Real Yield and Why it Matters in DeFi

Excited about DeFi and its high yield potential?

Let's delve into the concept of "real yield" in DeFi and why it matters for investors and the overall sustainability of the ecosystem.

💰 What is DeFi Yield?

#DeFi yield refers to the interest or return generated from participating in DeFi protocols. Yield farming, also known as liquidity mining, is a popular method of generating yield in DeFi. It involves staking assets in smart contracts in exchange for rewards like tokens or fees.

💹 How Does Yield Farming Work?

In yield farming, you provide liquidity to a DeFi protocol's pool, such as ETH and DAI, and earn rewards like trading fees. The fees are distributed proportionally among liquidity providers. Some protocols also offer governance tokens as additional incentives.

🤔 How Does DeFi Pay Such High Yields?

#DeFi protocols can offer high yields due to lower overhead costs and more efficient capital allocation on decentralized networks. The use of governance tokens, which can appreciate in value, is another factor contributing to high returns.

🆕 The Rise of Real Yield

While the high yields from token emissions and governance tokens were attractive, they often proved unsustainable. The rise of real yield in DeFi seeks to offer a more practical approach to yield farming by providing a share of protocol revenue in established cryptocurrencies like ETH.

📈 DeFi Protocols with Real Yield

Some #DeFi protocols that pay real yield:

• GMX: Offers an APR of 4.49% for staking GMX and 10.23% for holding GLP tokens, paid out in ETH.

• Synthetix: Pays approximately 53% yield from emissions-based staking rewards and trading fees.

• Dopex: Offers Single Staking Option Vaults (SSOVs) with yields based on option premiums.

❓ Why Real Yield Matters

Real yield in DeFi provides a more sustainable and investor-friendly approach compared to hyperinflationary token emissions. It allows investors to earn income without relying solely on the value of governance tokens.

🛠️ Considerations for Yield Farming

Maximizing yield in DeFi involves evaluating factors like trading volume, fees, governance token value, and potential impermanent loss. Complex strategies may involve moving assets between multiple protocols. Thorough research and understanding of the DeFi ecosystem are essential.

⚖️ Balancing Risk and Return

While real yield may offer more sustainable returns, protocols paying a portion of revenue to users may have less capital for project development. Investors should weigh the risks and rewards before participating in DeFi yield farming.

📚 Conclusion

Real yield in DeFi is an improvement over unsustainable token emissions and governance token strategies. It provides a more practical approach to yield farming, giving investors a chance to earn income without relying solely on volatile tokens. Remember to research and assess risk before investing in any cryptocurrencies or protocols.