How is APY different from APR?

APR is the simple annual rate; APY adds the effect of compounding. With daily compounding, APY = (1 + APR/365) to the power of 365, minus 1. A 100% APR becomes roughly 171% APY compounded daily.

What is impermanent loss?

Impermanent loss is the value a liquidity provider gives up versus simply holding the two tokens, caused by price divergence between them. Subtracting an estimate of it makes liquidity-pool yields comparable to plain lending.

How are fees and tax applied?

Protocol fees and impermanent loss reduce the gross yield first, then tax is applied to the remaining profit. The result is net annual profit you actually keep, which is what the ranking uses.

Why compare net rather than headline APY?

Headline APYs ignore fees, impermanent loss and tax, which can turn the highest-advertised strategy into a worse outcome than a lower, cleaner one. Comparing net yield surfaces the real winner.

Are these figures guaranteed?

No. DeFi yields are variable and depend on usage, token prices and emissions. Treat the output as a planning estimate using your own assumptions, not a promise of returns.

DeFi Yield Optimizer Comparison

The DeFi Yield Optimizer Comparison puts up to five strategies side by side and ranks them by the yield you actually keep — after compounding, protocol fees, impermanent loss and tax. Headline APYs flatter the noisiest strategies; this tool levels the field.

How it works

For each strategy the tool first converts the quoted rate into a compounded APY:

APY = (1 + APR / n)^n - 1

where n is the number of compounding periods per year. It then subtracts protocol fees and expected impermanent loss from the gross yield, and applies your tax rate to the remaining profit:

Net profit = capital × (gross yield − fees − IL) × (1 − tax)

Strategies are ranked by net annual profit, so the winner is the one that puts the most money in your pocket, not the one with the biggest banner number.

Adjustments that matter

Compounding frequency turns an APR quote into a realistic APY — daily compounding meaningfully boosts high rates.
Impermanent loss only applies to liquidity-pool strategies; set it to zero for lending or single-asset staking.
Protocol fees cover performance fees on vaults and swap fees on entry.
Tax is applied last, to profit only.

Example and notes

A lending position at 8% APY with no impermanent loss and a 20% tax nets 8% × (1 − 0.20) = 6.4%. A flashy 40% APR liquidity pool compounded daily is ~49% APY, but a 10% protocol fee, 15% impermanent loss and 20% tax cut it to roughly (49% − 10% − 15%) × 0.8 ≈ 19%. Always stress-test impermanent loss — it is the figure that most often flips the ranking.