1 peg and varying levels of annual yield through unique mechanisms.
#What Is Falcon Finance Offering with USDf?
Falcon Finance has introduced USDf, a synthetic dollar that is underpinned by a mix of cryptocurrencies and tokenized real-world assets (RWAs). The protocol employs a model that relies on over-collateralization while actively generating yields across various markets. Users can mint USDf by depositing a range of collateral and stake it to earn an annual percentage yield (APY) between 8% and 12%. Yield sources include delta-neutral arbitrage, staking rewards, and returns from U.S. Treasuries.
Why Is Falcon Finance Unique?
Falcon Finance stands out due to its diversified, multi-strategy structure, ensuring competitive yields without reliance on a single income source. This strategy helps maintain the USDf peg, positioning Falcon Finance as an evolving universal collateralization layer for the digital economy.
How Is Falcon Finance Growing?
As of September 2025, Falcon launched its governance token, FF, and secured a $10 million investment round in October, initiating the second phase of its reward campaign. By October 2025, the supply of USDf surpassed $2 billion, reflecting strong market demand for hybrid yield models.
#What Does Ethena Offer with USDe?
Ethena has introduced USDe, leveraging a fully cryptocurrency-based approach to achieving stable yields. Minting USDe requires locking crypto assets such as ETH or stETH. A key feature of Ethena is its delta-neutral positioning, which effectively balances spot and futures market activities, ensuring the token remains pegged to the dollar while generating yields. Actively staking sUSDe can yield holders between 4% and 8% APY derived from perpetual swap funding rates and staking rewards.
What Makes Ethena Stand Out?
What sets Ethena apart is its pioneering decentralized stablecoin-like protocol, which consistently provides yields and dollar stability without the need for fiat or off-chain assets. This transparency and reduced reliance on traditional banking resonate with DeFi enthusiasts.
How Has Ethena Grown?
With the recovery of crypto markets during 2024 and 2025, Ethena's approach proved attractive, leading to a surge in USDe circulation beyond $12 billion by mid-October 2025. However, it's important to note that returns are significantly influenced by crypto market dynamics, with bullish periods typically yielding higher returns.
#What Role Does Sky Play with USDS?
Sky, evolving from MakerDAO, introduced its own stablecoin, USDS, which generates yield for its holders. Users can earn approximately 4.5% APY by depositing USDS. This token is primarily backed by tokenized Treasuries and corporate bonds, yielding steady outcomes from real-world investments. Governance mechanisms adjust the APY based on prevailing macroeconomic interest rates and vault activities.
Why Is USDS Different?
While USDS remains a decentralized stablecoin, it now integrates real-world yield elements. This combination fosters trust and allows access to institutional-level collateral through an enhanced governance framework under the SKY token.
How Has Sky Grown?
At its launch, the migration of DAI holders to USDS instantly increased supply, pushing it to over $8 billion by October 2025.
#How Does Ondo’s USDY Work?
Ondo Finance presents USDY, a token linked to short-term Treasuries and bank deposits. Unlike its crypto-based counterparts, USDY operates more like a money market fund while remaining on-chain. The yield for USDY holders ranges from 4.1% to 4.5% APY, net of fees, with all returns backed by cash-equivalent assets.
What Sets Ondo Apart?
Prioritizing regulatory compliance and institutional access, USDY emerges as one of the few stablecoins deemed suitable for regulated entities. However, US investors face restrictions in accessing USDY. Its transparent and asset-backed framework positions USDY as a reliable vehicle for guaranteed yields.
What Has Fueled Ondo’s Growth?
Ondo Finance has established key partnerships with various blockchain ecosystems, as well as numerous funds. Even with the investor restrictions in play, USDY circulated approximately $700 million by October 2025.
#How Does Aave Integrate GHO?
Aave's GHO stablecoin made its debut in 2023 and subsequently became integral to the Aave ecosystem. While GHO is over-collateralized like USDf and USDS, it offers additional features including discounted borrowing rates for AAVE stakers and an integrated Aave Savings Rate (ASR). GHO can yield around 8% APY for stakers, with returns stemming from borrowing interest and DAO incentives.
Why Is GHO Beneficial?
GHO leverages Aave's significant liquidity network and governance structure, ensuring seamless integration within decentralized finance lending markets. By using Aave's scale, it presents a straightforward yet dependable avenue for yield generation.
What Does the Growth Look Like for Aave?
After an initial slow start, subsequent updates in 2024—including peg-stability modules and increased borrowing rates—spurred increased adoption. By mid-October 2025, the GHO supply had reached about $350 million, demonstrating continuous growth.
#What Do These Developments Indicate for the Future of Stablecoins?
The rise of USDf, USDe, USDS, USDY, and GHO signifies a transformative era in the cryptocurrency landscape, where stablecoins have evolved from mere value storage to active income-generating assets. Each protocol showcases its unique methodology, from Ethena’s solely crypto-driven model to Ondo’s regulatory-friendly yields. Among these advancements, Falcon Finance stands out with its ambitious plan to integrate multiple yield strategies within a unified platform.