Tokenized Yield

Definition ∞ Tokenized yield refers to the practice of converting the future earnings or interest generated from an asset into a separate, tradable digital token. This allows investors to separate the principal asset from its income stream, enabling independent trading or collateralization of the expected yield. It offers new avenues for liquidity and financial engineering within decentralized finance.
Context ∞ Tokenized yield is a rapidly developing area within decentralized finance, creating novel financial products and strategies. News often covers platforms and protocols that enable the creation and trading of these yield tokens, highlighting their potential for capital efficiency. Understanding the underlying mechanisms and associated risks is essential for participants in this market segment.