Yield Tokenization

Definition ∞ Yield tokenization is the process of separating the future income stream or yield generated by a digital asset from its underlying principal and converting that income stream into a standalone, tradable token. This financial primitive allows investors to speculate on or hedge against future yield rates independently. It enables the creation of new fixed-income derivatives within decentralized finance. This process enhances financial product flexibility.
Context ∞ Yield tokenization is an innovative development in decentralized finance that allows for more flexible and sophisticated yield management strategies. News often covers protocols implementing this feature, enabling users to isolate and trade future earnings from staked assets or liquidity provision. This financial primitive is viewed as a step towards building more mature and composable fixed-income markets within the digital asset ecosystem. This area is a focus for advanced DeFi product development.