DeFi Yield Calculator
Estimate your decentralized finance yield farming returns. Enter your deposit amount, APY percentage, compounding frequency, and time period to see projected earnings broken down by day and month.
How DeFi Yield Farming Works
DeFi yield farming involves depositing cryptocurrency into decentralized protocols to earn returns. These returns come from several sources: lending interest from borrowers, trading fees from liquidity pools, and protocol reward tokens distributed as incentives to attract capital. The combined return is expressed as an APY.
Lending protocols like Aave and Compound let you deposit assets that borrowers can access by posting collateral. You earn interest on your deposit proportional to borrowing demand. Automated market makers like Uniswap and Curve let you provide liquidity for trading pairs, earning a share of every trade's fee.
Many protocols also distribute their own governance tokens as additional rewards, which can dramatically boost short-term APYs. These reward rates typically decrease over time as more participants enter and as token distribution schedules taper off. Sustainable yields generally fall in the 3 to 15 percent range once early incentive phases end.
Understanding Compound vs. Simple Interest
Simple interest calculates returns only on your original deposit. If you deposit $1,000 at 10% for one year, you earn exactly $100 regardless of how often interest is credited. The formula is straightforward: earnings equal principal times rate times time.
Compound interest reinvests earnings so they generate additional returns. With daily compounding at 10% on $1,000, each day's interest gets added to your principal. Over a year this adds up to roughly $105.16 instead of $100, a modest but meaningful difference.
In DeFi, compounding is not always automatic. Some protocols require you to manually claim and restake rewards, incurring gas fees each time. Auto-compounding vaults handle this automatically for a small performance fee. Weigh the gas cost against the additional yield, especially for smaller deposits.
Realistic Expectations for DeFi Returns
Extremely high APYs almost always come with correspondingly high risk. A pool advertising 500% APY is likely paying returns in a newly minted token whose price can collapse. When the token drops 90%, your actual dollar return is negative despite the headline number.
Stablecoin lending on established protocols typically offers 3 to 12 percent APY. These rates are sustainable because they are driven by genuine economic activity rather than inflationary token rewards. Think of them as fair compensation for smart contract risk.
Always factor in gas fees, protocol fees, and potential impermanent loss. A 10% APY on a $500 deposit can be wiped out by a few compounding transactions at high gas prices. This calculator shows gross returns before fees, so subtract expected costs for a more accurate picture.
Frequently Asked Questions
What is APY in DeFi?
APY (Annual Percentage Yield) is the effective annual rate of return that accounts for compounding. In DeFi, APY represents the projected yearly return from staking, lending, or providing liquidity. A 10% APY on a $1,000 deposit means you would earn approximately $100 over one year if the rate stays constant, which is an important caveat because DeFi rates fluctuate constantly.
What is the difference between APY and APR in DeFi?
APR (Annual Percentage Rate) is the simple interest rate without compounding. APY includes the effect of compounding. If a protocol compounds daily at 10% APR, the actual APY is about 10.52%. DeFi protocols may advertise APR or APY, so check which one they are quoting. Higher compounding frequency increases the gap between APR and APY.
Are DeFi yield rates guaranteed?
No. DeFi yields are highly variable and change based on supply and demand, protocol incentives, token prices, and market conditions. A pool showing 50% APY today might drop to 5% next week as more capital enters or incentive rewards decrease. Use this calculator for estimation purposes only, and never treat projected returns as guaranteed.
How does compounding frequency affect DeFi returns?
More frequent compounding produces higher returns because earned interest starts generating its own interest sooner. Daily compounding at 10% APR yields about 10.52% APY, while monthly compounding at the same rate yields about 10.47%. The difference is small at low rates but becomes significant at the higher rates common in DeFi. Many auto-compounding vaults compound every few hours.
What risks should I consider with DeFi yield farming?
Key risks include smart contract bugs that could drain funds, impermanent loss when providing liquidity to automated market makers, rug pulls where project teams abandon the protocol with user funds, token price decline that erases yield gains, and regulatory risk. High APYs often signal higher risk. Diversifying across protocols and using audited platforms helps mitigate these risks.