Private credit on-chain: yield above treasuries and risks written in fine print

The second-largest RWA segment after treasuries is private credit: protocols collect stables from on-chain investors and lend to offline companies - fintech, logistics, miners. A yield of 8-15% looks sweet next to 4-5% on treasuries. The difference is the price of risk, and it is worth understanding.

Where the yield comes from

The borrowers are companies a classic bank refused or quoted expensively: emerging markets, young fintechs, exotic collateral. For them an on-chain pool is a way to borrow faster and simpler. The investor earns a premium precisely for lending to those the banks filter out.

What happens on default

The sector's history has already provided answers: defaults on unsecured lending pools have happened at every major protocol of the genre. Recovery goes through offline procedures: courts, collateral seizure, restructuring. That takes months or years, and a smart contract speeds up none of those steps. Pool liquidity is frozen the whole time: you cannot "exit" a defaulted tranche.

The rules: look not at the APY but at the borrowers (are they public, what collateral, which jurisdiction), the size of the junior tranche, the protocol's default history. And treat it as venture debt, not "stables at interest". Reviews - in the RWA section.