Evaluate yield on stablecoins
Trace who pays a return and compare it with the risks and cost of leaving.
✨ Aprende con IA
Start with: stablecoin, lending, lending markets.
Objective
Evaluate whether a potential return compensates for the additional risks of deploying a stablecoin.
Prerequisites and assumptions
You can identify the token, issuer, network and exact market. You understand withdrawal mechanics and have funds for fees. Rates and reward-token prices are variable.
Mechanics
In a lending market, borrower payments can support supplier interest. Incentives may add a separate reward. A vault can combine several actions, adding its own contract and management dependencies. Follow each source of income separately.
Approaches and tradeoffs
| Approach | Return source | Added exposure |
|---|---|---|
| Hold the token | None from a protocol | Issuer, backing and market price |
| Supply to a lending market | Borrower payments and possible incentives | Market, oracle and withdrawal liquidity |
| Use a managed strategy | One or more combined activities | Manager, strategy and underlying protocols |
Compare net income after entry, exit, conversion and monitoring costs. Higher advertised annual yield is not proof of a better risk-adjusted choice.
Risks
Stablecoin depegs, contract exploits, bad debt, limited withdrawal liquidity and administrator changes can overwhelm interest. An incentive paid in another token can fall in value. A quoted annual rate is neither fixed nor guaranteed.
Example
At an unchanged illustrative 4% simple annual rate, 1,000 units would earn about 40 units over a year before costs. A 2% depeg costs about 20 units of market value; a 10-unit round-trip cost consumes another quarter of the nominal interest. Actual rates, duration and compounding will change the result.
❓ Is the displayed 4% enough to estimate the final return?
No. You still need the time held, rate changes, entry and exit costs, reward-token value and any change in the stablecoin's market price.
When it may not make sense
It may not make sense for funds needed at a fixed near-term date, a small deposit with high costs, or any offer whose revenue source you cannot explain. Write an exit condition, such as a material change in backing or withdrawal availability, before supplying.