If the project’s revenues cover the amount of tokens distributed to stakers, its own funds aren’t being drained. When we describe yield as being “real,” what we are talking about is its sustainability. Real and Sustainable Yield vs Dilutionary Emissions With high APYs abundant in the DeFi space, how does one estimate the true value of projects and their interest-generating potential? One option is to look at a project's crypto real yield. Demand for such tokens, it turned out, was supported by emissions rather than their utility. Once these APYs dropped as a result of the project's treasuries dwindling, token prices would often plummet as users rushed to sell off the farmed token. This, however, often resulted in unnaturally high and unsustainable APYs, some even over 1000%. Yield farmers will also move their funds around, looking for the best returns available in the market.Īs DeFi grew more popular, many protocols began offering higher rewards as incentives for stakers. It's common for yield farmers to use protocols that maximize their returns, known as yield optimizers. What they all have in common is that they generate a return for the user in exchange for putting this user’s fund to work. There are various opportunities to yield farm, including liquidity pools, staking, and lending protocols. Yield farming allows users to earn cryptocurrency rewards for locking up their assets in yield-bearing pools. This simple, quick, and relatively effective calculation can help you assess the feasibility of a project's promises at a glance and estimate just how “real” its yield actually is. One popular method for evaluating the promised yields is calculating a project's real yield. Yet, if you've ever come across 100% or even 1000% returns on a staking opportunity, it is fair to question if it's too good to be true. The sizable APYs often seen offered in the decentralized finance (DeFi) world are certainly intriguing for many investors. However, this indicator can serve as a useful tool for gauging a project's long-term yield-bearing prospects. This means that their yield isn’t sustainable or, in lay terms, “real.” Real yield isn't necessarily better than dilutionary emissions, which are often used for marketing purposes. If the returns for staking are greater in real terms than the provided interest, the emissions are dilutionary. Crypto real yield as a metric compares a project's offered yield against its revenue.
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