# Yield Performance

## Why We Publish This

Most DeFi protocols show only a current APY — a single number that tells you nothing about consistency, volatility, or what to expect next quarter. We publish historical data because **yield credibility comes from track records, not snapshots.**

This page tracks the actual performance of ETH Strategy's underlying yield sources and, once the protocol is fully live, will include realized protocol returns updated quarterly.

{% hint style="info" %}
ETH Strategy is currently in its initial phase. Treasury Lending launches Q2 2026 per the [roadmap](/introduction/roadmap.md). Realized protocol yield data will be published starting Q3 2026. Until then, this page presents historical data for the underlying yield sources that power the protocol.
{% endhint %}

***

## Underlying Yield Sources

ETH Strategy generates returns from three distinct sources. Each has a different risk/return profile and cyclicality.

### Source 1: ETH Staking Yield (via esETH)

esETH wraps liquid staking tokens (stETH, cbETH, rETH, weETH). The underlying staking yield is harvested by the protocol and accrues to the treasury, increasing [ETH per STRAT (EPS)](/tokenomics/strat-economics.md#how-eth-per-strat-eps-grows).

**Quarterly Network Staking APR (2024–Q1 2026)**

| Quarter | Network APR | stETH Net APY | cbETH Net APY | rETH Net APY | Notes                                                                                       |
| ------- | ----------- | ------------- | ------------- | ------------ | ------------------------------------------------------------------------------------------- |
| Q1 2024 | 3.5–4.0%    | 3.2–3.6%      | 3.1–3.4%      | 2.8–3.0%     | Spiked to \~6% in March due to post-Dencun blockspace demand                                |
| Q2 2024 | 3.2–3.5%    | 2.9–3.2%      | 2.8–3.1%      | 2.6–2.8%     | Post-Dencun normalization                                                                   |
| Q3 2024 | 3.0–3.3%    | 2.7–3.0%      | 2.7–2.9%      | 2.4–2.6%     | Gradual compression as staked ETH grew                                                      |
| Q4 2024 | 3.0–3.1%    | 2.7–2.8%      | 2.7–2.8%      | 2.4–2.5%     | Nominal 3.08%, real (inflation-adjusted) 2.73% per Coin Metrics                             |
| Q1 2025 | 2.9–3.3%    | 2.6–3.0%      | 2.6–2.9%      | 2.3–2.6%     | Staked ETH crossed 34M                                                                      |
| Q2 2025 | 2.8–3.1%    | 2.5–2.8%      | 2.5–2.8%      | 2.3–2.5%     | Staked ETH hit 35.3M ATH                                                                    |
| Q3 2025 | 2.8–3.0%    | 2.5–2.7%      | 2.5–2.7%      | 2.3–2.4%     | Continued compression                                                                       |
| Q4 2025 | 2.8–3.0%    | 2.5–2.7%      | 2.5–2.7%      | 2.3–2.4%     | Net staking flows turned negative                                                           |
| Q1 2026 | 2.75–3.3%   | \~2.7%        | \~2.9%        | \~1.9%       | \~35.9M ETH actively staked (28.9% of supply); validator entry queue \~3.4M ETH (\~60 days) |

*Sources: Rated Network, Coin Metrics (Issue 288), Staking Rewards, DefiLlama. Network APR includes consensus + execution layer rewards (MEV/priority fees). Net APYs reflect protocol fees (Lido 10%, Coinbase 10%, Rocket Pool variable).*

**Key observations:**

* ETH staking yield has compressed from \~4% to \~2.7–3% over two years as the validator set grew from \~28M to \~35.9M staked ETH
* Execution layer rewards (MEV + priority fees) contribute \~20% of total validator income and are the primary source of variance
* The floor is set by consensus rewards (\~2.8% at current validator count); the ceiling depends on network activity

### Source 2: Treasury Lending Interest

Once [Treasury Lending](/core-mechanics/treasury-lending.md) launches, borrowers pay fixed-rate interest denominated in esETH. This interest flows to the [StakedStrat](/core-mechanics/strat-staking.md) contract and is distributed to STRAT stakers via 7-day linear streaming.

**Comparable DeFi Lending Rates (ETH Borrow APY)**

| Quarter | Aave V3  | Compound V3 | Morpho   | SparkLend |
| ------- | -------- | ----------- | -------- | --------- |
| Q1 2024 | 2.5–4.0% | 2.8–4.2%    | 2.3–3.5% | 2.6–3.8%  |
| Q2 2024 | 2.0–3.0% | 2.2–3.2%    | 1.8–2.8% | 2.0–3.0%  |
| Q3 2024 | 1.8–2.5% | 2.0–2.8%    | 1.6–2.3% | 1.8–2.5%  |
| Q4 2024 | 1.8–2.5% | 2.0–2.7%    | 1.7–2.3% | 1.9–2.6%  |
| Q1 2025 | 1.8–2.5% | 2.0–2.8%    | 1.7–2.4% | 1.9–2.6%  |
| Q2 2025 | 2.0–3.5% | 2.2–3.5%    | 1.8–3.0% | 2.0–3.2%  |
| Q3 2025 | 1.8–2.5% | 2.0–2.8%    | 1.6–2.3% | 1.8–2.6%  |
| Q4 2025 | 1.5–2.3% | 1.8–2.5%    | 1.5–2.2% | 1.7–2.4%  |
| Q1 2026 | 1.95%    | 2.27%       | 2.00%    | 2.32%     |

*Sources: DeFiRate, Aavescan, DefiLlama Yields. Q1–Q4 2025 ranges estimated from available on-chain data and DeFi market reports; exact rates fluctuate continuously with utilization. Q1 2026 figures are point-in-time snapshots from DeFiRate (March 17, 2026).*

**Why Treasury Lending rates differ from DeFi lending rates:** Treasury Lending is a fixed-rate, fixed-term product with no liquidation risk (positions are non-liquidatable). This structural difference means borrowers may accept higher rates for the certainty and safety, while the protocol captures the premium. The [worked example](/core-mechanics/treasury-lending.md) uses a 10% annual rate to illustrate mechanics — actual rates will be set by governance based on market conditions.

### Source 3: Implied Option Premium (Convertible Notes)

The protocol borrows ETH at [zero interest](/core-mechanics/convertible-notes.md) through convertible notes. In traditional fixed income, equivalent borrowing costs 5–10% annually. The difference — what bond buyers "pay" in exchange for conversion rights — is the implied option premium. This is structural revenue, not a yield you can track quarterly like interest. It manifests as treasury growth without corresponding interest expense.

**Comparable Convertible Bond Yields (TradFi)**

| Issuer                      | Coupon | Conversion Premium | Year |
| --------------------------- | ------ | ------------------ | ---- |
| MicroStrategy (0.625% 2028) | 0.625% | 42.5%              | 2024 |
| MicroStrategy (0.875% 2031) | 0.875% | 35.0%              | 2024 |
| MicroStrategy (0% 2027)     | 0.000% | 50.0%              | 2021 |
| Tesla (2% 2024)             | 2.000% | 42.5%              | 2019 |

*ETH Strategy's notes carry 0% coupon — matching the most aggressive MicroStrategy issuance. The "yield" to the protocol is the full cost of capital that would otherwise be paid as interest.*

***

## Projected Yield Stack (Illustrative)

The following table illustrates how ETH Strategy's multiple yield sources combine. These are **projections based on historical data**, not guarantees.

| Yield Source                          | Conservative | Base Case | Bull Case | Accrues To                  |
| ------------------------------------- | ------------ | --------- | --------- | --------------------------- |
| ETH staking yield (via esETH harvest) | 2.5%         | 3.0%      | 4.0%      | Treasury (EPS growth)       |
| Treasury Lending interest             | 3.0%         | 5.0%      | 8.0%      | StakedStrat (esETH rewards) |
| Implied option premium (annualized)   | 2.0%         | 5.0%      | 10.0%     | Treasury (EPS growth)       |
| **Gross protocol yield on treasury**  | **7.5%**     | **13.0%** | **22.0%** |                             |

{% hint style="warning" %}
These projections assume: (a) Treasury Lending utilization of 50–80%, (b) sustained bonding demand, and (c) ETH staking yields within historical ranges. Actual results will vary. The conservative case uses current depressed rates; the bull case reflects conditions like Q1 2024.
{% endhint %}

**Important:** These yields accrue differently depending on your role in the protocol:

* **STRAT stakers** earn Treasury Lending interest as esETH rewards
* **All STRAT holders** benefit from EPS growth driven by staking yield harvest and implied option premium
* **Bond holders (CDT + NFT option)** earn 0% interest but hold conversion rights with embedded optionality value
* **ESPN depositors** earn option premium income from a different strategy — see [ESPN](/espn/espn.md)

For role-specific yield expectations, see the [persona guides](/guides/start-here.md).

***

## ETH Staking Market Context

| Metric                    | Value                                          | As Of                      |
| ------------------------- | ---------------------------------------------- | -------------------------- |
| Total ETH staked (active) | \~35.9M ETH                                    | Mar 2026                   |
| % of ETH supply staked    | \~28.9%                                        | Mar 2026                   |
| Active validators         | \~1,100,000                                    | Mar 2026                   |
| Staked ETH market value   | \~$77B                                         | Mar 2026 (at \~$2,140/ETH) |
| Lido market share         | \~24.3% of staked ETH (\~8.7M ETH)             | Mar 2026                   |
| Lido TVL                  | \~$18.6B                                       | Mar 2026                   |
| Network-wide staking APR  | \~2.86% (consensus) / \~3.3% (total incl. MEV) | Mar 2026                   |

*Sources: Datawallet (35,859,802 ETH actively staked), StakingRewards, DefiLlama, beaconcha.in. Validator entry queue contains \~3.4M ETH pending activation (\~60-day wait) while exit queue remains minimal (\~15K ETH), indicating strong net inflows.*

***

## Yield Comparison: ETH Strategy vs Alternatives

| Strategy                      | Expected Yield     | Liquidation Risk   | Complexity        | Capital Efficiency  |
| ----------------------------- | ------------------ | ------------------ | ----------------- | ------------------- |
| Solo ETH staking              | 2.75–3.3%          | None               | High (run a node) | Low (32 ETH locked) |
| Liquid staking (stETH)        | \~2.7%             | None               | Low               | Medium              |
| Aave ETH lending              | 1.0–2.0%           | None (supply side) | Low               | Medium              |
| Leveraged staking (Aave loop) | 5–12%              | **Yes**            | High              | High                |
| ETH Strategy (STRAT staking)  | 7.5–13%+ projected | **None**           | Medium            | High                |

ETH Strategy targets the yield range of leveraged strategies **without the liquidation risk**. The yield comes from structural sources (zero-interest borrowing, fixed-rate lending, staking rewards) rather than leverage or token emissions.

***

## Reporting Cadence

Once Treasury Lending is live, all reporting will move to a live dashboard which captures

* **Realized EPS growth** — actual ETH per STRAT change over the quarter
* **Treasury Lending utilization** — % of available treasury lent out
* **Interest revenue distributed** — total esETH distributed to StakedStrat
* **Bonding volume** — total ETH bonded and implied option premium captured
* **Staking yield harvested** — esETH harvested from underlying LST yield

***

## Failure Modes & Gotchas

These projections can be wrong. Here's how:

1. **Staking yield compression.** If the validator set grows to 40M+ ETH, consensus rewards drop below 2.5%. Execution layer rewards could partially offset this if network activity increases.
2. **Low bonding demand.** If nobody wants to purchase convertible notes, the implied option premium is zero. This is the largest variable — it depends on STRAT's perceived value and market conditions.
3. **Low Treasury Lending utilization.** If borrowers don't show up, lending interest revenue is minimal. The protocol has other revenue sources, but staker yield from lending would be low.
4. **Correlation of sources.** In a severe bear market, staking yields compress, bonding demand drops, and lending demand falls — all three sources weaken simultaneously. The protocol is designed to survive this (zero-interest debt, no liquidations), but yields would be low.
5. **Smart contract risk.** A vulnerability in any protocol contract could result in loss of funds, not just reduced yield. See [Risks](/security-and-risk/risks.md) and [Defense in Depth](/security-and-risk/defense-in-depth.md).

*Last updated: March 2026. Next update: Q3 2026 (first realized performance data).*


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