Earning Interest in DeFi
Learn how to generate yields in DeFi through lending, staking, and liquidity provision - with rates typically 5-20x traditional banks
🎯 What You'll Learn
How DeFi Yields Work
In traditional finance, banks pay you 0.5-2% on savings while charging borrowers 5-20% for loans, pocketing the difference. In DeFi, smart contracts eliminate the middleman - you earn most of what borrowers pay, resulting in yields typically ranging from 2-15% for stablecoins and potentially higher for volatile assets.
DeFi yields come from real economic activity: borrowers pay interest to access liquidity, traders pay fees to swap tokens, and blockchain validators share staking rewards. These yields fluctuate based on supply and demand - when borrowing demand is high, rates increase; when markets are quiet, rates compress.
Current DeFi Yield Landscape
Rates vary significantly by protocol, chain, and market conditions - always check current rates before depositing
DeFi Yield Calculator
Major Lending Protocols
Where to Find Current Yields
📊 Real-Time Yield Analytics
APR vs APY Explained
APR (Annual Percentage Rate) is simple interest without compounding. If you earn 10% APR on $1,000, you'll have exactly $1,100 after one year, regardless of how often interest is paid.
APY (Annual Percentage Yield) includes the effect of compounding. Most DeFi protocols compound continuously (every block), meaning your interest earns interest. At 10% APY with continuous compounding, $1,000 becomes $1,105.17 after one year.
The difference becomes dramatic over time: $10,000 at 20% APY with daily compounding becomes $22,140 after 4 years, versus just $18,000 with simple 20% APR. Always check whether a protocol displays APR or APY, as the difference can be significant at higher rates.
Risk vs Reward Framework
2-5% APY
5-15% APY
15-50% APY
50%+ APY
Impermanent Loss: Providing liquidity to volatile pairs can result in losses even with high APY
Liquidation Risk: Using deposited assets as collateral for borrowing adds liquidation risk
Sustainability: Yields above 20% often come from token emissions that may not be sustainable
Regulatory Risk: Some yield products may face regulatory challenges in certain jurisdictions
Smart Yield Strategy for Beginners
Start with Stablecoin Lending
Begin with USDC or USDT on Aave or Compound for 2-8% APY with minimal volatility risk
Check Multiple Chains
Compare rates across Ethereum, Arbitrum, Optimism, and Base - L2s often have better rates
Diversify Across Protocols
Split funds between 2-3 established protocols to reduce single-point-of-failure risk
Monitor and Rebalance
Check rates weekly and move funds when significant opportunities arise (consider gas costs)
Graduate to Advanced Strategies
Once comfortable, explore liquid staking, LP provision, or leveraged yield farming
🔑 Key Takeaways
Knowledge Check
1. What's the typical yield range for stablecoin lending on major protocols?
2. Why are DeFi yields higher than bank savings rates?
3. Where should you check for current DeFi yields?
Practical Exercises
Compare Live Rates
Visit DeFiLlama Yields and find: 1) Current highest stablecoin yield, 2) Average ETH staking APY, 3) Which chain has the most yield opportunities. How do these compare to the ranges in this module?
Calculate Compound Returns
Use the calculator above: If you invest $5,000 at 12% APY with continuous compounding for 3 years, what's your total return? How much more is this than simple 12% APR?
Risk Assessment Challenge
Find a protocol offering 30%+ APY. Research: Is it audited? How long has it existed? Where does the yield come from? Would you invest? Document your analysis.