DeFi Yield / APY Calculator

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Convert DeFi protocol APR to APY at any compounding frequency. Project final position size from yield, principal, and lockup period. Free, no signup.

RT-FIN-156 · Finance & Money

DeFi Yield / APY Calculator

⚠ Disclaimer: Estimates only. Not investment advice. RECATOOLS is not a registered investment adviser under the U.S. Investment Advisers Act of 1940 or MiFID II. Past performance does not guarantee future results. Trading and investing carry risk of partial or total loss of capital.

Convert quoted DeFi APR to true APY at any compounding frequency. Project final position value over your hold period. Backs out the gas-fee impact — critical for small deposits where gas can exceed yield on L1 Ethereum.

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📅 Research current as of 23 May 2026 · Sources: APY = (1 + APR/n)^n − 1 (discrete) or e^APR − 1 (continuous). Most DeFi protocols quote APR with autocompounding; APY assumes you do the compounding.
Rates, regulations, and lender practices change frequently — verify current figures with your provider or licensed advisor before acting.
Effective APY (after compounding)
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Final value: — · Net of gas: —
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After results · AD-W1Responsive · Post-tool

How to Use the APY Calculator

Check which rate the protocol quotes

Aave + Compound: APY (already compounded). Curve / Convex / Uniswap LP: typically APR (you handle the compounding). Yearn vaults: usually APY (auto-compounded). Read the protocol UI carefully — the same number can mean very different things.

Pick a realistic compounding frequency

Most DeFi protocols compound continuously (block-by-block). For Aave/Compound choose "continuous" or "daily". For positions where you manually compound (claim rewards + re-stake), choose the actual frequency you'll execute — weekly is common for moderate-yield positions.

Include all gas fees

Entry + every compound event + exit + claim. On L1 Ethereum during high-traffic periods: USD 20-200 per transaction. On L2 (Arbitrum/Optimism/Base): USD 0.10-1. The "net after gas" line tells the real story for small positions.

Compare to opportunity cost

Compare DeFi APY to risk-free alternatives. Aave USDC at 4% APY vs Treasury bills at 5% — the Treasury wins on risk-adjusted basis. DeFi yields above the safe-rate compensate for smart-contract + protocol + IL risk. Diversify across protocols; never go all-in on a single yield farm.

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After how-to · AD-W2Responsive

DeFi Yields — Math, Risk, and the Reality Behind the Numbers

APR vs APY — A Common Confusion

APR (Annual Percentage Rate) is the nominal annual rate; APY (Annual Percentage Yield) accounts for compounding. At 10% APR compounded daily: APY = (1 + 0.10/365)^365 − 1 = 10.52%. At 100% APR compounded daily: APY = 171%. The gap grows with rate and compounding frequency. Most DeFi protocols quote APR but the position auto-compounds at the protocol level — meaning the actual return is the APY, not the displayed APR. Aave + Compound display APY directly; many AMM/LP positions display APR and you compound by reinvesting rewards.

The same percentage shown two different ways can be misleading. "12% APR" sounds about the same as "12% APY" but compounded daily, 12% APR = 12.75% APY. Compounded continuously, 12% APR = 12.75% APY. For high yields the gap explodes — "1000% APR" daily-compounded is e^10 = 22,026× return per year (an absurd number that highlights how unsustainable extreme APR claims are; the protocol either inflates the rewards token or the rate decays toward zero).

Where DeFi Yields Come From

Honest DeFi yields come from one of three sources: (1) lending interest — borrowers pay X, depositors receive a fraction of X. Steady-state in low-volatility markets: 2-8% APY on USD stablecoins. (2) trading fees — Uniswap/Curve LP positions earn a share of pool swap fees. Highly variable, can be 0-50% APR depending on pool + volume. (3) protocol governance token emissions — protocols pay reward tokens to attract liquidity. Sustainable only as long as the token retains value; many "100% APR" yields come from this source and decay rapidly.

Less honest sources: (a) Ponzinomics — new deposits fund withdrawals, collapses when net flow turns. (b) Smart-contract exploits — protocol promises high yield, but a bug or backdoor drains user funds. (c) Mercenary capital chasing high token-emission rates — yields stay high only until the next sub-paying protocol emerges. Most "200%+ APY" claims fall into one of these. The safe-rate floor for crypto-native USDC is 3-5% APY on established on-chain lending markets such as Aave; everything above is paying for additional risk.

"DeFi rule of thumb: if a yield is more than 3-4× the prevailing USD risk-free rate, the extra return is paying for risk. The market is roughly efficient at pricing yield-vs-risk. A 50% APY position isn't a free lunch; it's compensation for a 15-30% probability of total loss."

Impermanent Loss and Other Hidden Costs

Liquidity-pool positions (Uniswap, SushiSwap, Curve) have a unique downside called impermanent loss (IL). When the two assets in the pool diverge in price, the LP position's value is less than just holding the two assets separately. A 50/50 ETH-USDC pool, if ETH doubles, has IL of about 5.7% (you give up ~5.7% of value vs simple holding). Stablecoin-stablecoin pools (USDC-USDT-DAI on Curve) have negligible IL because the assets stay near-pegged. Volatile/volatile pairs (ETH-BTC, ETH-MEMECOIN) have material IL exposure. Most DeFi yield trackers display "rewards APR" but NOT impermanent loss — the actual net yield can be substantially lower than advertised after IL.

10 Facts About DeFi Yields

01

APR = nominal rate; APY = compounded. APY > APR for any rate > 0%.

02

At 10% APR daily compounded: APY = 10.52%. The gap widens at higher rates.

03

Aave + Compound display APY directly. Most AMM/LP pools display APR.

04

Steady-state USD stablecoin lending APY: 2-8% on major protocols (2024-2026 typical).

05

Impermanent loss: LP positions in volatile pairs underperform simple holding when prices diverge.

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L2 gas (Arbitrum, Optimism, Base): USD 0.10-1 per transaction. L1 Ethereum: USD 5-200.

07

Yield rates above 3-4× the risk-free rate typically compensate for material risk, not arbitrage.

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TVL (Total Value Locked): best single risk indicator — established protocols with USD 1B+ TVL > newer USD 10M protocols.

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Common audit firms: Trail of Bits, Open Zeppelin, Quantstamp, Certik. Multiple audits = better signal.

10

Tax: DeFi yield is taxable as ordinary income at FMV when received. Compounding generates multiple taxable events.

Frequently Asked Questions

  • APR is the nominal annual rate; APY includes compounding. APY = (1 + APR/n)^n − 1 where n is compounding frequency. At 10% APR compounded daily: APY = 10.52%. The gap grows with rate magnitude and compounding frequency. DeFi protocols vary in which they display — read carefully. Aave/Compound: APY. Most AMM/LP pools: APR (you compound by claiming + re-staking rewards).
  • Spectrum. Lending on Aave/Compound at 2-6% APY on USDC: established protocols, multiple audits, billions in TVL — relatively safe but smart-contract risk always present. Yield farming new tokens at 100%+ APR: high risk of governance attacks, protocol exploits, token-price collapse. The yield premium over Treasury bills is compensation for risk — don't expect it for free. Diversify across protocols + types of yield.
  • When assets in a liquidity pool diverge in price, your LP position underperforms vs simply holding the two assets separately. For a 50/50 pool: 2× price divergence = 5.7% IL; 5× = 25.5% IL; 10× = 42.5% IL. Stablecoin pools (USDC-USDT) have negligible IL. ETH-USDC has meaningful IL if ETH moves significantly. Tools like APY.vision, IL.fyi let you check IL on existing positions. Always assume worst-case IL when projecting LP returns.
  • L1 Ethereum: highest security, USD 5-200 gas per transaction. Worth it only for large positions (USD 50K+) or trades that need maximum security. L2 (Arbitrum, Optimism, Base, zkSync): USD 0.10-1 gas, modern protocols mostly available, slightly less battle-tested. For positions under USD 50K, L2 is the default — the gas savings often exceed the yield differential.
  • Yield is taxed as ordinary income at the FMV when received. Compounding rewards generate multiple separate taxable events (each compound = new income). When you later sell the received tokens, additional capital gains/losses on the difference between receipt-FMV and sale price. Use crypto-tax software (CoinTracker, Koinly) to track — manual tracking is impossible for active DeFi users with hundreds of compounds.
  • Rule of thumb: deposit must yield > (total gas cost) × 10 to make sense. On L1 with USD 100 round-trip gas, you need USD 1,000+ of annual yield to make it worthwhile — meaning USD 25K+ position at 4% APY. For smaller positions or shorter holds, use L2 (Arbitrum, Base, Optimism) where gas is USD 0.10-1. Many small DeFi positions on L1 actually lose money to gas — verify the math before depositing.
  • CeFi platforms (Celsius, BlockFi, Voyager, FTX) all failed 2022-2023 — depositors lost most funds. DeFi protocols (Aave, Compound, MakerDAO) survived the same period. The key difference: DeFi protocols are non-custodial — your deposit lives in an on-chain smart contract, not a company's balance sheet. Smart-contract risk remains but counterparty risk is reduced. Avoid CeFi yield offerings (Nexo, Coinbase Earn) for serious deposits; they're regulated lending products with platform risk like any bank.
  • Yield aggregators (Yearn Finance, Beefy, Convex) auto-compound + auto-rebalance across protocols. Convenience comes at a cost — typically 1-2% management fee + 10-20% performance fee. For small positions or infrequent monitoring, aggregators save gas + time vs manual compounding. For large positions where you'd compound anyway, direct deposit is cheaper. Established aggregators (Yearn, Beefy) have strong track records; newer ones haven't been battle-tested.
  • Checklist: (1) TVL > USD 100M (more skin in the game = more scrutiny); (2) operational 2+ years without major exploits; (3) multiple independent audits (Trail of Bits, Open Zeppelin, Quantstamp); (4) governance token with clear utility (not just speculation); (5) team identifiable and reachable (not fully anonymous); (6) clear documentation of how yield is generated. Anything failing 3+ of these is high-risk. Use DefiLlama.com for TVL + audit info.
  • Mechanically yes — DeFi is permissionless and global. Tax treatment varies dramatically. Singapore: 0% personal capital gains, but yield as ordinary income at marginal rate. Germany: yield treated as miscellaneous income, taxable annually. UK: yield as miscellaneous income + capital gains at sale. Australia: yield as ordinary income. Many ASEAN expats use DeFi for USD yield via stablecoins to escape weaker local currencies — but tax compliance is still required. Always consult a local crypto-savvy CPA.

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