Currently, much of the DeFi yield actually comes from protocol incentives, but the truly important signal has been overlooked—the on-chain fee income.

Protocols that can generate their own fees do not rely solely on hype to survive. These projects often share common characteristics: genuine user activity, actual fund flows, and sustainable revenue generation.

These three points are the foundation for long-term compound growth. In comparison, liquidity attracted solely through incentives is often less stable. The key issue is that on-chain fee income directly reflects a protocol’s actual value capture ability and is a more hardcore indicator of ecosystem health. Many projects overlook this point and ultimately fall into the quagmire of incentive competitions.