Tokens All the Way Down: A Money View of Decentralized Finance

Abstract: DeFi protocols stack derivative tokens atop one another, yet the resulting structure of claims remains unmapped. Applying the Money View framework, we show that DeFi functions as a layered credit hierarchy that mirrors conventional banking: each protocol accepts tokens and issues new claims against them, creating tiers of increasingly derived assets. By late 2025, each dollar of base assets supported $4.7 of total claims, with lending and staking driving over 80% of this layering. Position in this hierarchy shapes yields. Reported rates rise with tier depth (+2.0 pp per tier) because lending protocols, which pay higher rates, concentrate in deeper tiers. Yet after correcting for this composition effect, yields fall with each derivation step (-2.9 pp per hop), reflecting lower borrowing demand for nested tokens. The tier premium widens during crises, consistent with repricing of upstream dependency risk. These findings reframe DeFi's "double counting" problem as a structural risk question and provide a macro-prudential metric for tracking system-wide leverage.