What is Yield?
Yield represents the earnings your assets generate while in the pool. We calculate real yield by simulating transactions to price each pool, rather than relying on the protocol’s advertised yield rates.
Causes of Negative Yield in Current Calculations:
Temporary Causes:
Asset Depeg: If an asset in your pool loses its peg (e.g., a stablecoin temporarily falls slightly below $1), it lowers the redemption value of your Liquidity Provider (LP) tokens.
Market Discount: The price of LP tokens on a decentralized exchange can differ from their actual fair value due to low liquidity or when many users sell the LP token, reducing the value of your investment and impacting yield calculations.
Pool Dynamics: If the assets in a liquidity pool aren't valued the same as in the market, it can cause inefficiencies and cause negative yield for liquidity providers.
Long-Term Causes:
Impermanent Loss (IL): In concentrated liquidity pools, IL occurs when asset prices diverge from each other, potentially outweighing the fees earned (your yield) and leading to reduced redemption value over time.
While temporary issues should resolve quickly, long-term negative yield may signal more fundamental challenges within the pool.
Negative yield is a result of how these issues are currently categorized in our real yield methodology. We're actively working on refining their categorization and moving them to a separate bucket under asset depreciation for better clarity.