// GLOSSARY -- DEFI

What is DeFi Yield?

1 min read Updated

DeFi yield is the return earned on cryptocurrency assets deployed in decentralized finance protocols — including interest from lending, trading fees from liquidity provision, and staking rewards.

WHY IT MATTERS

DeFi yield comes from multiple sources: lending interest (borrowers pay to use your capital), LP fees (traders pay for swap execution), staking rewards (network secures itself), and incentive emissions (protocols distribute tokens).

Sustainable yields come from real economic activity — fees paid by actual users. Unsustainable yields come from token emissions that dilute value. The shift from incentive-driven to fee-driven yield is a sign of DeFi maturation.

Current sustainable DeFi yields range from 3-15% for conservative strategies, with higher yields available at proportionally higher risk. The 1000%+ APY era is gone for legitimate protocols.

FREQUENTLY ASKED QUESTIONS

What's a realistic DeFi yield?
Conservative (stablecoin lending, ETH staking): 3-8%. Moderate (LP provision, active farming): 8-20%. Aggressive (leveraged strategies, new protocols): 20%+. Higher yield = higher risk.
Where does DeFi yield come from?
Borrower interest, trading fees, block rewards (staking), and token incentives. Yields from fees are sustainable. Yields from token emissions are inflationary and temporary.
Is DeFi yield taxable?
In most jurisdictions, yes — earned yield is taxable income. Treatment varies (income vs capital gains). Consult a crypto tax professional for your jurisdiction.

FURTHER READING

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