Tokens All the Way Down: A Money View of Decentralized Finance
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arXiv
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| Format: | Preprint |
| Publié: |
2026
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| _version_ | 1866908920018108416 |
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| author | Wu, Wenbin |
| author_facet | Wu, Wenbin |
| contents | In traditional banking, repeated deposit-and-lend cycles let a single dollar of reserves support multiple dollars of claims. Decentralized finance produces an analogous structure with tokens. Constructing a Token Graph of 10,200 tokens across 200 blockchains, this paper maps the resulting hierarchy and shows that, by late 2025, each dollar of base assets supports $4.7 of total claims. An embedded yield correction disentangles two channels that raw data conflates: a compositional channel, where lending protocols concentrate in deeper tiers and mechanically raise average yields; and a liquidity channel, where each derivation step reduces secondary-market depth and depresses yields in liquidity-sensitive pools. The liquidity channel concentrates in DEX pools and vanishes in lending pools. A yield decomposition shows that the tier gradient operates entirely through fundamental protocol yields, not incentive-token emissions; quantile regressions reveal that the structural associations concentrate in the upper tail of the yield distribution, with near-zero effects at the median. These findings reframe DeFi's "double counting" as a structural risk question and identify liquidity fragmentation as the primary mechanism associated with yield variation across the token hierarchy. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2603_01803 |
| institution | arXiv |
| publishDate | 2026 |
| record_format | arxiv |
| spellingShingle | Tokens All the Way Down: A Money View of Decentralized Finance Wu, Wenbin General Economics Economics Computational Engineering, Finance, and Science In traditional banking, repeated deposit-and-lend cycles let a single dollar of reserves support multiple dollars of claims. Decentralized finance produces an analogous structure with tokens. Constructing a Token Graph of 10,200 tokens across 200 blockchains, this paper maps the resulting hierarchy and shows that, by late 2025, each dollar of base assets supports $4.7 of total claims. An embedded yield correction disentangles two channels that raw data conflates: a compositional channel, where lending protocols concentrate in deeper tiers and mechanically raise average yields; and a liquidity channel, where each derivation step reduces secondary-market depth and depresses yields in liquidity-sensitive pools. The liquidity channel concentrates in DEX pools and vanishes in lending pools. A yield decomposition shows that the tier gradient operates entirely through fundamental protocol yields, not incentive-token emissions; quantile regressions reveal that the structural associations concentrate in the upper tail of the yield distribution, with near-zero effects at the median. These findings reframe DeFi's "double counting" as a structural risk question and identify liquidity fragmentation as the primary mechanism associated with yield variation across the token hierarchy. |
| title | Tokens All the Way Down: A Money View of Decentralized Finance |
| topic | General Economics Economics Computational Engineering, Finance, and Science |
| url | https://arxiv.org/abs/2603.01803 |