Baskin Logic Crypto Academy

Intermediate · DeFi

Where does DeFi yield come from?

By Joshua Baskin, founder · Reviewed · Sources

Where real DeFi yield comes fromBorrowers pay interest. Traders pay swap fees. New token rewards (can dilute). None of these? Ask who pays.1Borrowers pay interest2Traders pay swap fees3New token rewards (can dilute)4None of these? Ask who pays
Where real DeFi yield comes from

The short lesson

If you are paid, someone is paying. Ask where the money comes from.

  • Borrowers: lending pools pay interest that borrowers pay in.
  • Trading fees: liquidity providers earn a cut of swaps.
  • Staking: networks pay validators for securing the chain.
  • Token rewards: new tokens printed to attract users. These can lose value fast.

Red flags

  • A fixed, high return with “no risk”.
  • You can't tell where the yield comes from.
  • Withdrawals get delayed or need a “fee” first.
  • Several lending platforms froze withdrawals in 2022. Yield is payment for risk.

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Common questions

Is staking yield the same as lending yield?

No. Staking pays for securing a network; lending pays for loaning out tokens. Both carry risk.

Are rewards taxable?

In the US, rewards are generally income when you gain control of them. Check your country's rules.

Sources

  1. Investor.gov: Crypto asset interest-bearing accounts
  2. IOSCO: Decentralized Finance Report (2022)
  3. FTC: Cryptocurrency and scams

Sources checked October 31, 2026. Rules change; check the official source before acting.

Education only. Not investment, tax or legal advice. We do not pick coins.