The words around yield often compress several assumptions into one label. This reference separates the calculation from the mechanism—and the mechanism from its risks.
Search by term, mechanism, or risk.
APR expresses a simple annualized rate without assuming reinvestment. APY includes an assumed compounding schedule, so earned amounts are treated as if they can be reinvested at the same rate.
Ask: How often does compounding occur, can proceeds actually be reinvested, and is the underlying rate stable enough for the APY convention to be informative?
Return after accounting for inflation. A positive nominal return can still produce a negative real result when purchasing power falls faster than capital grows.
Working approximation: real yield ≈ nominal yield − inflation. Exact calculation compounds the two rates rather than simply subtracting them.
A measure of how long cash flows remain exposed and, in fixed-income analysis, how sensitive value may be to changes in interest rates. Duration is not merely the calendar date at which an instrument matures.
Why it matters: a quoted rate may require capital to remain committed longer than the holder’s actual time horizon.
The possibility that a borrower, issuer, custodian, or other necessary party cannot or will not meet its obligations. The return depends on more than the asset; it also depends on the parties between capital and repayment.
Ask: Who owes what, what protects the claim, and what recovery process exists if that party fails?
The risk that on-chain code, integrations, or control mechanisms behave incorrectly or are exploited. This includes implementation defects, oracle failure, governance capture, unsafe upgrades, and dependencies on other contracts.
Important: an audit can reduce uncertainty; it cannot make executable code risk-free. On-chain yield also may carry counterparty and market risk.
The reduction in purchasing power caused by rising prices over the holding period. It is a cost to economic return even though it does not appear as a line-item fee.
Keep distinct: fees reduce account value directly; inflation reduces what the resulting value can buy.
A displayed return funded partly or entirely by newly issued units, commonly token incentives. The quoted quantity may rise while the value per unit falls through dilution, price changes, or declining demand.
Do not confuse: receiving more units is not the same as receiving durable income from an external cash-flow source.
Try “risk,” “inflation,” “rate,” or “on-chain.”