The decentralized finance (DeFi) ecosystem offers significantly higher returns than traditional banking, albeit with greater risk. In this article, we explain how DeFi yields work and which platforms are most widely used.
What is DeFi and how does it generate returns?
DeFi (Decentralized Finance) consists of financial protocols that operate on blockchain, without banks or intermediaries. Returns are generated primarily through:
- Lending: you lend stablecoins (USDC, USDT, DAI) and earn interest from borrowers
- Liquidity provision: you provide liquidity to decentralized exchanges and earn fees
- Staking: you lock up tokens on a blockchain network and receive rewards for participating in validation
- Yield farming: more complex strategies that combine multiple sources of yield
Best DeFi platforms by profitability
Here are some of the highest-rated platforms on APYData:
- Binance — Binance USDC Flexible Savings: 5% APY — Guaranteed 5% APY on the first 200 USDC; via enci
- Binance — Binance ATOM Flexible Savings: 6.82% APY — Flexible staking of Cosmos (ATOM) on Binance Simple Earn. If
- Binance — Binance USDT Flexible Savings: 3% APY — Guaranteed 3% APY on the first 200 USDT; via enci
- Compound — Compound V3 — USDC (Ethereum): 2.56% APY — Compound V3 (Comet) on Ethereum. One of the leading lending protocols in DeFi, audited by
- Aave — Aave V3 — USDC Supply (Base): 2.53% APY — Aave V3 on Base. Leading lending protocol in DeFi, audited
Are DeFi yields safe?
The risk in DeFi is significantly higher than in traditional banking:
- Smart contract risk: protocols may have vulnerabilities that allow for hacks
- Liquidity risk: during market panic, it can be difficult to withdraw funds
- No government guarantee: there is no deposit insurance or state protection
- Counterparty risk: some protocols have anonymous teams or lack audits
At APYData, we evaluate each protocol with a risk score. More established protocols like Aave, Compound, or Sky (MakerDAO) have years of track record and security audits, though risk is never zero.
How to get started with DeFi?
To access DeFi, you need:
- A Web3-compatible wallet (MetaMask, Coinbase Wallet...)
- Stablecoins (USDC, USDT, DAI) or cryptocurrencies
- ETH or another native token of the network to pay gas fees
- Connect your wallet to your chosen protocol and deposit
We recommend starting with small amounts and well-established, audited protocols.
Conclusion
DeFi can offer returns far higher than traditional banking, but requires an understanding of the risks. Use APYData to compare protocols by profitability, security, and liquidity before investing.
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