The sustainability of annualized yields in decentralized finance (DeFi) protocols is questionable. High yields, often exceeding 10-100% APY, rely on token emissions, liquidity incentives, and market speculation, which can resemble Ponzinomics. These are unsustainable long-term, as they depend on continuous new capital inflows. Stablecoin-based yields (3-8% APY) on platforms like Aave or Compound are more stable but face risks from volatile collateral or regulatory scrutiny. Impermanent loss, smart contract vulnerabilities, and market volatility further erode returns. Real yield protocols tied to revenue-generating assets (e.g., RWAs) show promise for sustainability but are nascent. Without native mechanisms to absorb shocks or diversify strategies beyond ETH, most DeFi yields remain precarious. 0 reply
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