Explore ways to put your assets to work, with the source of the return, the fees and the withdrawal terms in view.
An annual percentage is only one part of an opportunity. The mechanism explains what is earning, and what can change.
| Opportunity | Return source | What affects the position |
|---|---|---|
| Lending | Interest paid by people borrowing assets from a protocol. | Borrowing demand, utilization, collateral rules and the protocol’s available liquidity. |
| Liquidity provision | Fees paid by traders using a pool; sometimes additional incentives. | Trading activity and changes in the relative prices of the assets in the pool. |
| Reward programs | Tokens distributed by a protocol for a particular activity. | The program’s duration, distribution rules, reward-token price and claim costs. |
APR annualizes a rate without compounding. APY includes a compounding assumption. Neither tells you exactly what you will receive after costs.
In Aave, supply rates respond to how much of the pool is borrowed and to protocol parameters. Deposits, borrowing, repayments and withdrawals can change the rate after you enter. Today’s figure does not lock in a full year of interest.
Find out whether returns are reinvested automatically or need a separate action. A projected APY can assume repeated reinvestment; claim costs and time out of the position can change the result.
Read the base return separately from any promotional reward. Check its end date, eligibility and payment asset. A reward paid in another token adds that token’s changing value to the calculation.
Protocol example: how Aave supply rates work.
Providing liquidity involves holding a changing mix of assets. Uniswap’s concentrated-liquidity model shows why a fee rate alone cannot describe the position.
As trades move the pool price, the position holds more of one token and less of the other. At the edge of its selected range, it can become entirely one asset.
In Uniswap v3 and v4, a position earns trading fees while liquidity is active within its range. Outside that range, fee earning stops; it resumes if the price returns.
Changing relative prices can leave the position worth less than simply holding the original tokens. Trading fees may offset that difference, but they do not guarantee that they will.
Read Uniswap’s explanations of concentrated liquidity and impermanent loss. Other pool designs have their own mechanics.
Your supplied balance, accumulated return and immediately withdrawable amount may differ.
In a lending pool, some supplied assets may be in use by borrowers. Withdrawal capacity depends on the protocol’s rules and assets currently available. A balance displayed in the wallet does not guarantee immediate withdrawal.
If you also borrow against a position, withdrawing collateral can affect that loan. Review the remaining collateral and debt before changing it. A supply-only position has a different set of conditions.
Aave, for example, can return wrapped ETH or unwrap it to ETH during withdrawal. Receiving a different token may involve an additional swap; review that route separately from closing the supplied position.
For a concrete protocol example, see Aave’s explanation of liquidity and collateral constraints. Each service sets its own conditions.
A larger balance can include new deposits. To understand a position’s result, keep the money you added separate from what the position earned.
Record the opening position, additions, withdrawals and closing position over matching dates. Comparing two balances without those cash flows can mistake a deposit for growth or a withdrawal for a loss.
Separate rewards still waiting to be claimed from amounts already included in the position. If a return was reinvested, adding it to the closing balance again would count it twice.
Token quantities and their currency value answer different questions. Keep the asset amount and valuation time with each record, including costs paid in a different token.
Network fees can change the economics of a small position.
Understand transaction costs