Key Findings
93% ($5.2 billion) of crypto treasury wealth sits idle as protocols fall short on capital efficiency. Among median treasury assets, just 7% are allocated to income-generating positions.
Millions of dollars are being left on the table annually. If the 25 protocols we analysed shifted their yield-bearing allocation from 8.2% to 30%, aggregate annual income would jump from $6.6 million to $84.7 million, a 1,183% increase.
Crypto-native treasuries remain procyclical and at risk of severe drawdowns. With around 80% of aggregate treasury value held in native governance tokens, balance sheets expand in bulls but collapse in bears.
Is 2026 the end of the treasury HODL? The industry is shifting from accumulation to allocation, building a sustainable funding model that doesn't rely on selling governance tokens.
Token sales aren’t the only solution. Treasuries can generate income directly on existing holdings through onchain vaults, staking strategies, or structured derivatives. The result? They open a recurring funding stream without materially reducing native token exposure.
A small cohort of sophisticated protocols like Aave and Gnosis are leading the way as active diversifiers. Aave has reduced its native token concentration to 41%, with 33% held in a stablecoin ‘buffer’. A higher stablecoin holding provides predictable liquidity to fund purchases, and protects against market volatility.
[Chart: Sky vs Maple]
Executive Summary
Crypto-native treasuries manage institutional-scale balance sheets. Across the 25 protocols analysed in this report, aggregate treasury holdings exceed $5.6 billion. In absolute terms, many of these organisations now resemble mid-sized financial institutions. Yet scale has not been matched by sophistication. Treasury construction across the sector remains heavily concentrated, structurally volatile, and materially underproductive.
Approximately 86% of aggregate treasury value remains concentrated in native governance tokens. Median stablecoin allocation is just 3.6%. Most strikingly, the median protocol allocates only 7% of its treasury to income-bearing positions. The majority of capital sits idle, exposed to token price volatility without generating recurring income.
This structure is outdated, and creates fragility. Native token concentration amplifies upside during bull markets but compounds drawdowns during downturns. Our analysis shows that treasuries spent 57.4% of observed time more than 50% below prior highs. In many cases, this drawdown exposure coexists with minimal stable reserves and limited recurring yield generation. The result is pro-cyclical treasury behaviour that strengthens balance sheets during bull markets and weakens operational flexibility during bears.
The constraint is not capital, nor is it infrastructure. The constraint is a sophistication gap between the tools now available and the strategies currently deployed.
Over the past 18-24 months, a suite of institutional-grade primitives has matured. Onchain vault infrastructure now manages billions in stable, battle-tested lending markets. Direct protocol participation allows treasuries to earn supply yield while reinforcing ecosystem liquidity. Automated Market Maker (AMM) positions enable fee generation while supporting market microstructure. Tokenised Real-World Assets (RWAs) offer regulated fixed-income exposure without abandoning onchain transparency. Options markets, particularly bespoke OTC structures, enable systematic volatility monetisation and drawdown management. The arsenal of treasury management options is comprehensive, and growing.
The median 7% allocation to productive capital no longer reflects infrastructure limitations. It reflects governance inertia and risk aversion formed during earlier DeFi cycles. Yet the maturity profile of leading protocols has changed meaningfully. Lending markets such as Aave, Morpho, and Compound operate at institutional scale with multi-year track records. ERC-4626 vault standardisation reduces integration friction. Capacity across major markets comfortably absorbs nine-figure deployments. We make the argument that the operational risks that defined early DeFi are materially lower than in prior cycles.
Importantly, productive deployment does not require abandoning native token alignment. Even modest diversification, for example allocating 10-20% of treasury into stablecoins, ETH, or BTC, can generate recurring income sufficient to meaningfully extend runway. At 3-8% achievable yields, incremental deployment scales quickly into seven-figure annual income for large treasuries. This income can fund contributors, audits, ecosystem grants, or protocol growth without liquidating core governance positions.
Beyond productive reserves, volatility itself represents a monetisable asset. High-beta governance tokens exhibit implied volatility regimes far above traditional equities, or even beta assets within the digital assets industry. Covered call strategies, structured conservatively at far out-of-the-money strikes, can generate meaningful premium income while preserving core exposure, with managed and minimal probability of being exercised. Under historical volatility conditions, such programmes can materially increase treasury yield with limited dilution risk. For treasuries unwilling to sell tokens outright, options provide a systematic alternative to passive exposure.
For smaller treasuries facing genuine existential drawdown risk, structured collars can convert extreme two-sided volatility into bounded ranges, preserving operational viability during prolonged downturns. Cross-asset options structures further allow governance-approved diversification to occur systematically into strength rather than via discretionary timing decisions. These tools shift treasury management from reactive spot execution to rule-based capital deployment.
A recurring governance concern identified in our research is transparency. Many DAOs require onchain traceability of treasury positions, even when instruments are executed offchain. This design constraint is, in our opinion, legitimate given the nature of these treasuries. Governance legitimacy depends on verifiability. For offchain derivatives providers to scale within crypto-native treasuries, solutions must integrate onchain visibility, whether through escrowed collateral contracts, tokenised position receipts, cryptographic attestations, or proof-of-reserve style reconciliation. The next phase of treasury infrastructure will be defined by both pricing efficiency and by governance compatibility.
We make the case that treasury management is becoming a differentiator. Protocols that adopt structured deployment frameworks will enter downturns with income streams, diversified buffers, and systematic risk controls. Those that remain fully concentrated and passive will continue to experience amplified volatility and operational compression during adverse cycles.
Examples across the ecosystem, including those we have analysed and interviewed, already demonstrate the spectrum, from treasuries deploying into their own lending markets to those supporting AMM liquidity directly, and others beginning to implement volatility monetisation programmes. The toolkit exists. The capacity exists. The market has matured.
What remains is execution discipline and governance alignment.
As the sector professionalises, the gap between passive token holders and actively managed crypto-native endowments will widen before it closes. Treasury sophistication will increasingly influence runway stability, ecosystem resilience, and ultimately market perception. Capital alone is no longer the defining variable. How that capital is structured, deployed, and governed is.
The transition from accumulation to allocation has begun.
Download the full report here
Download the "Keyrock: A new Playbook for realising crypto's $5.6 billion treasury opportunity" report here (PDF)

Key Findings 93% ($5.2 billion) of crypto treasury wealth sits idle as protocols fall short on capital efficiency. Among median treasury assets, just 7% are all

Keyrock: A New Playbook for Crypto’s $5.6B Treasury Opportunity

Active management strategies for crypto-native treasuries beyond stablecoin parking

Katana is purpose-built for DeFi. Rather than acting as a general-purpose Layer 2, it functions as a financial network where every transaction, pool, and application reinforces collective liquidity and long-term yield generation for its users.
Most Layer 2s aim for breadth, supporting a wide range of applications. Katana instead prioritises depth, embedding yield creation, liquidity routing, and value distribution directly into its base layer. The result is an ecosystem where users, protocols, and the network advance together through shared incentives and productive capital.
[Chart: Katana]
This report examines how that model works in practice. It explores how Katana transforms liquidity into a network-wide resource, how onchain activity generates sustainable revenue, and how value flows back to participants. By analysing key components such as VaultBridge, AUSD, and Chain-Owned Liquidity, it demonstrates how Katana redefines DeFi sustainability through structural alignment between users and infrastructure.
The Shift from Speculation to Productive Capital
In its early years, DeFi set out to prove that financial primitives could exist without intermediaries. MakerDAO enabled collateralised lending onchain. Uniswap introduced automated market making, allowing trades to clear without order books. Compound laid the groundwork for algorithmic borrowing and lending markets. These breakthroughs proved that decentralised finance could function independently, but they also raised a new question: how could protocols attract enough liquidity to operate at scale?
The answer came through token incentives. Total Value Locked (TVL) became the dominant measure of success, and teams began distributing newly issued tokens to reward users and attract capital. This model reached its peak during DeFi Summer, when protocols such as Yearn, Synthetix, and SushiSwap expanded rapidly through aggressive liquidity mining campaigns.
By offering high emissions, they were able to draw liquidity at record speed. As users discovered these new financial primitives and their generous yields, DeFi’s TVL soared from $600 million at the start of 2020 to $15 billion by year-end.
Liquidity increased across all pools during the incentive period, but only two out of five (wstETH/WETH 0.05% and OP/USDC 0.3%) maintained higher levels once rewards stopped. The rest soon reverted to their original state. Gauntlet found that incentives could have a lasting effect only when the short-term boost in liquidity translated into greater trading volume and fee generation, which was uncommon.
While Uniswap’s programme is just one example, the same pattern has appeared across the ecosystem. Many recent campaigns show that attracting liquidity through emissions is one thing, but keeping it is another. One of the more recent examples, the zkSync Ignite programme, which allocated 300 million ZK in rewards, demonstrates this even more clearly. During its incentive period, TVL climbed to around $260 million, but after rewards ended, it fell to about $45 million.
From Token Emissions to Real Yield
Around the same time, it became clear that DeFi could no longer rely on emissions alone to grow its TVL. As the limits of liquidity mining became visible, a new focus began to take hold around real yield. During 2023 and 2024, users started asking tougher questions about sustainability.
Phrases like “Where does the yield come from?” and “If you don’t understand the yield, you are the yield” became common across DeFi discussions, reflecting a broader realisation that not all returns were built to last.
Attention shifted toward protocols that earned revenue from real activity rather than token inflation. Trading platforms helped push this shift into the spotlight, with GMX and later Hyperliquid popularising fee-sharing models that tied rewards directly to usage and volume. Users began comparing protocols not by how much they emitted, but by how much they earned.
At the same time, lending saw renewed momentum. Protocols such as Aave, Compound, and Morpho became the backbone of this new environment, offering yield linked to borrower demand rather than incentives which explains the rapid growth of lending vs other sectors which showed less sustainability in its revenue.
By late 2024, the conversation in DeFi had changed: growth was no longer about who could print the most tokens, but about who could generate real, repeatable cash flow.
Katana: Building the Infrastructure for Productive Capital 
As DeFi matured and the real yield narrative took hold, attention shifted toward sustainable revenue and long- term value creation. Yet one problem persisted. Even as protocols learned to generate real yield, large portions of onchain capital remained idle. Liquidity existed, but much of it sat in wallets or contracts instead of supporting lending, trading, or market depth.
This gap between secured and productive capital became the starting point for Katana, a network built by teams from Polygon Labs, GSR, and other experienced DeFi builders. Having lived through the rise and decline of liquidity mining, the team concluded that lasting sustainability could not be achieved at the application layer. It required infrastructure that embeds yield generation directly into the base layer while drawing from multiple sources of revenue.
On top of that, Katana’s philosophy is built around the idea that value should be measured not only by Total Value Secured (TVS) but also by how much of that value is actively working within DeFi.
A network might secure one billion dollars in assets, but if only a fraction of that is deployed productively, the rest adds little to growth. For this reason, every asset on a chain should be made productive, and the yield from those assets should flow not to users who simply hold them in wallets, but to those who use them actively within DeFi.
Chain Architecture: Where Yield and Infrastructure Converge The
Foundation: Rollup Architecture and Proving 
When Katana set out to build a DeFi-first chain, its goal was to make yield a structural feature of the network itself, not something dependent on isolated applications. To achieve this, the team needed a foundation that was both proven in production and adaptable enough to support major architectural innovation.
Katana is connected to Polygon’s AggLayer and built using the AggLayer Chain Development Kit (CDK-OP Geth), which uses OP Geth with zero-knowledge proofs. While it uses OP Geth, Katana is not part of the Optimism Superchain and, instead of being optimistic, it uses ZK proofs for security and finality.
Working in close partnership with Conduit, Katana used this CDK-OP framework to accelerate development and deployment. Conduit provided the engineering backbone for the chain, handling rollup implementation, infrastructure management, and sequencing services, while co-developing the custom modifications required for Katana’s design.
This collaboration allowed Katana to focus on what mattered most: integrating liquidity, yield, and user incentives directly into the base layer of the network.
But the project’s vision extended far beyond a standard rollup. To enable capital to move seamlessly and productively across the ecosystem, the team needed to solve two key challenges: slow finality and fragmented liquidity. The first was addressed through Katana’s proving architecture, which builds on the OP Stack with integrated ZK proving, and the second through deep interoperability with Polygon’s Agglayer network.
The Proving Layer: Fast Finality with Succinct 
One of the main bottlenecks for DeFi users on existing rollups is capital lockup. Withdrawals often take several days to finalise, leaving liquidity idle and discouraging active participation. Katana approached this challenge by rethinking how rollup proofs could work for a financial chain that relies on continuous liquidity movement.
The solution came from Succinct, a zero-knowledge proving network that enables chains built on the OP Stack to operate as fully verified ZK rollups. By integrating Succinct’s validity proofs, Katana reduced withdrawal times from a week to just a few hours. This upgrade not only improved the user experience but also unlocked a higher level of capital efficiency, allowing liquidity to move freely between Katana, Ethereum, and other connected chains.
Succinct’s Prover Network was another key part of this evolution. It decentralises the proof generation process, spreading it across a network of independent provers and driving costs down to fractions of a cent per transaction. The result is a cost-effective and scalable environment where high-frequency DeFi activities like trading, lending, and yield vaults can function without interruption or excessive fees.
The Interoperability Layer: Connecting to the Agglayer
While fast finality solved the issue of capital lockups, another challenge remained: fragmented liquidity. Liquidity across Layer 2 ecosystems is often siloed, forcing users and protocols to bridge manually between chains. Katana addressed this by becoming one of the first rollups to integrate directly with Polygon’s Agglayer, a unifying interoperability layer that connects multiple chains through shared liquidity and canonical bridging.
Agglayer serves as the connective layer of Polygon’s ecosystem, allowing assets and messages to move freely between connected chains. This creates a fluid environment where liquidity is no longer trapped within a single domain. For Katana, this means users can onboard seamlessly from any Agglayer-connected chain, while developers can access a larger pool of capital and users without building separate integrations.
Through Agglayer, Katana evolves from a standalone Layer 2 into a connected financial hub, part of a broader network of interoperable ecosystems where liquidity and capital can move freely.
The sequencer
Every transaction on Katana generates value through the sequencer. Unlike most chains where sequencer fees are collected and stored passively, Katana’s system recycles them directly into its liquidity economy. Once operational costs such as data posting to Ethereum are covered, the remaining revenue flows back into the network.
This approach creates a feedback loop where activity drives revenue, revenue deepens liquidity, and deeper liquidity attracts more users and volume. Over time, this system compounds on itself, turning Katana’s sequencer into a sustainable and recurring source of yield rather than a simple fee collector.
Currently, sequencer fees (aka network REV) on Katana accounts for only a small portion of its total revenue, representing around 2% every month. However, this could change in the future as onchain activity increases.
Built-In Yield Infrastructure: VaultBridge and AUSD
While most rollups rely on applications to generate chain revenue, Katana builds yield directly into its architecture. Two key mechanisms power this: VaultBridge and AUSD.
VaultBridge
If Katana’s proving and interoperability layers laid the groundwork for efficient capital movement, VaultBridge was the system that made that capital productive from the moment it entered the network.
In most ecosystems, bridged assets remain idle on Layer 1. Users deposit tokens into a smart contract, and those assets simply sit there until they are withdrawn. This inefficiency locks up billions of dollars in unproductive collateral. VaultBridge was created to change that by giving every bridged asset a role in yield generation.
When users bridge supported tokens such as USDC, WETH, USDT, or WBTC into Katana, their assets are automatically deployed into low-risk yield strategies on Ethereum via Morpho Vaults, which are managed by independent risk curators like Gauntlet and Steakhouse Financial. These vaults generate real yield that is streamed back to Katana and distributed to users who actively participate in DeFi.
This design also makes Katana one of the most Ethereum-aligned Layer 2s, as assets bridged to Katana continue to support and strengthen the Ethereum DeFi ecosystem through Morpho deposits.
Download the full report here
Download the "The Katana Flywheel: Rethinking Incentives and Liquidity for Sustainability" report here (PDF)

Katana is purpose-built for DeFi. Rather than acting as a general-purpose Layer 2, it functions as a financial network where every transaction, pool, and applic

The Katana Flywheel: Rethinking Incentives and Liquidity for Sustainability

How Katana coordinates emissions and liquidity at the chain level

Why Liquidity Matters Liquidity is the lifeblood of decentralised finance. Without reliable market depth, tokens cannot function as mediums of exchange, collate

Owning or Renting Liquidity? A Study of Incentives and POL for Sustainable Models

How protocol-owned liquidity changes the economics of DeFi market depth

If you look back at the last cycle of Decentralised Finance (DeFi), the primary issue for capital was discovery. Allocators, DAOs, and treasuries spent the majority of their resources simply trying to find where yield existed. The market was sketchy, opportunities were fleeting, and the highest APY was the only metric that truly moved liquidity.
That era has shifted. In the current market, yield discovery is no longer the primary constraint. Aggregators, dashboards, and automated optimisers have commoditised the search for return. We now face a different structural challenge: the immense operational burden of liquidity fragmentation and governance complexity.
As DeFi has matured, liquidity has separated across hundreds of chains, layer-2s, and isolated protocols. For a DAO or institutional treasury, managing a portfolio now involves bridge risk, governance latency, and multiple execution environments. Maintaining a position can require more operational overhead than the yield it produces.
This shift has forced a re-evaluation of what performance means. In the early days, performance was synonymous with a high annual percentage yield (APY). Today, sophisticated allocators understand that withdrawal liquidity is just as important as the return itself. 
A high APY is meaningless if the exit door is too small when you need it most. We have seen countless examples where optimised positions became trapped positions during market volatility because the underlying strategy ignored the mechanics of exit.
Consequently, Vaults have emerged as the dominant interface for capital. They are now active management layers that remove the complexity of fragmentation. However, not all vaults are built equal. We are witnessing a massive consolidation of curation into a specialised layer. 
This layer builds the operational rails required to access it safely. This is where the industry is moving: away from raw yield hunting and toward operationally resilient infrastructure.
Delegation vs. curation: the institutional pivot
As we analyse the State of DeFi reports for 2025, a critical distinction has emerged in how capital is managed: the difference between Delegation and Curation.
While often used interchangeably, they represent different architectures of trust.
Delegation is largely discretionary. It creates a relationship where an asset owner hands over control to a manager, trusting their judgment to make the right call in the heat of the moment. It is a model inherited from traditional finance, which trusts the manager. 
While flexible, this model scales poorly in crypto. It relies on human latency and introduces opacity. If the manager’s theory drifts, or if their risk appetite changes, the asset owner is often the last to know.
Curation, by contrast, is bounded authority enforced by rules. It is the architectural preference of the onchain economy. In a curated model, the parameters of execution, what can be bought, where it can be deployed, and liquidity thresholds are encoded into the vault’s logic before a single dollar is deposited.
Why do institutions increasingly prefer curation? Because it offers predictability. Large-scale capital allocators care less about squeezing out the final basis point of alpha and more about ensuring that execution adheres to a strict mandate. They require rule-based execution where the manager cannot wake up one day and decide to ape into a high-risk meme coin or an unverified lending market.
Governance-heavy models can introduce coordination latency that becomes mismatched with market speed. Relying on DAO votes for frequent parameter changes or reallocations can be operationally heavy at scale.
Transparency and enforceability are the new gold standards. It is not enough to promise a low-risk strategy because the strategy’s constraints must be visible onchain. 
As treasuries mature, many move away from discretionary mandates and toward models that provide verifiable constraints on execution. The future of asset management is not about better human traders; it is about better onchain constraints.
Stress-testing the model: the EURC lesson
Theoretical distinctions between vault structures often feel abstract until the market provides a live stress test. We recently witnessed such an event involving EURC liquidity, a scenario that perfectly illustrated the differences in vault architectures.
During a localised liquidity stress event, the peg dynamics of EURC fluctuated, causing a ripple effect across lending markets and liquidity pools. 
In the market, we saw immediate segregation of outcomes. Several yield-maximising vaults, which had allocated heavily to illiquid secondary markets to boost APY, suddenly found themselves gated. The underlying assets were technically solvent, but the withdrawal liquidity had evaporated. Users who wanted to exit were forced to wait or accept significant slippage.
In contrast, vaults structured with curation parameters behaved differently. Because these strategies prioritised liquidity buffers and operated within strict concentration limits, they were able to restore withdrawal liquidity very fast. 
The automated monitoring systems, designed to detect de-pegs and utilisation spikes, triggered predefined reallocation logic within approved parameters, without requiring emergency governance intervention.
This event served as a validation of the risk-first approach. It highlighted that in DeFi, liquidity is a dynamic condition of the market. A vault that ignores this reality in favour of a higher headline rate is essentially shorting volatility.
The trade-off: optimisation vs. infrastructure
This brings us to the core philosophy of kpk. The market for curators is splitting into distinct camps, and it is important for allocators to understand the trade-offs involved.
Some curators optimise purely for protocol solvency. Their goal is to ensure the lending market itself doesn’t go into bad debt, often at the expense of the liquidity provider’s flexibility.
Others focus on governance safeguards, building elaborate multisig structures that, while secure, move at a glacial pace. And there remains a contingent that leans on discretionary speed, relying on active trading teams to outmanoeuvre the market.
kpk sees curation differently: they view it as infrastructure.
When you position curation as infrastructure, you accept a fundamental trade-off: you prioritise bounded behaviour over maximum theoretical upside. kpk vaults are designed with intentional constraints.
They utilise liquidity buffers and caps that may, at times, drag on the absolute ceiling of yield. A vault may exclude double-digit APY markets if liquidity depth or exit mechanics do not meet predefined criteria.
Optimisation maximises upside, but infrastructure prioritises survival and continuity. By treating the vaults as infrastructure, they ensure they can serve as the bedrock for other applications. A DAO cannot build its operational budget on a strategy that might be illiquid for three weeks during a downturn. They need reliable, liquid, and bound yield.
kpk implements automated monitoring and circuit breakers to prevent configuration drift, the silent killer of algorithmic strategies. Automated systems can introduce reflexivity if all agents respond identically to volatility. Deterministic parameterisation mitigates that effect.
If every agent reacts to a price drop simultaneously, they increase the crash. kpk avoids this by maintaining a deterministic approach to parameterisation. They don’t just ask “How much can we make?” They ask, “can we explain, observe, and control the risk exposure?”
From vaults to funds
Curation is not the endpoint, it is the foundation. We view the current market of curated vaults as the first step in a larger standardisation of the DeFi capital stack.
Currently, curated vaults are standardising execution. They take the messy reality of swapping, bridging, and lending, and wrap it into a predictable, tokenised interface. The next layer of this will standardise exposure.
We are now seeing the transition from single-strategy vaults to comprehensive, tokenised Funds. kpk is extending the same infrastructure logic that powers its curated vaults into Funds built on kpk’s onchain fund infrastructure, which provides onchain accounting, policy-enforced execution, and multichain support. The goal is to allow funds to retain strategic allocation decisions within rule-defined execution environments, while offloading operational complexity to infrastructure.
Imagine a fund structure where settlement is non-custodial, and accounting is entirely onchain. Instead of waiting for monthly PDF reports to understand Net Asset Value (NAV), the fund’s health is visible block by block. This is the hybrid portfolio allocation framework they are building towards. 
A fund manager can retain high-conviction control over specific assets while delegating the safe, low-volatility portion of the portfolio to kpk’s infrastructure.
This roadmap leads to a future where risk assessment is based on verifiable, onchain data. Whether it is Real World Assets or liquid restaking tokens, the principle remains the same: if you can’t monitor the risk onchain, you can’t curate it safely.
We will detail this thesis, and the infrastructure kpk is building around it, in our forthcoming report next week.

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