Most Bitcoin Yield Is Fake

Bitcoin yield products are ubiquitous. Self-custodial ones in particular aim to recreate the conditions that generate real yield, while eliminating the intermediaries that once enforced them. Banking, stripped of banks. Interest, stripped of institutions.

Unfortunately,  most yield products forgot the mechanism (economic activity) and kept the middleman's worst habit (debasing the currency to pay debts). At what point do investors ask the uncomfortable question nobody wants to answer: What are you actually getting paid in? If the answer isn’t Bitcoin itself, then it’s not real BTC yield.

Token emissions dressed up as returns only go so far. The last five to ten years suggest that distance is short. In other words, getting paid in a protocol’s IOUs that you have to cash out, effectively making you the exit liquidity for insiders and early adopters.

This blog proposes a framework for evaluating the legitimacy of your BTC yield.

A Framework for Evaluating Real Bitcoin Yield

Before you lock BTC anywhere, ask four questions:

1. What are you paid in?
2. Where does the revenue come from?
3. How many revenue streams back it?
4. Does the yield survive without emissions?

Most Bitcoin yield products fail on the first question. Many don't survive the second. Almost none can answer yes to the fourth.

What are you paid in?

The first filter ascertains denomination, and (rightfully so) it is the most revealing. You deposited Bitcoin for yield, should imply BTC yield. If anything other than Bitcoin is yielded, then you are not earning real BTC yield.

For example, if you’re being rewarded in a governance token, that is simply another coin you’ll have to sell for Bitcoin to realize any value. By receiving an inflationary token as “yield,” you’ve become the exit liquidity for that token’s insiders. When your “dividend” is paid in an inflationary token, the value of that token is being diluted about as fast as you’re earning it. This is the sleight of hand behind most "Bitcoin staking" products.

The denomination question cuts through the marketing. Real yield pays you in the asset you deposited, or in a stablecoin derived from actual revenue. Fake yield pays you in tokens that need a buyer.

Where does the revenue come from?

The source of yield is how, at a glance, one can evaluate the sustainability of yield. It’s essential always to ask: Who is actually paying for the yield I’m receiving? If a platform promises, say, 5% APY on your BTC, what is generating that 5%?

In legitimate setups, there’s an identifiable source of revenue behind the yield. For example, borrowers may be paying interest to borrow your Bitcoin, traders may be paying fees on a platform, or a protocol may be sharing real profits with you. In these cases, your yield is coming from an actual economic activity. This is how traditional yields work (e.g., banks pay interest from borrowers, companies pay dividends from profits), and it’s how “real yield” should operate.

If you can’t pinpoint where the money’s coming from, be very wary. Many platforms have offered enticing yields that, upon scrutiny, had no real income to back them. They were paying old depositors with new depositors’ funds or with tokens printed from nothing. That is the textbook definition of a Ponzi scheme. A notorious example was Terra’s Anchor Protocol, which promised 20% APY on a stablecoin (UST). It turned out those yields were subsidized by a finite reserve, rather than any sustainable revenue. When the reserve ran dry and new money stopped flowing in, the entire scheme unraveled, UST lost its peg, and tens of billions in value evaporated. Real yield must be funded by real economic activity.

How many revenue streams back it?

Even if a yield has a legitimate source, single-revenue stream yield models have concentration risk.

Consider the increasingly common design where Bitcoin is staked into a network and earns yield exclusively from transaction fees generated on that chain. Typically, a portion of those fees is allocated to validators, and the remainder is accrued to holders of a liquid staking representation of BTC. While this real-yield model avoids inflationary tokenomics, it exposes participants to acute concentration risk. Diversified revenue models, on the other hand, draw from multiple independent streams of income. This makes the overall yield more resilient.

Does the yield survive without emissions?

Most defi yield protocols survive purely because of native governance token inflation. For defi to become more commonplace among institutional or retail actors, yield has to be something more tangible.

For many so-called Bitcoin staking or yield farming products, the honest answer is that their “yield” is the token emission. In these setups, if you remove the constant distribution of new tokens (or points, or whatever incentive currency), there’s nothing left to pay out to users.

By contrast, a yield that can survive without emissions is one built on fees and revenues from actual usage. Such a yield might be lower without the extra incentive on top, but it’s fundamentally there and can continue indefinitely from actual economic activity.

How veBTC Passes the Test

Let’s apply the above framework to Mezo’s veBTC and see how it measures up. veBTC is the token you receive when you lock Bitcoin into the Mezo protocol, and it entitles you to a share of various fees.

1. What are you paid in? veBTC yields are paid in BTC. When you hold veBTC, the rewards you accrue come as Bitcoin-denominated fees: for example, actual BTC from bridging/transaction fees and MUSD (Mezo’s BTC-collateralized stablecoin) loan interest.
2. Where does the revenue come from? The yield for veBTC holders comes from real economic activity on the Mezo platform. Three primary revenue streams are driving these rewards:
   • MUSD borrowing generates loan interest, origination fees, and refinancing fees
   • DEX pools generate swap fees on BTC and MUSD pairs
   • The chain itself generates bridging and transaction fees
3. How many revenue streams back it? As outlined above, veBTC is supported by at least three distinct revenue streams. This built-in diversification means no single activity dominates the yield. Each stream has different drivers: borrowing demand depends on the need for BTC-collateralized dollars, trading fees depend on market volume, and bridging fees depend on network usage and growth. Because veBTC aggregates all of these, its yield doesn’t rise or fall on any one thing alone. This multi-pillar design makes the BTC yield significantly more stable and resilient compared to a product that, for instance, only engages in one type of lending or one type of staking.
4. Does the token boost yield or replace it? Yes, and this is a critical differentiator. The base yield of veBTC (from the fees above) exists independently of any token incentives. If Mezo stopped all MEZO token rewards tomorrow, veBTC holders would still earn Bitcoin and MUSD from loans, trades, and bridges happening on the platform. In fact, MEZO tokens in Mezo Earn act as a boost mechanism rather than the source of yield. When you lock MEZO, you get veMEZO, which boosts your veBTC voting power (and thereby the share of fees you can claim) up to 5x. In simpler terms, holding the MEZO token can amplify your yield by increasing your stake in the fee distribution, but it does not create the underlying yield. The underlying yield is generated by Bitcoin activity and paid in BTC/MUSD; MEZO lets participants capture a larger slice of that fee pie if they choose.

Real Bitcoin Yield Comes From Real Bitcoin Economics

Most Bitcoin yield products out there fall apart under scrutiny. They pay you in the wrong currency, or they can’t point to genuine revenue, or they rely on one shaky source, or they’d evaporate without token incentives. Mezo’s veBTC is constructed to avoid those pitfalls: it pays yield in BTC, draws from multiple real revenue streams, and can stand on its own without relying on token inflation.

Do your own research. Ask these four questions of every platform, and you’ll see why veBTC stands out.

Haven't minted veBTC? Learn how to mint veBTC and start earning BTC-denominated fees today.