Yield

Yield in the context of cryptocurrencies and DeFi refers to earnings generated from holding digital assets. It can come from various sources, such as staking, providing liquidity to pools on decentralized exchanges (DEX), or participating in yield farming mechanisms. Yield in DeFi is often expressed as the Annual Percentage Yield (APY), which accounts for the effects of compound interest.

Yield can be an attractive form of passive income but also carries risks. Market volatility, impermanent loss, and vulnerabilities in smart contracts can impact an investor’s actual returns or lead to losses. Therefore, before engaging in yield-generating strategies, it is essential to carefully assess potential risks and the mechanics of the chosen protocol.