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

• Sperax (USDs auto-yield): https://app.sperax.io

• DeFi Llama (TVL tracker): https://defillama.com

• Aave: https://aave.com

• Uniswap: https://app.uniswap.org