DeFi Yield Calculator

Why advertised DeFi yields overstate what you keep

DeFi protocols advertise APYs that attract attention — sometimes dramatically high numbers. The net number that actually hits your wallet after fees is usually meaningfully lower. Protocol fees (often 0.1-2% of assets per year), performance fees (10-20% of yield on some vaults), gas costs to enter and exit positions, and periodic compounding costs all eat into the headline. The tool strips away the fees so you can see the realistic net yield, which is what matters for an investment decision.

How the math works

Net APY = Gross APY − (Protocol Fee %) − (Annual Gas Cost / Principal × 100). Final balance = Principal × (1 + Net APY)^years. The calculator treats protocol fees as a percentage drag on the stated APY and amortises gas costs as a fixed annual dollar cost divided by the principal. For a $1,000 position with $50 annual gas cost, that is a 5% drag on the yield — enormous. For a $100,000 position with the same gas cost, the drag is 0.05% — negligible. Position size matters enormously in DeFi economics.

The main cost categories

Protocol fees: Many vaults and yield aggregators take 10-20% of earned yield. A 10% APY with a 20% performance fee is effectively 8% to the user. Also common: 0.5-2% annual management fee on the position principal regardless of yield.

Gas costs: On Ethereum mainnet, depositing, withdrawing, compounding, or moving funds each cost gas. Active strategies on L1 can easily cost hundreds of dollars per year in gas. Layer 2s and alternate chains reduce this significantly but do not eliminate it.

Compounding costs: Some vaults auto-compound; others require manual claiming of rewards, which incurs gas. Manual compounding that happens weekly incurs weekly gas — at 52 transactions per year, this adds up fast on small positions.

Impermanent loss: For liquidity provisioning positions (not pure lending), impermanent loss can offset or exceed yield when underlying prices diverge significantly. The tool does not model IL — it only handles straightforward APY + fee scenarios.

Realistic vs advertised yields

A rule of thumb: subtract 2-5 percentage points from advertised APY for well-established protocols with modest fees, and more for aggressive vaults with high fee loads. Apply realistic gas drag based on position size and chain. If the net yield after these adjustments still beats the short-term government-bond rate by a wide margin, the position may be worth noting. If it does not, the headline APY was aspirational more than real.

Risks this tool does not model

Smart contract risk (bugs, exploits), oracle risk (manipulated price feeds), depeg risk (stablecoins or LSTs losing their peg), governance risk (parameter changes by protocol DAOs), impermanent loss for LP positions, and counterparty risk on lending protocols. DeFi yields exist because they are compensated for these risks — high yields typically signal high tail risk, and the highest advertised yields often signal that the risk is not well-priced.