Auto-Compounding Vaults
Auto-compounding vaults (Yearn, Beefy, Convex) automatically harvest yield rewards and reinvest them back into the LP position. This turns simple APR into compound APY — and the difference can be massive at high yield rates. But vaults charge performance fees, and gas costs matter for smaller positions.
📈 Compound vs Simple Yield
Simple (1yr)
$15,000
Compound (1yr)
$16,180
After Fees (1yr)
$15,562
Effective APY
64.9%
APY after Fees
55.6%
Compound Bonus
+$1,180
🏗️ Major Auto-Compounding Protocols
🏦
Yearn Finance
OG yield aggregator. Vaults use complex strategies across multiple protocols. 20% performance fee on profits.
🐮
Beefy Finance
Multi-chain, 800+ vaults. Simple auto-compound with low fees. 4.5% performance fee.
⚡
Convex Finance
Boosted Curve yields without locking CRV. Earns CRV + CVX rewards. 16% platform fee.
🍰
Concentrator
Focuses on Curve/Convex vaults. Auto-compounds into aCRV or aFXS for maximum capital efficiency.
⚠️ When Auto-Compounding Doesn't Help
Low APR
At 5% APR, compounding daily vs monthly adds only ~0.1%. Vault fees can eat more than the compounding benefit.
High Gas Chains
On Ethereum L1, gas costs for frequent harvesting can exceed the compounding benefit for small positions (<$10k).