DeFi Yield Calculator
Calculate DeFi yields with compound interest. Estimate returns from lending, liquidity pools, and yield farming including impermanent loss.
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Last updated: January 2026
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Frequently Asked Questions
What is the difference between APY and APR in DeFi?
APR (Annual Percentage Rate) is simple interest without compounding. APY (Annual Percentage Yield) includes compound interest. For example, 100% APR compounded daily equals 171.5% APY because you earn interest on interest. The formula is: APY = (1 + APR/n)^n - 1, where n is compound periods. Always compare APYs when evaluating DeFi protocols, as a lower APR with daily compounding can beat higher APR with less frequent compounding.
What is impermanent loss and how is it calculated?
Impermanent loss (IL) occurs when providing liquidity to an AMM (Automated Market Maker) pool and token prices change from when you deposited. The loss becomes 'permanent' if you withdraw at different price ratios. Formula: IL = 2×√(price_ratio) ÷ (1 + price_ratio) - 1. For example: if ETH doubles (2x), IL is about 5.7%. If ETH 4x's, IL is about 20%. IL is offset by trading fees—if fees exceed IL, you're still profitable.
How does yield farming work and what are the risks?
Yield farming involves depositing crypto into DeFi protocols to earn rewards, often in the protocol's native token plus trading fees. Common strategies: (1) Lending on Aave/Compound for interest, (2) LP positions in Uniswap/Curve for fees + incentives, (3) Staking governance tokens. Risks include: smart contract bugs, rug pulls, token price collapse, impermanent loss, and gas costs eating profits. APYs above 100% usually involve high-risk new tokens.
How do I calculate my real DeFi returns including gas fees?
Net Return = (Final Value - Initial Investment - Gas Costs - Impermanent Loss) ÷ Initial Investment × 100. Include all transactions: deposit, claim rewards, reinvestment (compounding), and withdrawal. On Ethereum mainnet, complex DeFi transactions can cost $20-100+ in gas. For small investments (<$5,000), consider L2 solutions (Arbitrum, Optimism) or low-fee chains (Polygon, Avalanche) where gas is cents instead of dollars.
What factors should I consider when choosing a DeFi protocol?
Evaluate: (1) TVL (Total Value Locked)—higher TVL suggests trust but isn't a guarantee. (2) Smart contract audits—check for audits by Certik, OpenZeppelin, or Trail of Bits. (3) Protocol age—older protocols have more battle-tested code. (4) Sustainable yield source—are rewards from trading fees (sustainable) or token emissions (may decline)? (5) Token vesting—check if rewards have lock-up periods. (6) Insurance options—consider Nexus Mutual coverage for large positions.