Where does the return on an off-chain loan come from?
Where does the return on an off-chain loan come from?
Every return comes from somewhere. Asking where is one of the most useful questions an investor can ask.
The simple answer
The return on an off-chain (RWA) loan comes from the borrower paying interest. A business borrows to buy stock, fund a contract or bridge the gap until its customers pay, and the interest it pays is the return. That money comes from real economic activity, not from other investors or token incentives.
How that differs from crypto yield
Much on-chain yield comes from demand for crypto leverage, trading fees or token rewards. Those sources rise and fall with the crypto market. Off-chain loan returns depend on whether real businesses repay, which is a different set of drivers.
Why access matters
Some well-performing credit has been hard for many investors to reach. It's been held by banks and specialist funds, with high minimums, slow processes and little visibility. When verification and underwriting that used to take weeks get faster, and the data is available continuously, that credit can be offered more efficiently.
That's why, at Rekord, we describe the return as an efficiency and access premium, not a risk premium. It reflects better access to credit and lower friction in reaching it, not extra risk taken to earn it.
What it doesn't mean
It doesn't mean the return is fixed or that off-chain loans can't lose money. Borrowers can pay late or default. The point is that you should be able to trace the return to its source and see how the loans behind it are performing.
Related: The yield provenance spectrum and The payment waterfall.