The Promise of Credit

Yield isn’t yield until you get paid.

In our last blog post, “The Onchain Yield Problem”, we outlined how DeFi yields are often backed by trading activity, token emissions, or circular incentives that can vanish the moment sentiment flips.

We propose a more stable yield foundation. In traditional finance, yield comes from real cash flows – backed by contractual obligations, guaranteed payments and promises enforced by law. Especially in volatile macro markets such as today, yield hunters need to get back to the basics: chasing predictable cash flows over speculative points farming.

All yield farmers should consider credit assets as part of their portfolio allocation. Credit assets aren’t just safer; they are smarter.

The Case for Credit Assets

Credit is boring. And that’s exactly why it’s attractive.

Fixed income products, or credit markets, are the single largest global asset class, hovering between US$130-150 trillion (source: Bank for International Settlements, McKinsey Global Institute, IFC / World Bank Group). Credit instruments are financial contracts, such as bonds, loans, or notes, where one party lends money to another in exchange for a promise to repay with interest over time.

At their core, credit agreements signal the following pact: "Pay me what you owe me. Or else I take claim of your assets." No tokenomics wizardry. No "APYs" inflated by unsustainable trading fees. The investment is backed by a contractual agreement, real-world enforcement, and cold hard cash flow.

Credit investments offer:

1. Predictability
   All types of credit investments - including bonds, loans and private credit - spell out when and how much you get paid. No praying for transaction volumes, no guessing which governance vote will slash your payout.

2. Risk-Adjusted Returns
   Over decades, credit has delivered returns competitive with equities. Barclays data shows U.S. high-yield bonds returned ~7% annually from 1990–2020, with far fewer gut-wrenching drawdowns than the S&P 500. The yields offered in faster growth regions such as APAC are much more attractive.

3. Seniority
   When business performance goes sideways, creditors stand in front of the line. They have senior asset claims in the scenario of bankruptcy or asset liquidations. In DeFi, you're lucky if you even know where the exit is when the music stops.

Credit Assets vs. DeFi Yields: Know What You’re Betting On

DeFi yields can look sexy, until they aren't. When the cycle turns, vapor yields disappear faster than a rugpull.

Here's the real comparison:

DeFi yields are reflexive by design: they soar in bull markets when everyone’s greedy and collapse the second fear hits. They're built on flows, not fundamentals. 

Credit, on the other hand, is built on legally binding promises to pay. Even when spreads widen and asset prices dip, your contractual cash flow keeps coming; unless there's an outright default (and even then, creditors get first crack at the leftovers).

Changing the Paradigm

Marketing attractive headline yields is cheap. Sourcing and delivering predictable return is rare.

At Mu Digital, our focus is on asset selection. We bring over 30+ years of collective experience in origination of credit investments. Our mission is to source the most attractive yields across Asia Pacific and deliver these to the onchain economy.

If you’re serious about growing capital without getting rugged by the next market hiccup, it’s time to look beyond the hype. Follow our blog and X @MuDigitalHQ to track how we are building a more stable foundation for DeFi.