DeFi yield calculator
Pool APR is the sticker price. Net APR after IL, gas, and emissions is what you keep.
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Pool APRs on DefiLlama and Pendle look beautiful — 28%, 45%, sometimes 120%. Then you realize the reward token is inflating 8% a week, you ate 4% in gas entering and exiting, and impermanent loss trimmed another 6% when the pair diverged. This calculator strips the marketing number down to what lands in your wallet.
Enter principal, base pool APR (fees only), reward-token APR, your expected IL, and entry/exit gas. You get the realistic net return — before taxes — across the position.
The gap between advertised and real APR has been a consistent theme in DeFi since 2020. During the Compound liquidity mining launch in June 2020, COMP token rewards pushed headline APYs above 100%. Within 30 days, COMP's price had dropped 40% from peak, and farmers who held rewards rather than selling saw their actual APR fall to 30-40%. The same pattern played out on SushiSwap, Curve wars farms, and every major protocol launch since. The number on the pool page is what you earn at today's token price. Tomorrow is a different calculation.
Gas costs are the other underappreciated drag. On Ethereum mainnet, entering a Uniswap V3 position, claiming rewards twice a month, and exiting after 90 days can cost $150-$300 in gas. On a $5,000 position, that's 3-6% off the top before impermanent loss or token depreciation enter the picture. L2 deployment has changed this math significantly — on Arbitrum or Base, the same activity costs $5-15 total, which changes the minimum viable position size from ~$10,000 on mainnet to ~$500 on an L2.
$25,000 into a 32% APR ETH/USDC Uniswap V3 pool, 90-day hold
Headline APR: 32% (12% fees + 20% rewards token).
If ETH moves ±20% over 90 days → impermanent loss ≈ 1.0% of position = $250.
Gas to enter + collect + exit on mainnet: ~$90.
Reward tokens sold at claim often drop 30-50% from peak → effective reward APR is ~12%, not 20%.
Net 90-day return: ($25,000 × 24% × 90/365) − $250 − $90 = $1,479 − $340 = $1,139 = 18.3% annualized.
Where DeFi yield actually comes from
Three sources: (1) trading fees paid by swappers — the cleanest yield; (2) emissions of a reward token — inflation in disguise; (3) leverage/re-hypothecation — where platforms pay you to supply collateral they lend out. Fees-only yield on deep Uniswap pools runs 8-20% APR. Reward-heavy pools can show 80%+ but usually bleed because the reward token is being dumped on you.
Managing IL: concentrated vs full-range
Uniswap V3 lets you concentrate liquidity in a tight price range for 3-10x fee capture. The trade: if price exits your range, you stop earning and hold only one side of the pair. A realistic framework — run concentrated ranges on majors you're bullish on ETH and stablecoins, wider ranges on volatile pairs, and never in tokens you wouldn't want 100% of on either side.
Evaluating reward token quality before entering a pool
Not all reward tokens are created equal. Before allocating capital to a reward-boosted pool, check three things: (1) the token's emission schedule — if 50% of supply unlocks in 6 months, farm and exit before the cliff; (2) whether the protocol has real revenue — tokens backed by protocol fee buybacks hold value better than pure governance tokens with no cash flow; (3) trading volume on the reward token itself — a token with $50,000 daily volume can't absorb $500,000 in daily farm sales without price collapsing.
Curve's CRV token illustrates both sides. During peak Curve Wars in 2022, protocols bribed veCRV holders to direct emissions — CRV had genuine demand pressure from Convex, Yearn, and Frax. That kept price relatively stable versus pure emission tokens. Post-2022, as bribe revenue fell, CRV dropped 85% from peak. The lesson: farm tokens with active secondary demand, not just supply-side emissions.
A simple filter before entering any high-APR pool: take the total daily reward emissions in USD and divide by the pool's TVL. If daily emissions exceed 0.1% of TVL, the pool is likely unsustainable unless new capital is entering faster than farmers are selling. Pools above this threshold tend to see TVL collapse and APR evaporate within 30-90 days.
Auto-compounders vs manual farming: the fee tradeoff
Yield aggregators like Beefy Finance, Yearn, and Convex auto-compound rewards into LP positions on your behalf. They charge 2-15% of yield as a performance fee. Whether that's worth it depends on how often you'd realistically compound manually and the gas cost per compound. On mainnet at 40 gwei, manually claiming and reinvesting costs $20-40 per action. If your position generates $50 in rewards weekly, Beefy's 9.5% fee on $50 = $4.75 — you pay $4.75 versus a $30 gas bill for the same result.
On L2s, the calculus shifts. Gas is cheap enough that manual claiming costs $0.50-$2 per action, which means auto-compounder fees become expensive relative to the gas savings. For positions under $20,000 on Arbitrum or Base, manual weekly compounding often beats auto-compounder fees. Above $50,000, the frequency optimization that aggregators provide (sometimes compounding 4-8 times daily) outweighs their fees through the extra compounding lift.
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DeFi yield — frequently asked questions
What is impermanent loss in plain English?
When a pair's price ratio changes, the AMM rebalances against you. If ETH doubles relative to USDC, the pool sells ETH on the way up, leaving you with less ETH than if you'd just held. IL becomes permanent when you withdraw. Classic 50/50 IL table: 25% price change = 0.6% IL, 50% = 2.0%, 100% = 5.7%, 400% = 25%.
Why do reward tokens lose value so fast?
Farmers dump them. If a pool pays 40% APR in a new governance token, most participants harvest and sell instantly. Emissions add to supply, sell pressure subtracts from price, and the 'APR' you're projecting in dollars evaporates. The tokens that hold value long-term are ones with real protocol revenue feeding buybacks or fee distribution.
Is Curve or Uniswap safer for stablecoin farming?
Curve stable pools have the lowest IL for like-kind pairs (USDC/USDT/DAI) — often a few basis points annually. Uniswap V3 stable pairs in tight ranges can outyield Curve on fees but have smart-contract attack surface. Both have been exploited in the past (Curve in July 2023, Uniswap via router bugs). Never put more in any protocol than you can afford to lose to an exploit.
Are DeFi yields taxed as income or capital gains?
In the US, fee yield and rewards both count as ordinary income on receipt. When you later sell those earned tokens, you pay capital gains on the delta. LP tokens themselves may or may not trigger taxable events on deposit/withdrawal depending on jurisdiction and interpretation — most CPAs treat deposit/withdrawal as taxable swaps.
What's a realistic target yield for 2025 DeFi?
Fees-only on deep major pools: 5-15% APR. Stablecoin-stablecoin pools: 3-8% APR. Reward-boosted pools: 15-40% APR, heavy caveats. Anything above 50% sustained on non-degenerate pools is usually a red flag for imminent reward-token collapse or exploit risk.
What's the minimum position size that makes DeFi worth it on mainnet?
At 40 gwei and $3,200 ETH, entering and exiting a Uniswap V3 position costs roughly $80-$120 in gas including range management. At 15% net APR, break-even on gas requires ~$7,000 minimum for a 90-day hold. Below that, move to an L2 where the same position costs $5-10 in gas and the minimum viable size drops to $500.
How do I know if a protocol is safe enough to deposit into?
Four checks: (1) audit count and auditor reputation — Trail of Bits, OpenZeppelin, and Spearbit are the top tier; (2) TVL age — protocols with $100M+ TVL that has held for 12+ months without incident are meaningfully de-risked; (3) bug bounty — active bounties on Immunefi of $1M+ signal the team takes security seriously; (4) multisig or governance timelock on admin keys — if one wallet can drain the protocol instantly, that's a red flag regardless of audit count.
What happens to my LP position if a pool's TVL drops 80%?
Your share of the pool increases (you own a larger percentage of a smaller pool), but the absolute value of your position falls with TVL if you hold both tokens. Fee income also drops because fewer swaps occur in a less-liquid pool. Reward APR often spikes as a percentage because fewer LPs share the same emission schedule — but if TVL is falling, it's usually because reward token price is also falling, so the higher APR in token terms may not mean more USD. Falling TVL is a signal to reassess, not to add more capital.
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