Real yield is a term that is becoming increasingly popular in the world of decentralized finance (DeFi). At its core, real yield refers to the actual return on investment (ROI) that a user can expect from a DeFi platform or product, after accounting for the various fees and other costs associated with the investment.
One of the key advantages of DeFi is the ability to access a wide range of financial products and services, without the need for a traditional intermediary like a bank or financial institution. However, this also means that users need to be more vigilant when it comes to understanding the true costs and risks associated with their investments.
One of the most common examples of real yield in DeFi is the interest earned on a lending or borrowing platform. For example, if a user borrows $100 at a 10% annual interest rate, they would expect to pay back $110 at the end of the year. However, if the platform also charges a 2% origination fee, the real yield for the user would be 8% ($8).
Another important aspect of real yield in DeFi is the impact of volatility on investments. Many DeFi products, such as yield farming and liquidity provision, are based on the value of cryptocurrencies, which can be highly volatile. This means that the value of an investment can fluctuate significantly in a short period of time, making it difficult to predict the actual return on investment.
In order to understand the real yield of a DeFi investment, it is important to consider both the potential returns and the potential risks. For example, yield farming can offer high returns, but it also comes with the risk of impermanent loss, which occurs when the value of the underlying cryptocurrency drops.
One of the lesser-known ways to earn real yield in DeFi is through liquidity mining. This is a process where users can earn rewards for providing liquidity to a particular market or token pair on a decentralized exchange (DEX). These rewards can come in the form of the native token of the DEX, and can be substantial, making it an attractive option for earning real yield.
Another lesser-known way to earn real yield in DeFi is through using a platform that utilizes idle assets, such as idle crypto or idle computational power. These platforms are designed to allow users to earn rewards for their idle assets, which can be a great way to put otherwise unused resources to work and earn a return on investment.
In conclusion, real yield in DeFi refers to the actual return on investment that a user can expect after accounting for the various costs and risks associated with the investment. It is an important concept to understand in order to make informed decisions about DeFi investments and earning returns through various ways such as liquidity mining, idle assets, lending, borrowing and more. As the DeFi space continues to evolve, it is important for users to stay informed and aware of the true costs and risks associated with their investments in order to maximize their returns.
