Question 1

What are DeFi Yields?

Accepted Answer

DeFi yields represent the annual percentage yield (APY) earned by depositing assets in decentralized finance protocols. They come from liquidity provision, staking, lending, and more, consisting of base APY and reward APY. Higher yields carry risks like impermanent loss (IL).

Question 2

What is impermanent loss (IL)?

Accepted Answer

Impermanent loss occurs when the price ratio of paired assets in a liquidity pool changes. The greater the price divergence, the larger the IL. Stablecoin pools have low IL risk, while volatile asset pairs carry high IL risk.

Question 3

What is the difference between Base APY and Reward APY?

Accepted Answer

Base APY comes from protocol-native sources like trading fees, while Reward APY is additional token incentive yield provided by the protocol. Reward APY may decrease over time, so pools with higher Base APY tend to be more sustainable long-term.

DeFi Yields

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