DeFi likes to show off
high APYs, but it's important to understand where that yield comes from. Some yields are generated through actual income that the protocol earns, while others are based on
emissions and may look attractive—until the token inflates and eventually loses value completely.
Real yield is straightforward. The protocol collects fees or interest, and that money is divided among the users. There are no inflation cycles involved, and you don’t need to rely on more deposits coming in.
Sources of real yield typically include:
- Fees from trading – For example, GMX allocates part of its futures trading fees to users who stake.
- Ethereum staking payouts – Lido distributes rewards generated by validators who are making and verifying blocks.
- Interest proceeds – MakerDAO earns from lending and assets in the real world that gain interest at a fixed rate.
A key point to note: the rewards are still present even if the value of the token does not go up.
Yield that acts like a Ponzi is a different story. In this case, the protocol creates new tokens or constantly needs fresh capital to keep the APY high. If emissions slow down, the APY drops. When demand falls, the token price decreases.
You might notice:
- Rewards paid out as new tokens
- APY adjusted based on emission schedules
- Returns grow as more investors come in
The check is simple:
real yield, backed by actual income, tends to stick around, while yield from emissions doesn’t have longevity. It’s like a story that just doesn’t last for long.
