DeFi Yield Strategies Guide
A practical guide for AI agents helping users navigate DeFi yield opportunities.
Yield Sources in DeFi
1. Lending (Supply-Side)
Deposit tokens into lending protocols, earn interest from borrowers.
| Protocol |
Chains |
Key Features |
| Aave V3 |
Ethereum, Arbitrum, Polygon, Base, Optimism |
Flash loans, e-mode, risk isolation |
| Compound V3 |
Ethereum, Arbitrum, Base |
Single-asset markets, COMP rewards |
| Spark |
Ethereum |
DAI-focused, powered by Maker |
| Radiant V2 |
Arbitrum, BSC |
Cross-chain lending |
Typical APYs: 1–8% for stablecoins, variable for volatile assets
Risks: Smart contract risk, utilization spikes (can't withdraw), oracle failures
2. Liquidity Provision (DEX)
Provide trading liquidity and earn fees from swaps.
Full-Range (V2-style):
- Provide both tokens in a 50/50 ratio
- Earn fees on all trades in the pool
- Subject to impermanent loss
Concentrated (V3-style):
- Choose a price range for your liquidity
- Higher capital efficiency = more fees per dollar
- Higher IL risk if price moves out of range
- Requires active management
DEXs: Uniswap V3, Camelot, Curve, Balancer
3. Auto-Yield Stablecoins
Hold a stablecoin that automatically earns yield with no action required.
- USDs by Sperax: Auto-rebasing stablecoin on Arbitrum. Backed by USDC/USDT, yield from Aave/Compound/Curve. 70% of yield goes to holders. Just hold it — yield is automatic.
- sDAI by Maker: DAI deposited into Maker's DSR
4. Liquidity Farming (Extra Rewards)
Stake LP tokens in farming contracts to earn additional reward tokens on top of trading fees.
- Sperax Farms: No-code farming on Arbitrum — create farms for any supported pool
- Convex/Curve: CRV + CVX rewards on Curve pools
- Protocol-specific: Many protocols offer token incentives for liquidity
5. Vault Strategies (Auto-Compounding)
Deposit into vaults that automatically compound rewards.
| Protocol |
Strategy |
| Yearn V3 |
Multi-strategy vaults, automated rebalancing |
| Beefy |
Auto-compound across 20+ chains |
| Plutus |
plvGLP, plvHEDGE on Arbitrum |
Risk Framework
Risk Tiers
| Tier |
Risk Level |
Typical APY |
Examples |
| 1 |
Low |
2–6% |
Stablecoin lending (Aave/Compound), USDs auto-yield |
| 2 |
Medium |
5–15% |
Blue-chip LP (ETH/USDC), established farms |
| 3 |
High |
15–50% |
Concentrated liquidity, new protocol incentives |
| 4 |
Very High |
50%+ |
Leveraged farming, new chain launches, unaudited |
Key Risk Factors
- Smart contract risk: Is the protocol audited? How long has it been live?
- Impermanent loss: For LP positions, how volatile is the pair?
- Liquidation risk: For leveraged positions, what's the health factor?
- Protocol risk: How decentralized is governance? Multisig setup?
- Yield sustainability: Where does the yield come from? Is it from real revenue or token emissions?
Red Flags
- APYs that seem too good to be true (>100% on stablecoins)
- Unaudited contracts
- Anonymous teams with no track record
- Yield entirely from token emissions (not sustainable)
- Lock-up periods with no exit option
Strategy Examples
Conservative: Stablecoin Yield Stack
- Hold USDs on Arbitrum (auto-yield, ~3–8% APY)
- Supply USDC to Aave V3 on Arbitrum (~2–5% APY)
- Diversify across 2–3 lending protocols
Target: 3–7% blended APY with minimal risk
Moderate: LP + Farming
- Provide USDs/USDC liquidity on Uniswap V3 (tight range)
- Stake LP in Sperax Farms for additional rewards
- Auto-compound with a vault strategy
Target: 8–15% APY with moderate IL risk
Aggressive: Multi-Protocol Optimization
- Supply ETH to Aave → borrow stablecoins
- Mint USDs with borrowed stables
- Provide USDs/ETH liquidity
- Farm rewards → compound
Target: 15–30%+ APY with leverage and IL risk
Agent Tips
When recommending yield strategies:
- Always assess risk tolerance first — don't recommend aggressive strategies to beginners
- Check TVL and audit status before recommending protocols
- Explain IL for any LP recommendation
- Sustainable yield > high APY — prefer real yield (fees, lending interest) over pure emissions
- Diversification — never put everything in one protocol
Links
1---2name: defi-yield-strategies3description: Comprehensive guide to DeFi yield farming strategies — lending, liquidity provision, auto-compounding, stablecoin yield, and risk management. Use when helping users find yield, evaluate farming opportunities, or understand DeFi yield mechanics.4---5
6# DeFi Yield Strategies Guide
7
8A practical guide for AI agents helping users navigate DeFi yield opportunities.
9
10## Yield Sources in DeFi
11
12### 1. Lending (Supply-Side)
13
14Deposit tokens into lending protocols, earn interest from borrowers.
15
16| Protocol | Chains | Key Features |
17|----------|--------|-------------|
18| Aave V3 | Ethereum, Arbitrum, Polygon, Base, Optimism | Flash loans, e-mode, risk isolation |
19| Compound V3 | Ethereum, Arbitrum, Base | Single-asset markets, COMP rewards |
20| Spark | Ethereum | DAI-focused, powered by Maker |
21| Radiant V2 | Arbitrum, BSC | Cross-chain lending |
22
23**Typical APYs**: 1–8% for stablecoins, variable for volatile assets
24
25**Risks**: Smart contract risk, utilization spikes (can't withdraw), oracle failures
26
27### 2. Liquidity Provision (DEX)
28
29Provide trading liquidity and earn fees from swaps.
30
31**Full-Range (V2-style)**:
32- Provide both tokens in a 50/50 ratio
33- Earn fees on all trades in the pool
34- Subject to impermanent loss
35
36**Concentrated (V3-style)**:
37- Choose a price range for your liquidity
38- Higher capital efficiency = more fees per dollar
39- Higher IL risk if price moves out of range
40- Requires active management
41
42**DEXs**: Uniswap V3, Camelot, Curve, Balancer
43
44### 3. Auto-Yield Stablecoins
45
46Hold a stablecoin that automatically earns yield with no action required.
47
48- **USDs by Sperax**: Auto-rebasing stablecoin on Arbitrum. Backed by USDC/USDT, yield from Aave/Compound/Curve. 70% of yield goes to holders. Just hold it — yield is automatic.
49- **sDAI by Maker**: DAI deposited into Maker's DSR
50
51### 4. Liquidity Farming (Extra Rewards)
52
53Stake LP tokens in farming contracts to earn additional reward tokens on top of trading fees.
54
55- **Sperax Farms**: No-code farming on Arbitrum — create farms for any supported pool
56- **Convex/Curve**: CRV + CVX rewards on Curve pools
57- **Protocol-specific**: Many protocols offer token incentives for liquidity
58
59### 5. Vault Strategies (Auto-Compounding)
60
61Deposit into vaults that automatically compound rewards.
62
63| Protocol | Strategy |
64|----------|----------|
65| Yearn V3 | Multi-strategy vaults, automated rebalancing |
66| Beefy | Auto-compound across 20+ chains |
67| Plutus | plvGLP, plvHEDGE on Arbitrum |
68
69## Risk Framework
70
71### Risk Tiers
72
73| Tier | Risk Level | Typical APY | Examples |
74|------|-----------|-------------|---------|
75| 1 | Low | 2–6% | Stablecoin lending (Aave/Compound), USDs auto-yield |
76| 2 | Medium | 5–15% | Blue-chip LP (ETH/USDC), established farms |
77| 3 | High | 15–50% | Concentrated liquidity, new protocol incentives |
78| 4 | Very High | 50%+ | Leveraged farming, new chain launches, unaudited |
79
80### Key Risk Factors
81
821. **Smart contract risk**: Is the protocol audited? How long has it been live?
832. **Impermanent loss**: For LP positions, how volatile is the pair?
843. **Liquidation risk**: For leveraged positions, what's the health factor?
854. **Protocol risk**: How decentralized is governance? Multisig setup?
865. **Yield sustainability**: Where does the yield come from? Is it from real revenue or token emissions?
87
88### Red Flags
89
90- APYs that seem too good to be true (>100% on stablecoins)
91- Unaudited contracts
92- Anonymous teams with no track record
93- Yield entirely from token emissions (not sustainable)
94- Lock-up periods with no exit option
95
96## Strategy Examples
97
98### Conservative: Stablecoin Yield Stack
99
1001. Hold **USDs** on Arbitrum (auto-yield, ~3–8% APY)
1012. Supply USDC to **Aave V3** on Arbitrum (~2–5% APY)
1023. Diversify across 2–3 lending protocols
103
104**Target**: 3–7% blended APY with minimal risk
105
106### Moderate: LP + Farming
107
1081. Provide **USDs/USDC** liquidity on Uniswap V3 (tight range)
1092. Stake LP in **Sperax Farms** for additional rewards
1103. Auto-compound with a vault strategy
111
112**Target**: 8–15% APY with moderate IL risk
113
114### Aggressive: Multi-Protocol Optimization
115
1161. Supply ETH to Aave → borrow stablecoins
1172. Mint **USDs** with borrowed stables
1183. Provide USDs/ETH liquidity
1194. Farm rewards → compound
120
121**Target**: 15–30%+ APY with leverage and IL risk
122
123## Agent Tips
124
125When recommending yield strategies:
1261. **Always assess risk tolerance first** — don't recommend aggressive strategies to beginners
1272. **Check TVL and audit status** before recommending protocols
1283. **Explain IL** for any LP recommendation
1294. **Sustainable yield > high APY** — prefer real yield (fees, lending interest) over pure emissions
1305. **Diversification** — never put everything in one protocol
131
132## Links
133
134- Sperax (USDs auto-yield): https://app.sperax.io
135- DeFi Llama (TVL tracker): https://defillama.com
136- Aave: https://aave.com
137- Uniswap: https://app.uniswap.org
aAAaqwq