🌾 Yield Farming Internals

Yield farming is the practice of deploying capital across DeFi protocols to earn returns — from swap fees as a liquidity provider, to governance token rewards, to complex multi-protocol strategies. Understanding the math behind LP positions, impermanent loss, and compounding is essential for anyone putting capital to work in DeFi.

📊 Yield Sources in DeFi

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Swap Fees

LPs earn a share of trading fees (0.01%–1%) proportional to their pool share

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Token Incentives

Protocols distribute governance tokens to bootstrap liquidity (UNI, CRV, SUSHI)

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Lending Interest

Supply assets to Aave/Compound and earn variable interest from borrowers

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Staking Yield

Earn consensus rewards by staking ETH via Lido, Rocket Pool, or native staking

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Impermanent Loss

Why providing liquidity can lose you money — interactive calculator showing IL vs price divergence

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LP Math

How liquidity pool shares work, fee accrual, and the constant product formula x·y=k visualized

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Auto-Compounding

Manual harvesting vs auto-compounding vaults — Yearn, Beefy, and the math behind compound yield

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Yearn Finance

How Yearn's auto-yield vaults work — strategy allocation across Curve/Aave/Compound, yToken mechanics, and fee structure

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Yearn vs Manual

Is Yearn automation worth the fees? Side-by-side calculator comparing gas costs, compounding frequency, and net returns