Yield

Yield in DeFi is the return from putting capital into protocols, usually quoted as APY, the annualized rate with compounding. Not all yields are the same. High advertised rates often hide short-lived economics.

Sustainable yield comes from real activity: trading fees from AMM liquidity, interest from lending, staking rewards from new issuance to validators. Those rates tend to be modest and last. Unsustainable yield usually comes from token emissions. Protocols pay governance tokens to bootstrap liquidity.

A new protocol offering 500% APY is almost always emissions that will drop once the launch incentives end. Mercenary capital chases the emissions and leaves when they fall, often crashing the token. Real yield, fees rather than emissions, is the metric people use to judge whether a protocol can last.

Yield also has costs: impermanent loss, contract bugs, oracle manipulation, and locked capital you cannot use elsewhere. Active farmers move across protocols, net of gas, lockups, and emission schedules. Yield in DeFi represents the returns earned from deploying capital into protocols, typically expressed as Annual Percentage Yield (APY), the annualized return accounting for compounding.

Understanding yield sources is required because not all yields are created equal and high advertised rates often mask unsustainable economics. These yields tend to be modest but persistent. When a new DeFi protocol offers 500% APY, that's almost certainly token emissions that will decline sharply once early adopter incentives end. On Aave, suppliers earn a variable APY paid by borrowers.

That rate moves with utilization. It is not a guaranteed bank coupon.