Intermediate level
Every yield in crypto is paid by someone: borrowers paying interest, traders paying swap fees, a network paying stakers from new issuance and fees, a protocol paying out its own new tokens, leveraged traders paying funding, or a government paying interest on the Treasury bills behind a tokenized fund. Find the payer, ask why they pay and what happens when they stop, and you know how durable the number is.
Every yield has a payer
A protocol cannot create income. It can only route money from someone who pays to someone who receives, and take a cut on the way. That makes every yield you will ever see answerable with three questions:
Who pays?
A borrower, a trader, a network, the other holders of a token, or a government.
Why are they willing to?
Leverage, convenience, security, growth, or ordinary interest on a loan.
What happens when they stop?
Some payers keep paying in every market. Others pay only in good times, or only until a budget runs out.
Answer those and the headline number becomes a description of a business you can judge. This is the most useful habit in DeFi, and it takes a few minutes per product.
The map: six sources, and one that is not yield
| Source | Who pays you | Why they pay | Main risk |
|---|---|---|---|
| Lending interest | Borrowers | Leverage, shorting, or cash without selling | Bad debt; withdrawals stuck when the pool is fully lent |
| Trading fees | Traders swapping through your liquidity | Immediacy | Impermanent loss |
| Staking rewards | The network (issuance) plus users (fees and MEV) | Security | The asset’s price; slashing; exit queues |
| Token emissions | Everyone holding the emitted token, through dilution | To attract liquidity or users | The reward token falling |
| Funding and basis | Leveraged traders, usually longs | The cost of holding leverage | Funding turning negative; exchange and custody risk |
| Real world assets | Offchain borrowers, often the US government | Ordinary interest on Treasury bills or loans | Issuer, custody and redemption terms |
| Points | Nobody, yet | A possible future airdrop | May convert to little or nothing |
Lending: borrowers pay depositors
In a pooled lending market, depositors supply an asset and borrowers pay interest to use it. Depositors earn less than borrowers pay, for two reasons: part of the pool is sitting idle, and the protocol keeps a slice.
This is how Aave v3 computes it in its rate contract. Utilization drives everything: as it rises, the borrow rate climbs, gently at first and then steeply past a target level, which pulls in deposits and pushes out borrowers. It also marks the risk. At full utilization every dollar is lent out, and a depositor who wants to withdraw waits for repayments or new deposits. The borrower’s side of the same market is in running a loan, and the rate curves in inside a lending protocol.
Trading fees: traders pay liquidity providers
Every swap pays a fee to the pool it trades through, which makes LP fees about as organic as yield gets: the payers are traders who want immediacy and will keep wanting it. The catch is on the other side of the ledger. The pool rebalances your position against you as prices move, so fee income has to be measured net of impermanent loss, and a busy week on a dashboard is not a year. Both are worked through with numbers in providing liquidity: your first pool.
Staking: issuance, fees and MEV
Staking rewards have three parts: newly issued tokens, transaction fees paid by users, and MEV, the value block producers capture by ordering transactions. Fees and MEV are paid by users of the network. Issuance is different, because it is paid by everyone who holds the token and does not stake. Suppose a network issues 4% a year and half the supply is staked (illustrative figures):
| Stakers | Holders who do not stake | |
|---|---|---|
| Tokens received from issuance | About 8% a year | Nothing |
| Change in their share of the network | About +3.85% a year | About −3.85% a year |
So a large part of a staking yield is protection from dilution rather than new income. The part that comes from fees and MEV is closer to a real return. Two networks as examples:
- Ethereum. The consensus specification divides the base reward by the square root of all active stake, so the more ETH is staked, the less each staked ETH earns from issuance. Lido’s stETH, which passes on rewards after a 10% fee, was yielding about 2.3% a year on DefiLlama in late September 2026.
- Solana. Issuance began at 8% a year in February 2021 and falls by 15% of its level each year toward a long run floor of 1.5%. It was about 3.65% in mid September 2026. JitoSOL, a liquid staking token that also passes on MEV tips, was yielding about 4.8% on DefiLlama at the same time.
How liquid staking tokens carry these rewards, and what they add in risk, is in liquid staking tokens in practice. In the US, staking rewards are generally taxed as income when you receive them; see staking and airdrop income.
Emissions: yield paid in the protocol’s own token
Many headline yields are mostly emissions: new tokens a protocol hands out to attract deposits. The payer is everyone holding that token, through dilution, and whoever buys the rewards from you when you sell. DefiLlama’s yield pages split each pool into a base APY, from fees or interest, and a reward APY, from emissions. That split is the first thing to look at.
Emissions are a legitimate way to start a market, but the number is quoted at today’s token price. Take 10,000 dollars in a pool paying 60% a year entirely in a reward token: 6,000 tokens at a starting price of 1 dollar, paid out evenly. Suppose the token falls steadily by 70% over the year (illustrative):
| What you do with the rewards | Value at year end | Realized yield |
|---|---|---|
| Sell each reward as it arrives | About $3,900 | About 39% |
| Hold every reward to the end | About $1,800 | About 18% |
The yield was paid, but a large part of it was paid in a currency that was losing value. When emissions end, the deposits they attracted tend to leave with them, a pattern covered in token mechanism design.
Funding and basis: leveraged traders pay
Perpetual futures use a funding rate to stay close to the spot price. When more traders want to be long, longs pay shorts at intervals set by each venue. Hold the asset and short the same amount of perp and your price exposure cancels while you collect funding, as long as it stays positive. Dated futures offer a similar carry: they usually trade above spot and converge at expiry, and that gap is the basis.
Ethena’s sUSDe is this trade at scale. Its documentation lists four revenue streams as of September 2026: funding and basis on hedged positions, lending, tokenized real world assets, and rewards on stablecoin holdings, with a reserve fund meant to absorb periods when combined revenue turns negative. sUSDe was yielding about 5% on DefiLlama in late September 2026. The payer is leveraged demand, which is strongest in rising markets and can flip in falling ones. The stablecoin side is in choosing a stablecoin and the trade itself in basis trades and delta neutral positions.
Real world assets: Treasury interest, onchain
Tokenized Treasury funds hold US government debt and pass the interest to token holders. The payer is about as dependable as payers get; the risks sit with the issuer, the custodian and the redemption terms, and many of these funds limit who may hold them. RWA.xyz counted about 14.7 billion dollars in tokenized US Treasury funds in late September 2026, with an average seven day yield of about 3.5%.
A plain fiat backed stablecoin pays its holders nothing. The issuer keeps the interest on the reserves. Savings wrappers exist to pass some income back: sUSDS, for example, carries the Sky Savings Rate, set by Sky governance and paid from the protocol’s income.
| Late September 2026 snapshot | Who pays | Yield, roughly |
|---|---|---|
| Tokenized US Treasury funds (average) | The US government | 3.5% (RWA.xyz) |
| sUSDS | Sky protocol income | 3.6% |
| USDT supplied on Aave v3, Ethereum | Borrowers | 3.6% |
| sUSDe | Leveraged traders, plus other revenue | 5.1% |
| stETH | Ethereum issuance, fees and MEV | 2.3% |
| JitoSOL | Solana issuance, fees and MEV tips | 4.8% |
Figures from DefiLlama except where marked. They move daily and are shown for scale, not as a recommendation. The pattern is the lesson: the more dependable dollar yields clustered around the Treasury bill rate. A dollar yield far above that line has an extra payer, an extra risk, or a subsidy with an end date.
APR, APY and the compounding assumption
APR is the simple annual rate. APY assumes every payment is reinvested at the same rate:
| APR | APY, compounded daily |
|---|---|
| 5% | 5.13% |
| 10% | 10.52% |
| 50% | 64.82% |
| 100% | 171.46% |
At ordinary rates the difference is small. At high rates APY runs away from APR, which is why eye catching figures are usually quoted as APY. The assumption behind it rarely holds: the rate will not stay put, and compounding costs money. With 10,000 dollars at 10% APR, not compounding at all ends the year at 11,000. Compounding monthly at 2 dollars of gas a time ends at about 11,022. Compounding weekly at the same cost ends at about 10,941, worse than doing nothing. Many vaults compound for you, spreading the cost across depositors, in exchange for a fee and another contract to trust.
Points: a promise, not a yield
A points program tracks your activity and hints at a future token distribution without promising how much, when, or at what conversion. Points have no payer yet. If they convert, the value comes from a new token, which means from whoever buys it. What points cost is concrete: the capital you commit, the gas you spend, and the yield you forgo against the roughly 3.5% dollar baseline. Early users have been rewarded well by some programs, and programs are also where headline yields are most often made of hope. How to judge one is in airdrops and points.
The sustainability test
Name the payer
If you cannot say who pays in one sentence, stop there.
Ask why they pay
Borrowers who want leverage, traders who want immediacy and networks buying security all have lasting reasons. A protocol paying to grow has a budget.
Ask what happens when they stop
Funding can turn negative in falling markets, emissions end on schedule, and borrowing demand fades when prices fall. Find the number you would earn then.
Compare with the baseline
Put the yield next to the Treasury rate and the staking rate for the asset. Every point above them is paid for by risk you take or a subsidy someone ends.
Check the currency
A yield paid in a token that is being emitted is worth what that token is worth when you sell it.
Common questions
Why are some DeFi yields so much higher than others?
Because they have a different payer or more risk. Yields near the Treasury bill rate usually come from dependable payers such as borrowers or government debt. Yields far above it usually include token emissions, leverage, a temporary subsidy, or exposure to an asset that can fall sharply.
What is the difference between APR and APY?
APR is the simple annual rate. APY assumes you reinvest every payment at the same rate. At 10% the two are close, 10% against about 10.5% compounded daily, but at 100% APR the APY is about 171%, which is why high figures are usually quoted as APY. Compounding costs gas, and rates rarely stay put.
Is staking yield real income?
Partly. The share paid from transaction fees and MEV comes from users of the network. The share paid from new issuance mostly offsets dilution, so it keeps your slice of the network from shrinking. In the US, rewards are generally taxed as income when you receive them.
Where does the yield on a yield bearing stablecoin come from?
It depends on the design. Savings wrappers such as sUSDS pay from protocol income, tokenized Treasury funds pass on government bond interest, and sUSDe earns mainly from funding and basis on hedged derivatives positions. Each has a different payer and a different way to fail.
Are points the same as yield?
No. Points are a record of activity with no promised value, amount or conversion date. They may turn into a token airdrop, or into very little. Treat them as a possible bonus on top of a yield you would accept anyway, not as the yield itself.
Where to go next
Next: Liquid staking tokens in practice
Guide 9 of 16 in the Intermediate level. Your place is kept on this device, so you can pick up exactly here next time.