How APY Comparison Works
APY (Annual Percentage Yield) represents your expected return over one year, including compounding. But not all APYs are created equal. Real yield comes from actual protocol revenue (trading fees, lending interest, liquidation penalties). Inflationary yield comes from the protocol minting new tokens as rewards — which dilutes the token's value over time.
DefiLlama's Real Yield metric separates the two, making it the single best tool for honest APY comparison. A 5% real yield from Aave is far more sustainable than a 200% inflationary yield from a fork-of-a-fork farm.
The Formula
Real APY = (Protocol Revenue to LPs ⁄ Total Value Locked) × 100
- Protocol Revenue = Actual fees earned by the protocol (trading fees, interest, etc.)
- Total Value Locked (TVL) = Total capital deposited in the protocol
- Inflationary APY = Token emissions × token price / TVL (this dilutes over time)
- Net Real Yield = Real APY − Token Inflation Rate
Example Calculation
Comparing two yield opportunities:
Quoted APY: 4.2% | Source: Lending interest from borrowers
Token emissions: 0% | Real Yield: 4.2%
FarmXYZ USDC Pool:
Quoted APY: 85% | Source: 3% from trading fees + 82% from FARM token emissions
FARM token inflation: 120%/year
Real Yield: ~3% (the other 82% is dilutive)
The 4.2% Aave yield is actually worth more than the "85%" farm because the Aave yield is entirely from real revenue, while the farm yield depends on an inflationary token maintaining its price — which it almost never does.
Best APY Comparison Tools
| Tool | Protocols Tracked | Real Yield Metric | Chain Coverage | Price |
|---|---|---|---|---|
| DefiLlama | 3000+ | Yes | 150+ chains | Free |
| Zapper | 500+ | No (total APY only) | 10+ chains | Free |
| DeFi Rate | 100+ | Partial | Ethereum, L2s | Free |
| Coingecko Yield | 200+ | No | Multi-chain | Free |
| vfat.tools | 800+ | No | 20+ chains | Free |
Tips for Using This in Trading
- Always check DefiLlama first. Sort by real yield, not total APY. Sustainable protocols have real yield above 3%.
- Diversify across protocols and chains. Do not put all your stables in one lending pool. Smart contract risk is real.
- Watch for APY decay. Yields drop as more capital flows in. The 20% you saw yesterday may be 8% by the time you deposit.
- Factor in gas costs. Compounding a $1,000 position on Ethereum L1 costs more in gas than the yield. Use L2s or auto-compounders.
- Understand the source of yield. If you cannot explain where the yield comes from in one sentence, it is probably coming from new depositors (Ponzi dynamics).
Common Mistakes
- Chasing the highest number. 1000% APY farms almost always collapse within weeks. The token price dumps as rewards are sold.
- Not accounting for impermanent loss. LP yields look great until you factor in IL. Always net out impermanent loss from your APY calculation.
- Ignoring smart contract risk. Unaudited protocols offering high yields are prime targets for exploits. Stick to battle-tested protocols.
- Comparing APR to APY. Some protocols quote APR, others quote APY. A 10% APR compounded daily is ~10.5% APY. Always convert to the same metric before comparing.
Frequently Asked Questions
What is real yield in DeFi?
Real yield is the portion of APY that comes from actual protocol revenue (trading fees, lending interest, liquidation penalties) rather than from inflationary token emissions. It is a more sustainable and honest measure of returns.
What is a good APY in crypto?
For stablecoins, 3-8% real yield is considered good in 2026. For volatile assets, 5-15% is reasonable. Anything above 20% should be scrutinised carefully for sustainability and inflation risk.
How do I check if an APY is sustainable?
Use DefiLlama to check the protocol's real yield metric. If most of the APY comes from token emissions rather than protocol fees, it is likely unsustainable. Also check if the APY has been declining over time.
Is APR or APY more accurate for comparing yields?
APY is more accurate because it includes the effect of compounding. When comparing protocols, always convert APR to APY (or vice versa) using the same compounding frequency to make a fair comparison.