About this tool
The APR to APY Equation
APR is simple interest. APY is compound interest. The formula utilized by modern Web3 developers to translate the two is:
APY = (1 + (APR / Compounding Hubs))^Compounding Hubs - 1
A 50% APR compounded daily yields exactly a 64.8% APY. The faster your harvest, the steeper the exponential curve.
The Mechanics of Impermanent Loss
When you deposit into a decentralized exchange (like Uniswap V2), you supply two tokens in equal fiat value (50/50 ratio). The Constant Product Formula (x * y = k) dictates that as traders buy Token A out of the pool, they deposit Token B.
If the external market price of Token A skyrockets by 200%, arbitrage bots will drain your Token A from the pool until the ratio matches Binance. Your "Impermanent Loss" is the difference between your pool value, compared to if you had simply held the tokens safely in a Cold Wallet.
Practical Usage Examples
Quick DeFi Yield Calculator & Impermanent Loss Simulator test
Paste content to see instant general utilities results.
Input: Sample content
Output: Instant resultStep-by-Step Instructions
Step 1: Define Deposit Capital: Enter the total fiat USD value of the tokens you are deploying into the Staking contract or automated market maker (AMM) Liquidity Pool.
Step 2: Enter Raw Yield: Input the advertised "APR", which is the raw foundational reward rate before math loops are applied.
Step 3: Define Compounding Velocity: Yield Aggregators (like Yearn or Beefy) auto-compound daily. If you are manually harvesting and re-staking once a week, select "Weekly". This dramatically alters the final APY.
Step 4: Execute IL Stress Test: Providing Liquidity to a 50/50 pool (e.g., ETH/USDC) carries systemic risk. Simulate what happens if ETH doubles in fiat value. The algorithm computes the permanent loss from algorithmic rebalancing.
Core Benefits
Unmasks APR vs APY Deception: Shady DeFi protocols advertise a "1,000% APY" to bait users. However, if the underlying APR is 200% and you are not auto-compounding 3 times a day, you will never hit that APY. This tool extracts the mathematical truth.
Quantifies the Silent Killer (Impermanent Loss): If you provide liquidity and Token A moons (5x increase), the AMM algorithm automatically sells your Token A to buy more Token B. You end up with less of the winning token. This explicitly calculates that exact dollar penalty.
Project Passive Income Vectors: Calculate exactly how much USD value you are generating daily, weekly, and monthly purely from decentralized trading fee accumulation.
Frequently Asked Questions
The only mathematically guaranteed way to avoid IL is to provide liquidity to pairs that are strictly pegged to each other (e.g., USDC/USDT stablecoin pools, or ETH/stETH pools). Because their price ratio never deviates from 1:1, IL is permanently 0%.
It is called "impermanent" because the loss is only realized on paper. If Token A moons 2x, you suffer IL. But if Token A crashes back down to its original entry price before you withdraw your liquidity, the IL drops perfectly back to $0.00. It only becomes "permanent" the exact second you click withdraw.
No. Executing smart contracts on Layer 1 Ethereum requires high gas fees. If it costs $40 to compound your yield, and you only earned $10 in rewards, your net APY is violently negative. Always farm on low-cost L2 rollups (Arbitrum, Optimism) if dealing with small capital.