How Are Yields Generated? Here’s a Simple Explanation
There's no doubt about it, generating yields on your crypto is one of the best things that has ever happened in crypto investing. However, have you ever wondered how yields are generated, or what factors influence yield percentages?
In this article, we take a look at some of the factors that influence or affect yields. We also tell you what the yields displayed on our platform are based on.
So, let’s get started.
WHAT IS A YIELD?
Yield refers to the earnings generated and realized on an investment over a particular period of time, expressed as a percentage.
In traditional finance, a yield percentage is usually based on the invested amount, current market value or face value of the security. A yield also includes interest earned or dividends received from holding a security. Based on the valuation of a security (fixed or fluctuating), yields may be classified as known or anticipated.
Last but not least, yields are mostly computed on an annual basis, though there are also quarterly and monthly yields.
YIELDS DISPLAYED ON CAKE DEFI
First and foremost, it is important to note that we don’t set or determine the yields displayed on our platform. Essentially, our platform aggregates various DeFi protocols available on the market and reflects the same yields displayed on their respective sources (less our commission).
DEFICHAIN EMISSION RATES
For DeFi services that are based on the DeFiChain blockchain, the main factor affecting or influencing the yields is the blockchain emission rate.
What is a blockchain emission?
Simply put, emission refers to how quickly new coins are released from the blockchain. As for the case of the DeFiChain blockchain, the emission rate decreases every 10 days by 1.658%. That means, over time, less DFI are paid out as rewards.
Since DeFiChain sets how many DFI of the total block rewards are allocated towards Staking, Liquidity Mining, etc., a change in this split requires a Masternode approval. To view the most up-to-date data on the DFI emission and inflation, you may click here.
LIQUIDITY MINING AND STAKING YIELDS
If you're a high-level crypto investor or active user of staking or liquidity mining services, you're probably aware that your crypto yield is heavily influenced by the number of participants using the same platform.
The same is true with the Staking and Liquidity Mining services that we give you access to and which are both based on the DeFiChain blockchain.
Of course, there are other factors that can influence yields - which you can read more about by clicking here. Also, you may click here to know more about our Staking service and here for more information on our Liquidity Mining service.
FINAL THOUGHTS
It is without a doubt crucial for a crypto investor to understand how yields are generated. Why? Because it helps you make informed decisions regarding which service provider to use, how much crypto to allocate, for how long, and what crypto investment strategy to use.
At Cake DeFi, we not only provide information on what the yields we display are based on, but also transparency on other information that are valuable to you as a crypto investor. You may click here to read more about our transparency features and protocols. Similarly, you may click here to read about how we continue to build and develop our platform based on transparency.
If you want to use our services and enjoy all the benefits that we offer, click here to create an account.
So, what are you waiting for? Sign up now and take control of your financial destiny!