DeFi Yield / APY Calculator
Convert DeFi protocol APR to APY at any compounding frequency. Project final position size from yield, principal, and lockup period. Free, no signup.
DeFi Yield / APY Calculator
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.
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.
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 Aave or Coinbase Earn; 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
APR = nominal rate; APY = compounded. APY > APR for any rate > 0%.
At 10% APR daily compounded: APY = 10.52%. The gap widens at higher rates.
Aave + Compound display APY directly. Most AMM/LP pools display APR.
Steady-state USD stablecoin lending APY: 2-8% on major protocols (2024-2026 typical).
Impermanent loss: LP positions in volatile pairs underperform simple holding when prices diverge.
L2 gas (Arbitrum, Optimism, Base): USD 0.10-1 per transaction. L1 Ethereum: USD 5-200.
Yield rates above 3-4× the risk-free rate typically compensate for material risk, not arbitrage.
TVL (Total Value Locked): best single risk indicator — established protocols with USD 1B+ TVL > newer USD 10M protocols.
Common audit firms: Trail of Bits, Open Zeppelin, Quantstamp, Certik. Multiple audits = better signal.
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 (~5%) 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% IL; 10× = 50% 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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